2007 (4) TMI 115 - HC - Income Tax

Revenue contended that (i) Assessee is domestic company (ii) Assessee is not liable for deduction u/s 80M of ITA in respect of the share income from the firms - Held that revenue contention was not correct in both cases and set aside

Summary

Issues:
1. Interpretation of whether the assessee is an industrial company under section 104 of the Income-tax Act.
2. Eligibility of the assessee-company for deduction under section 80M of the Income-tax Act in relation to share income from firms receiving dividend income from other domestic companies.

Analysis:

*Issue 1:*
The court rejected the Revenue's question regarding the assessee's classification as an industrial company under section 104 of the Income-tax Act. This decision was based on a previous ruling in the assessee's favor in a similar case, where the court had already rejected a similar question raised by the Revenue.

*Issue 2:*
Regarding the eligibility of the assessee-company for deduction under section 80M of the Income-tax Act, the case involved the assessee, a domestic company, being a partner in three different firms that received dividend income from other domestic companies. The Assessing Officer initially denied the deduction under section 80M, citing a decision of the Orissa High Court. However, the Commissioner of Income-tax (Appeals) ruled in favor of the assessee, stating that the assessee, as an industrial company, was entitled to the deduction. The Tribunal upheld this decision, referring to a previous judgment by the court in a similar case. The court reiterated the principle that income received by a partner from a firm should be assessed in the same manner as it was assessed in the hands of the firm, applying this reasoning to the deduction under section 80M as well. The court highlighted that the requirement for the assessee to directly receive dividend income from another domestic company was not supported by the language of section 80M. Therefore, the court dismissed all applications, upholding the Tribunal's decision and discharging the rule without any order as to costs.