Whether, in the case of company where part of dividend is utilised for setting-off loss under any other head, deduction under the section is to be allowed on reduced dividend remaining after such set-off - Income Tax - 58/1971

Circular 58 Dated 15/4/1971 SECTION 80M - INTER-CORPORATE DIVIDENDS Whether, in the case of company where part of dividend is utilised for setting-off loss under any other head, deduction under the section is to be allowed on reduced dividend remaining after such set-off 1. A question has arisen as to whether in the case of a company where a part of the dividend income is utilised for setting-off loss under any other head, relief under section 80M, is to be allowed on the reduced dividend income remaining after such set-off or on the total dividend income before set-off. 2. In this connection, the Board are advised that the income received by an assessee-company by way of dividends is one of the components which go to make up its gross total income which is arrived at by aggregating its income under the various heads. It would not be strictly in accordance with the language of the section to state that a certain amount which has been added in calculating the gross total income of an assessee should be considered as not being included in it merely because the computation of the total income of the assessee includes a loss. Thus, in the case of an assessee being a company, where a part of the dividend income is utilised for setting off loss under any other head, relief under section 80M, is to be allowed on the dividend income before such set-off, subject to the overall limit imposed by section 80A(2). This is illustrated in the following example : Rs. 1. Income from dividend 20,000 2. Business loss 10,000 Total income 10,000 Deduction under section 80M at the rate of 60 per cent of Rs. 20,000 (Rs. 12,000) but subject to the limit of total income, i.e, Rs. 10,000. Circular : No. 58 [F. No. 167/24/70-IT (A-I)], dated 15-4-1971.