2009 (2) TMI 94 - HC - Income Tax

Deduction under section 80M - assessee is a financial institution who is entitled to deduction u.s 36(i)(viii) - held that the Tribunal was justified in holding that deduction under Section 80M of the Act was allowable on gross amount of dividend without deducting the proportionate deduction available under Section 36(i)(viii)

Summary

Issues:
- Interpretation of deduction under Section 80M of the Income Tax Act
- Allowance of deduction on gross amount of dividend without deducting proportionate deduction under Section 36(i)(viii) of the Act

Interpretation of Deduction under Section 80M:
The case involved the interpretation of the deduction under Section 80M of the Income Tax Act for the Assessment Year 1986-87. The assessee, a financial institution, claimed deduction under Section 36(i)(viii) of the Act. The Assessing Officer believed that the deduction under Section 80M should be on the net amount of dividend after deducting the amount under Section 36(i)(viii) of the Act. However, the appellate authorities held in favor of the assessee, allowing the deduction under Section 80M on the entire amount of dividend without reducing the proportionate deduction available under Section 36(i)(viii) of the Act.

Consistency with Previous Orders:
The Commissioner (Appeals) and the Tribunal referred to their own previous orders for the Assessment Year 1988-89 in the assessee's case. It was noted that in the previous year, there was no distinction between gross dividend and net dividend, leading to the allowance of deduction under Section 80M on the entire dividend amount. Additionally, it was found that the deduction under Section 36 of the Act was applicable while computing business income under Section 28, and the relevant income did not fall under the category of "Income from Other Sources."

Lack of Distinguishing Features:
During the proceedings, the appellant-revenue failed to demonstrate any distinguishing features on facts that would justify a different view from the assessee's case for the year 1988-89. Consequently, the Tribunal's decision to allow deduction under Section 80M on the gross amount of dividend without reducing the proportionate deduction under Section 36(i)(viii) of the Act was upheld.

Conclusion:
The High Court upheld the Tribunal's decision, affirming that deduction under Section 80M of the Income Tax Act was permissible on the gross amount of dividend without subtracting the proportionate deduction available under Section 36(i)(viii) of the Act. As a result, the appeal was dismissed with no order as to costs.