TaxTMI 
TaxTMI 
1987 (8) TMI 131
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....2,311. The Income-tax Officer deducted Rs. 42,311 from Rs. 6,38,038 under section 80M(2) of the Act and on the balance of Rs. 5,95,727 he calculated deduction allowable under section 80M(1) being 60 per cent of said amount. This came to Rs. 3,67,436. He allowed this deduction under section 80M(1) of the Act. The assessee went in appeal before the Commissioner of Income-tax (Appeals) and pleaded that calculation of 60 per cent under section 80M(1) should have been on Rs. 6,38,038 and not on Rs. 5,95,727 in view of the provisions of section 80AA of the Act. The assessee relied on an earlier decision of the Tribunal in some other case. The Commissioner of Income-tax (Appeals) accepted the submission of the assessee. The department is now in ap....
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....ITR 120 and it was held that on true interpretation of the words of sub-section (1) of section 80M, deduction was allowable on net dividends and not gross dividends. By net dividends, what is meant is gross dividends as reduced by expenses for earning said dividends. 5. The decision of the Supreme Court in Cloth Traders (P.) Ltd.'s case was not accepted by the department. Hence section 80AA was inserted in the Act by the Finance (No. 2) Act, 1980 and its operation was made retrospective with effect from 1-4-1968. This section laid down that where any deduction is required to be allowed under section 80M in respect of any income by way of dividends from a domestic company which is included in the gross total income of the assessee, then, ....
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....ntion was not to grant relief on the income as computed in accordance with the provisions of the Act including Chapter VIA. The intention was to grant relief on the income by way of dividends as computed in accordance with all the provisions of the Act excluding Chapter VIA. Hence the words used in sec. 80AA are " the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) ". 8. The learned representative of the assessee relies on the words " before making any deduction under this Chapter " in section 80AA to contend that in computing deduction under section 80M(1), no deduction of amount representing deduction allowed separately as deduction under section....
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....ify this limited aspect section 80AA was inserted by the Finance (No. 2) Act, 1980, with retrospective effect. Subsequently, the Supreme Court itself in the case of Distributors (Baroda) (P.) Ltd. interpreted words in sub-section (1) of section 80M as meaning net amount of dividends. There was no dispute even when the case of Cloth Traders (P.) Ltd. was decided that deduction contemplated by sub-section (2) of section 80M should be made from income by way of dividends in order to arrive at the amount of admissible deduction. Sub-section (2) of section 80M was an independent provision about which there was never any dispute. Consequently, there could not have been any intention to nullify the effect of said sub-section of section 80AA contai....