INCOME TAX OFFICER v. TAMBOLI INVESTMENT PVT. LTD
[Citation -1986-LL-0102-3]

Citation 1986-LL-0102-3
Appellant Name INCOME TAX OFFICER
Respondent Name TAMBOLI INVESTMENT PVT. LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 02/01/1986
Assessment Year 1982-83
Judgment View Judgment
Keyword Tags memorandum of association • declaration of dividend • business in investment • gross dividend income • gross total income • investment company • source of income • domestic company
Bot Summary: During the relevant previous year, the assessee received gross dividend amounting to Rs. 6,000 from M/s Steel Cast Bhavanagar Ltd. 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. Accepting the submissions made on behalf of the assessee, the CIT(A) disposed of the appeal in favour of the assessee. Counsel for the assessee, the dividend income of Rs. 6,000 earned by the assessee fully qualified for deduction as contemplated under s. 80M of the Act. We entirely agree with the submissions made on behalf of the assessee that the assessee would be entitled to claim deduction a contemplated under s. 80M of the act, in respect of the dividend earned by it. The ITO, in his order, has stated that the only deduction which could be allowed to the assessee in computing the income from dividend would be commission or remuneration paid to a banker or nay other person for the purpose of realising such dividend on behalf of the assessee. Again, we entirely agree with the submissions made on behalf of the assessee that since both the assessee company and M/s Steel Cast Bhavnagar Ltd., are domestic companies and have made prescribed arrangement for declaration and payment of dividend within the India, the assessee would be entitled to claim deduction as contemplated under s. 80M of the Act. In view of our decision in the appeal filed by the Revenue, the cross objections filed by the assessee becomes infractions as the assessee has simply supported the order of the CIT(A).


U.T. SHAH, J.M. appeal filed by Revenue and cross objection filed by assessee against order of CIT(A), involving common point of disputes, and disposed of together for sake of convenience. 2. assessee is company. assessment year is 1982-83 and relevant previous year ended on 31st May, 1981. 3. During relevant previous year, assessee received gross dividend amounting to Rs. 6,000 from M/s Steel Cast Bhavanagar (P) Ltd. From accounts maintained, it is seen that assessee had incurred certain expenditure towards stationery, printing, scooter expenses, finding fees, audit fees, preliminary depreciation etc., and net profit carried over to balance sheet was shown at Rs. 759. Along with return of income, assessee had enclosed statement of income wherein it had worked out refund of Rs. 360 in 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 Rs. 820 4,041 separately . . 4,800 Less: ( ) . . (i) U/s 35D, 10per cent of Rs. Rs. 162 . 1,621 i.e. preliminary expenses. (ii) Depreciation on Scooter Cost Rs. 4,100 Dep. 20 per cent Rs. 820 . WDV. For Rs. 4,100 820 next year Rs. 3,280 . Rs. 982 982 Gross Income : . 3,818 Less : ( ) Depreciation u/s 80M Dividend received from Indian . 2,290 Compnay 6 per cent of Rs. 3,818 Total . 1,528 Income : . i.e. 1,530 Tax payable on Rs. 1,530 . 1,020 Less : ( ) T. D. From dividend . 1,380 Refundable . 360 : 4. While framing assessment under s. 143(3) of Act, ITO did not grant deduction as contemplated under s. 80M of Act, and determined total incmoe of assessee at Rs. 6,000 in following manner : "The only source of income disclosed is dividend. assessee has claimed several expenses including depreciation from this dividend income. However, as provided under s. 57 only deduction available against income chargeable under head income from other sources and consisting of dividend would be any sum paid by way of commission or remuneration to banker or any other person for purpose of realising such dividend on behalf of assessee. Except amount paid by way of commission or remuneration of nature described above no other deductions are permissible under law against income of dividend. amounts, therefore, claimed are not permissible deductions. total income therefore, is, worked out as under : Rs. Gross dividend income as per A/c 6,000 Relief under s. 80M claimed is not admissible as there is nothing on record to show that domestic company had made prescribed arrangement for declaration and payment within India of dividend payable out of company s income. Rs. Total Income : 6,000" 5 . In appeal