TaxTMI 
TaxTMI 
1985 (1) TMI 40
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....puting the chargeable profits under the said Act and the Rules made thereunder, the assessee-company deriving income by way of dividends from another Indian company is entitled to the exclusion of the gross dividend amount received, unaffected by the provisions of sections 57, 80K, 80L and 80M of the Income-tax Act, 1961 ? " The assessee is a public limited Company. For the assessment years 1971-72 and 1972-73, the total gross dividend income of the assessee came to Rs. 27,01,558 and Rs. 32,93,399, respectively. In respect of the said income, the assessee was entitled to deductions under ss. 80K and 80M of the 1961 Act totalling to Rs. 19,08,433 for the assessment year 1971-72, and Rs. 19,76,039 for the assessment year 1972-73. The assesse....
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....n of chargeable profits for both the years seems correct. If the total income computed under the Income-tax Act is taken to be the total of incomes referred to in section 5 (i.e., without the consideration of deductions in Chapter VIA), then the gross dividend, as claimed by the appellant, will necessarily have to be excluded from the total of such incomes. The result, however, will be the same as has been reached by the Income-tax Officer in computing the chargeable profits. As stated earlier, I am inclined to confirm the method of computation of chargeable profits adopted by the Income-tax Officer. " The assessee went on appeal before the Tribunal. The Tribunal was of the view that the matter was concluded by the decision of the Kerala H....
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....refore, if in the assessment, the net dividend has been included, such net dividend should only be excluded from the total income in terms of r. 1. It is contended that r. 1 of the First Schedule does not provide for exclusion from the total income computed by the ITO under the I.T. Act any amount in excess of what was included in it. If in the total income, only the net dividend is included, then such dividend income can only be excluded from the total income. It is urged that the expression " such total income " in r. 1(viii) of the First Schedule means total income as computed for the purpose of income-tax assessment. That item of income, profits or gains can be excluded from the total income which was included in it. On the other hand,....
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....l Pradesh High Court held that the definition of "chargeable profits " provided in s. 2(5) of the Companies (Profits) Surtax Act, 1964, deals with the total income of an assessee computed under the I.T. Act and the total income is further required to be adjusted in accord and with the provisions of the First Schedule by excluding "income by way of dividends". When the legislature speaks of " income by way of dividends ", it refers to the gross income shown in the books of the assessee and not the actual net income computed by the assessee. If the legislature intended that only net dividend is to be excluded, they would have used some other language than the expression " income by way of dividends ". The company which declared the dividend h....
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....the word " such income by way of dividends ". If the words " such income by way of dividends " are referable to the quantum of income included in the total income, then the contention of the Revenue has to be accepted inasmuch as what is included in the total income should be excluded in view of rule 1(viii) of the 1964 Act. However, the interpretation as contended by the Revenue cannot be accepted in view of the judgment of the Supreme Court in the case of Cloth Traders (P.) Ltd. [1979] 118 ITR 243 (SC). The Supreme Court held that the words " income by way of dividends " refer only to the category of the income included in the total income, and not to the quantum of the income so included. It, therefore, follows that if the total income i....