2008 (1) TMI 13

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....ed the A.O. to allow the deduction u/s.80M of the I.T.Act of Rs.2,19,97,105/- as against Rs. Nil ? (ii) Whether on the facts and in the circumstances of the case and in law the Hon'ble Tribunal is correct in law in allowing deduction u/s.80M of the I.T.Act of Rs.2,19,97,105/- for A.Y. 1997-98 even though the dividend distributed is Interim Dividend related to A.Y. 98-99? 2. The brief facts of the case are as follows :- (a)  During the financial year 1996-97, Assessee Company filed a return which included dividend income of Rs.2,69,16,774/. During this financial year, since the Assessee Company earned a net profit of Rs.0.06 lakhs only, no dividend was declared by the Company. The due date for filing the tax returns for the ....

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....tion was that the dividend declared and paid in a subsequent year could not be a permitted deduction from the income in a previous year since the said dividend was paid out of income accruing in the subsequent year. 4. To appreciate the contention raised by the revenue, it is necessary to reproduce ("80M" as then existing) which was as under : " 80M. Deduction in respect of certain intercorporate dividends. (1). Where the gross total income of a domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction of an amount equal to....

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....e words as contained in Section 80M. 7. Counsel appearing for the revenue sought to argue that where the literal meaning of the words contained in any provision of law, would lead to an absurd result i.e. a result not intended to be subserved, by the object of the legislation and if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal  construction. According to counsel for revenue, if a literal construction is given to Section 80M then it would lead to an absurd result, since the amount of deduction earned in the subsequent year will be permitted in respect of the income of the previous year. He placed strong reliance on the Judgment of the Apex Co....