1986 (1) TMI 126

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....d. From the accounts maintained, it is seen that the assessee had incurred certain expenditure towards stationery, printing, scooter expenses, finding fees, audit fees, preliminary depreciation etc., and the net profit carried over to the balance sheet was shown at Rs. 759. Along with the return of income, the assessee had enclosed the statement of income wherein it had worked out refund of Rs. 360 in the following manner: "Net Profit as per P&L A/c . 759 Add: (1) Taxation-provision Rs. 1600 . (2) Preliminary expenses S/off Rs. 1621 . (3) Depreciation treated separately Rs. 820 4,041 . . 4,800 Less: (—) . . (i) U/s 35D, 10per cent of Rs. 1,621 i.e. preliminary expenses. Rs. 162 ....

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.... under s. 80M claimed is not admissible as there is nothing on record to show that the domestic company had made prescribed arrangement for declaration and payment within India of dividend payable out of company's income.   Total Income : Rs. 6,000" 5. In appeal before the CIT(A), it was argued on behalf of the assessee that since it was engaged in the business of finance/investment, the ITO ought to have treated this income under the head "business". The CIT(A) attention was also invited to the memorandum of association with a view to impress upon him that the main object of the assessee company was to carry on business as investment company. It was also submitted that since both the assessee and M/s Steel Cast Bhavnagar (....

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....see fully qualified for deduction as contemplated under s. 80M of the Act. In this connection, he stated that it is of no consequence whether the assessee is carrying on business or investing funds in the shares of other companies with a view to earn dividend. Again, as both the assessee and M/s Steel Cast Bhavnagar (P) Ltd. are domestic companies and have made prescribed arrangement for declaration and payment of dividend within India, there was no justification on the part of the ITO to deny the assessee's claim for deduction as contemplated under s. 80M of the Act. The learned counsel for the assessee, therefore, submitted that the total income as shown in the statement of income sent alongwith the return ought to have been accepted by t....