assessee is private limited company with paid-up capital of Rs. 74,500. Its reserves amounted to Rs. 5,46,073 and resources available were loans and other provisions amounting to Rs. 8,00,118. As at end of year, it had invested these resources in motor car worth Rs. 12,613, shares in limited companies valued at Rs. 9,53,511, fixed deposit of Rs. 1,10,000, loan to sister concern amounting to Rs. 2,42,000 and other sundry assets such as cash in hand, etc. P & L A/c disclosed only receipts by way of dividends and shares amounting to Rs. 2,27,213 and interest on fixed deposit of Rs. 8,924. As against this, it had incurred liability for interest on borrowings to extent of Rs. 96,125 and other miscellaneous expenditure amounting to Rs. 33,260. In return of income filed before ITO, assessee declared dividend income at Rs. 1,31,088 by deducting amount of interest on borrowing of Rs. 96,125 out of gross dividend amounting to Rs. 2,27,213. It however, claimed relief under s. 80M of IT Act in respect of entire dividend of Rs. 2,27,213. In assessment made under s. 143(3) of IT Act, ITO granted relief under s. 80M of IT Act at rate of 60 per cent on dividend income at Rs. 1,31,088 as shown by assessee. It is not clear how assessee could have any grievance against such assessment made by ITO, yet it filed appeal before CIT (A) on following grounds: "(1) ITO erred in restricting deduction under section 80M on net dividend income; (2) He failed to appreciate and ought to have held that deduction under section 80M was rightly allowable on entire gross dividend income; (3) appellant prays that directions be given accordingly to recompute deduction under section 80M". CIT (A) for detailed reasons mentioned by him in his appellate order, rejected assessee s claim for relief under s. 80M on gross dividend, He, however, allowed deduction in respect of interest on borrowed funds to extent of Rs. 8,924 against interest on deposits which were to same extent. assessee has filed further appeal before Tribunal on ground that CIT (A) had erred in restricting deduction under s. 80M to 60 per cent of net amount of dividend instead of gross amount of dividend. Further objection is taken to order of CIT (A) in not following Gujarat High Court decisions in case of CIT vs. Cotton Fabrics (1981) 23 CTR (Guj) 247: (1981) 131 ITR 99 (Guj) and in case of Addl. CIT vs. Laxmi Agents Pvt. Ltd. (1980) 125 ITR 227 (Guj) (Appendix). Further objection is taken to CIT(A) s order on ground that CIT(A) had failed to appreciate and ought to have held that assessee bring and investment company, interest paid by it was business expenditure allowable under head 'business income ; interest paid by assessee being business expenditure, deduction under s. 80m was allowable on gross divided income without making any adjustment of interest expenditure and for investment company decision in case of Cotton Fabrics and in case of Laxmi Agents lay down correct legal position in respect of assessment of dividend income. assessee prayed that deduction under s. 80M be allowed on gross dividend income. ld. representative for assessee argued vehemently relying on Gujarat High Court decisions in case of Addl. CIT vs. Laxmi Agents Pvt. Ltd. (1980) 125 IT 227 (Guj) (Appendix) and in case of CIT vs. Cotton Fabrics Ltd. (1981) 23 CTR (Guj) 247: (1981) 131 ITR 99 (Guj). On behalf of Revenue, ld. departmental representative has invited my attention to provisions of s. 14 of IT Act under which detailed classification is laid down for various categories of income. Further reference was made to ss. 56(1) and 56(2) of IT Act. Particular reference was made to s. 56(2) of IT Act under which provisions has been for determining income from dividends. See. 57 of IT Act laid down how income from other sources was to be computed. It was submitted that considering express provisions of law on subject, it was not possible to follow any other provisions of law such as s. 36 of IT Act for determining assessee s income which was from dividends, which was relevant for considering relief admissible to assessee under s. 80M of IT Act. ld. representative for assessee has invited my 80M of IT Act. ld. representative for assessee has invited my attention to observations of ld. judges of Gujarat High Court at p. 230{See: Addl. CIT vs. Laxmi Agents Pvt. Ltd. (1980) 125 ITR 227 ((Guj)) (Appendix)} in case of Cotton Fabrics Ltd. (1981) 131 ITR 99 (Guj). I have carefully considered facts and circumstances of case and arguments on either side. facts of case are that on assessee s own admission, in return of income assessee s income from dividend was Rs. 1,13,088. This income has correctly been arrived at by deducting from gross dividend interest paid on borrowings for purchase of shares. ITO has accepted this position while calculating relief admissible under s. 80M as required under s. 80AA of IT Act. It is not clear how assessee could have been aggrieved by order of ITO in this respect and how appeal lay before CIT (A) and yet CIT (A) had entertained appeal and granted relief to extent of interest on fixed deposits which was only other item of income earned during year. assessee has filed further appeal before Tribunal objecting to grant of relief under s. 80M only to extent of net dividend income and not gross dividend income. In support, as stated earlier, assessee s representative has relied on Gujarat High Court decision in case of Laxmi Agents P,. Ltd. (supra). In my opinion, dictum laid down by ld. judge of Gujarat High Court in case of Laxmi Agents P. Ltd. (supra) has no bearing on facts of present case inasmuch as in case of Laxmi Agents P. Ltd. ld., Judges of Gujarat High Court were concerned with law prior to placing of s. 80AA in statute book. As regards argument on basis of Gujarat High Court decision in case of cotton Fabrics Ltd. this case is also fairly distinguishable inasmuch as in case of cotton Fabrics Ltd., assessee was dealer in shares. In instant case, assessee is not dealer in shares. assessee, on its own admission, is investment company and has no other income other than income on investments either by way of dividends on shares or interest on deposits. assessee in case of Cotton Fabrics Ltd. having other business activities, no wonder, ld. judge of Gujarat High Court considered provisions of s. 36 of IT Act under which allowance could have been made ain respect of interest liability incurred by assessee on other borrowings. In case presently under consideration before me, on assessee s own admission, according to return of income, entire interest liability was incurred for purchase of shares from which dividends were earned. By applying provisions of s. 80AA r/w s. 57 of IT Act, such interest had necessarily to be deducted before granting relief under s. 80M of IT Act. In my opinion therefore assessee is not eligible for any relief in grant of deduction under s. 80M of IT Act. In result, appeal is dismissed. *** SUMANI PVT LTD. v. INCOME TAX OFFICER