This reference under section 256(1) of Income-tax Act, 1961, is at instance of assessee to answer following question of law: " Whether, on facts and in circumstances of case and on correct interpretation of section 80M of Income-tax Act, 1961, Income-tax Appellate Tribunal was justified in holding that deduction under section 80M should be given on net dividend income, i.e., after deducting proportionate expenses? " relevant assessment year is 1973-74. assessee is limited company. Daring corresponding previous year, assessee received dividend income of Rs. 6,81,643. deduction of Rs. 3,81,311 was made in accordance with section 80K of Act and worked out balance at Rs. 3,00,332. Out of this amount, Income-tax Officer deducted Rs. 18,300 as expenses giving net dividend income at Rs. 2,82,032. Income-tax Officer granted relief in accordance with section 80M of Act at 606% of this amount, i.e., net dividend income. assessee preferred appeal to Appellate Assistant Commissioner which was dismissed, affirming view taken by Income-tax Officer regarding construction of section 80M of Act. assessee's further appeal to Tribunal has also failed. Tribunal also rejected assessee's contention that benefit in accordance with section 80M of Act is to be computed on basis of gross dividend income instead of net dividend income. Aggrieved by view taken by Tribunal, assessee sought reference to this court which has led to above question of law being referred to this court for our decision. In view of law as settled by recent decision of Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120, reference has to be answered against assessee. No doubt section 80M of Act was earlier construed by Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, in manner contended by assessee, taking view that benefit under section 80M of Act had to be computed on basis of gross dividend income and not on net dividend income. Thereafter, Legislature stepped in and Act was amended by inserting section 80AA, retrospectively with effect from April 1, 1968, with view to overcome Supreme Court case in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, by clearly providing that this benefit under section 80M was to be computed on basis of net dividend income and not gross dividend income. This amendment led to challenge to its constitutional validity before Supreme Court and decision of Supreme Court in that case is reported in Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120. larger Bench of Supreme Court took view that earlier decision in Cloth Trader s (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, by smaller Bench was incorrect and that, properly construed, section 80M, as it stood from very outset, gave benefit thereunder only on basis of net dividend Income and not gross dividend income. Accordingly, it was held that insertion of section 80AA was merely to declare law as it existed from very outset and not to introduce additional tax burden retrospectively. After this decision of Supreme Court, there can be no doubt that view taken by Tribunal in present case was correct. Consequently, reference is answered in favour of Revenue and against assessee as under: " Tribunal was justified in construing section 80M of Incometax Act, 1961, to mean that deduction thereunder should be given only on net dividend income." There will be no order as to costs. *** Shekhavati General Traders Ltd. v. Commissioner of Income-tax