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Issues: Interpretation of provisions under sections 80M, 80K, and 80L of the Income-tax Act, 1961 regarding the deduction of gross or net dividend income for assessment years 1968-69, 1969-70, and 1970-71.
Analysis: The judgment by the Delhi High Court, delivered by B. N. Kirpal J., addressed Income-tax References pertaining to the assessment years 1968-69, 1969-70, and 1970-71. The case involved a statutory corporation established under the Industrial Finance Corporation Act to provide medium and long-term credits to industrial concerns in India. The corporation's income primarily comprised interest on loans to industrial concerns, along with other sources like dividend, commission, interest, and commitment charges on unutilized loans. The dispute arose when the corporation claimed relief under sections 80M, 80K, and 80L of the Income-tax Act, 1961 for the mentioned assessment years. The Income-tax Officer allowed relief under section 80M based on net dividend income, while relief under sections 80K and 80L was granted for certain years but denied for others. Subsequent appeals led to the Appellate Assistant Commissioner directing relief under section 80M to be calculated based on gross dividend income, along with allowing reliefs under sections 80K and 80L. The Revenue appealed to the Tribunal, which upheld the decision, prompting the references of questions of law to the High Court. The key issue revolved around whether the relief under sections 80M, 80K, and 80L should be calculated based on gross or net dividend income. While the Supreme Court's decision in Distributors (Baroda) P. Ltd.'s case was cited as precedent for section 80M, a distinction was raised for sections 80K and 80L. The argument contended that the Supreme Court's decision in P. K. Jhaveri's case did not consider the specific language and scheme of sections 80K and 80L, unlike section 80M. The High Court, however, held that the Supreme Court's rulings in Distributors (Baroda) P. Ltd.'s case and P. K. Jhaveri's case were applicable to sections 80K and 80L as well. Consequently, deductions on gross dividend income were disallowed for sections 80K and 80L, aligning with the principles established in the cited Supreme Court decisions. In conclusion, the High Court ruled in favor of the Revenue, denying deductions on gross dividend income under sections 80K and 80L based on the precedents set by the Supreme Court. The Income-tax Appellate Tribunal was directed to determine the actual deduction available under the relevant sections in accordance with the judgment. No costs were awarded in the matter.
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