2003 (4) TMI 49

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....eliefs under section 80M on the dividends amounting to Rs. 15,58,646. However, the Income-tax Officer deducted Rs. 15,04,220 from Rs. 15,58,646 leaving a net amount of Rs. 54,426 being the eligible amount for computation of reliefs under section 80M. According to the Income-tax Officer, the major income of the bank was falling under the head "Income from securities" under sections 18, 19 and 20 of the Income-tax Act as it stood at the relevant time. According to the Income-tax Officer, section 20 contemplated deduction from "interest on securities" in the case of a banking company. According to the Income-tax Officer, the bank has earned income under the head "Interest on securities" which fell under section 18 of the Income-tax Act and sin....

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.... held that deduction under section 80M has to be calculated with reference to the amount of interest computed in accordance with the provisions of the Act after deducting interest on monies borrowed for earning such income and not with reference to the full amount of dividend received by the assessee. Therefore, the question referred to us is answered in favour of the Department and against the assessee. However, on the facts, the question which arises for determination is quite different and which the Tribunal has failed to appreciate. That question is as follows: "Whether the Department was entitled to import the rule of proportionate expenditure and interest contemplated by section 20 of the Act as it then stood into section 80M of....