1989 (2) TMI 61

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....oss amount of dividend of Rs. 9,54,744 and not on the net dividend after deduction of interest paid on the capital borrowed for investments ?" The assessee is a private limited company and for the assessment year 1972-73, a return was filed disclosing an income of Rs. 2,52,345. While doing so, the assessee debited Rs. 1,48,442 being the interest paid by it on monies borrowed to the profit and loss account. The Income-tax Officer held that inasmuch as borrowed funds had been utilised by the assessee in making investments, the interest attributable to such borrowed funds was to be deducted from the income chargeable under the head "Other sources" and could not be deducted in computing the business income. Accordingly, he deducted Rs. 94,86....

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....ken by the Department that only 60% of the net dividend should be allowed as deduction cannot be countenanced and further that under section 80M of the Act, the deduction has to be computed with reference to the gross dividend and not the net dividend. That is how the matter has come up before us on the question of law set out earlier. Though the assessee had been served in this reference, it has not appeared either through counsel or any other representative and learned counsel for the Revenue placed before us all the relevant materials. Learned counsel for the Revenue contended that only the net dividend should have been considered for allowance as a deduction under section 80M of the Act and that the Tribunal erred in holding that suc....