1990 (1) TMI 107 - AT - Income Tax

Summary

Issues:
Deduction under section 80M of the Income Tax Act.

Analysis:
The appeal before the Appellate Tribunal ITAT BOMBAY-E revolved around the deduction available to the assessee under section 80M of the Income Tax Act. The assessee, a company with a share in a firm, claimed a deduction on dividend income received directly and from the firm. The Income Tax Officer (ITO) allowed a deduction on a lesser amount than claimed by the assessee, considering proportionate registered firm tax and expenses. The CIT(Appeals) upheld the ITO's decision partially, allowing deduction after adjusting the proportionate registered firm tax. The Tribunal analyzed the provisions of section 67 of the Act, which governs the computation of a partner's share in the firm's income. The Tribunal emphasized that the purpose of apportioning profit under various heads was for loss carry-forward provisions and held that reducing the assessee's share of dividend income by proportionate registered firm tax was not justified for granting deduction under section 80M. The Tribunal directed the ITO to allow the deduction as claimed by the assessee and modify the assessment accordingly.

The Tribunal's decision was based on a thorough analysis of the relevant provisions of the Income Tax Act. The Tribunal highlighted that the method of computing a partner's share in the firm's income, as per section 67, does not authorize the ITO to deduct proportionate registered firm tax from the assessee's dividend income for the purpose of section 80M deduction. The Tribunal emphasized that the apportionment of profit under various heads was primarily for facilitating loss carry-forward provisions and not for reducing dividend income. Therefore, the Tribunal concluded that the ITO should allow the deduction under section 80M as claimed by the assessee, without reducing it by proportionate registered firm tax.

In conclusion, the Tribunal allowed the appeal, directing the ITO to grant the deduction under section 80M of the Income Tax Act as claimed by the assessee. The Tribunal's decision was based on a strict interpretation of the relevant provisions and the purpose behind apportioning profit under different heads. The Tribunal emphasized that such apportionment was not intended to reduce dividend income by proportionate registered firm tax for the purpose of granting deductions.