9911796707
|
Home
Issues Involved: Entitlement to relief under section 80K of the Income-tax Act, 1961, for the assessment years 1968-69 and 1969-70.
Detailed Analysis: 1. Background and Facts: The assessee, an individual deriving income from various sources including salary, annuities, directors' sitting fees, and dividends, had his total income computed by the Income Tax Officer (ITO) at Rs. 57,880 for the assessment year 1968-69 and Rs. 62,510 for the assessment year 1969-70. The ITO allowed deductions under section 80K of the Income-tax Act, 1961, amounting to Rs. 10,610 and Rs. 11,106 for the respective years. The Additional Commissioner of Income Tax (Addl. CIT) issued a notice under section 263 of the Act to revise the assessment orders, contending that the deductions under section 80K were improperly allowed. The assessee contested this, arguing that section 80K entitles relief on the gross total income from dividends. The Addl. CIT rejected this contention and directed the ITO to withdraw the deductions under section 80K. The assessee appealed to the Income-tax Appellate Tribunal, which ruled in favor of the assessee. The Addl. CIT then referred the matter to the High Court under section 256(1) of the Act. 2. Legal Provisions: The court examined several relevant provisions of the Income-tax Act, including: - Section 2(24) defining "income" to include dividends. - Section 2(45) defining "total income." - Section 5 detailing the ambit of total income. - Section 56 categorizing dividends as "Income from other sources." - Section 57 outlining deductions permissible under "Income from other sources." - Chapter VI-A, particularly sections 80A and 80K, dealing with deductions in computing total income. 3. Assessee's Contention: The assessee argued that relief under section 80K should be based on the gross dividend income, not the net dividend income after deducting interest paid on borrowings used for investment. The assessee maintained that section 80K and section 57 are mutually exclusive, and deductions under section 80K should be in addition to those under section 57. 4. Revenue's Contention: The revenue contended that the assessee is not entitled to the benefit of section 80K as there would be no dividend income after accounting for the interest paid on borrowed amounts for investment purposes. 5. Court's Analysis and Judgment: The court agreed with the assessee's contention, stating that section 80K provides for deductions on the gross dividend income attributable to profits and gains from new industrial undertakings. The court emphasized that section 57 and section 80K operate in different fields. Section 57 deals with deductions for expenses incurred to earn income, while section 80K focuses on dividend income from specific sources. The court noted that the legislative intent behind Chapter VI-A, including section 80K, was to promote new industrial undertakings by providing tax incentives. 6. Precedents and Comparative Analysis: The court referred to several precedents, including: - CIT v. South Indian Bank Ltd. (1966) 59 ITR 763 (SC), where the Supreme Court held that "interest receivable" means the amount calculated as per the terms of the securities, not reduced by expenses. - CIT v. Industrial Investment Trust Co. Ltd. (1968) 67 ITR 436 (Bom), where the Bombay High Court granted exemption from super-tax on the whole dividend income without deducting expenses. - CIT v. Darbhanga Marketing Co. Ltd. (1971) 80 ITR 72 (Cal), where the Calcutta High Court held that "dividend received" means the gross dividend income. - Madras Auto Service v. ITO (1975) 101 ITR 589 (Mad), where the Madras High Court held that relief under section 80K should be on the gross dividend income. - CIT v. Central Bank of India Ltd. (1976) 103 ITR 196 (Bom), where the Bombay High Court held that relief under section 56A and section 49B is on the whole dividend income without reducing it by expenses. 7. Conclusion: The court concluded that the assessee is entitled to relief under section 80K on the gross dividend income. The question referred was answered in the affirmative and against the revenue, with costs awarded to the assessee. Separate Judgments: No separate judgments were delivered by the judges; the judgment was delivered collectively.
|