before CIT(A), it was argued on behalf of assessee that since it was engaged in business of finance/investment, ITO ought to have treated this income under head "business". CIT(A) attention was also invited to memorandum of association with view to impress upon him that main object of assessee company was to carry on business as investment company. It was also submitted that since both assessee and M/s Steel Cast Bhavnagar (P) Ltd., were domestic companies and had made prescribed arrangement for payment and declaration of dividend with in India, ITO was not justified in drawing adverse inference while disallowing assessee s claim for deduction under s. 80M of Act. It was, therefore, urged that deduction as contemplated under s. 8oM of act, should have been allowed to it. Accepting submissions made on behalf of assessee, CIT(A) disposed of appeal in favour of assessee. 6. Being aggrieved by order of CIT(A), Revenue has come up in appeal before Tribunal with grievance that CIT(A) was not justified in directing ITO to treat assessee company as investment company and to allow deduction under s. 80M of Act. learned representative for Department strongly relied on order of ITO and submitted that CIT(A) was no justified in accepting submissions made on behalf of assessee. He, therefore, urged that order of CIT(A)should be reversed. ld. counsel for assessee, on other hand, strongly supported action of CIT (A). In this connection, he invited our attention to provisions of ss. 80B and 80M of Act, and r. 27 of IT Rules, 1962, with view to impress upon us that reasoning given by ITO for not granting deduction under s. 80M of Act, are devoid of any merits. According to ld. counsel for assessee, dividend income of Rs. 6,000 earned by assessee fully qualified for deduction as contemplated under s. 80M of Act. In this connection, he stated that it is of no consequence whether assessee is carrying on business or investing funds in shares of other companies with view to earn dividend. Again, as both 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 part of ITO to deny assessee s claim for deduction as contemplated under s. 80M of Act. learned counsel for assessee, therefore, submitted that total income as shown in statement of income sent alongwith return ought to have been accepted by ITO. 7. We have considered rival submission of parties and we do not find any merit in appeal preferred by Revenue. We entirely agree with submissions made on behalf of assessee that assessee would be entitled to claim deduction contemplated under s. 80M of act, in respect of dividend earned by it. However, in opinion, income from dividend has to be computed as per provisions contained in s. F. Income from other sources, or contained in Chapter IV of Act, irrespective of fact as to whether assessee is carrying on business in investment or not. Therefore, gross total income of Rs. 3,818 as computed by assessee after allowing certain deductions cannot be accepted. Since only source of income of assessee for year under appeal is dividend from investments made in shares of M/s Steel Cast Bhavnagar (P) Ltd. ITO is required to compute total income after allowing deductions as contemplated under s. 57 of Act. ITO, in his order, has stated that only deduction which could be allowed to assessee in computing income from dividend would be commission or remuneration paid to banker or nay other person for purpose of realising such dividend on behalf of assessee. In instant case, we find from P&L A/c. that no such expenditure was incurred by assessee. Therefore, entire dividend income of Rs. 6,000 would qualify for deduction as contemplated under s. 80M of Act. Again, we entirely agree with submissions made on behalf of assessee that since both assessee company and M/s Steel Cast Bhavnagar (P) Ltd., are domestic companies and have made prescribed arrangement for declaration and payment of dividend within India, assessee would be entitled to claim deduction as contemplated under s. 80M of Act. ITO is, therefore, directed to modify assessment after granting deduction under s. 80M of Act, in respect of dividend income earned by assessee. 8 . In view of our decision in appeal filed by Revenue, cross objections filed by assessee becomes infractions as assessee has simply supported order of CIT(A). 9 . In result, both appeal filed by Revenue and cross objection filed by assessee are dismissed. *** INCOME TAX OFFICER v. TAMBOLI INVESTMENT PVT. LTD.
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