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TMI Blog1984 (3) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 1979-80. The last two arise out of regular proceedings. We first take up for consideration a common issue which is involved in the appeal arising out of proceedings under section 154 for the assessment year 1977-78 as well as in the appeals for the assessment years 1978-79 and 1979-80. 2. In the assessment year 1977-78, subsequent to the completion of the original assessment on 28-1-1980, an amendment was made by the Finance (No. 2) Act, 1980, by introduction, with retrospective effect from 1-4-1968, of a new provision, section 80AA of the Act, which reads as under : " Where any deduction is required to be allowed under section 80M in respect of any income by way of dividends from a domestic company which is included in the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted. I do not think that there is much force in the assessee's contention. The preliminary objective of the corporation is not to invest in shares. In fact as per section 25(f) of the State Financial Corporation Act, the corporation can retain as part of its assets, any stocks, shares, bonds, etc., which it may have to take in fulfilment of its underwriting liabilities so, however, that it disposes of its stocks, shares, bonds, etc., so acquired as early as practicable but in no case the stock shares, bonds, etc., so acquired shall be retained beyond a period of 7 years from the date of such acquisition except with the prior permission of the Reserve Bank of India. It is admitted in the course of hearing that the relationship between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, the net dividend was arrived at Rs. 1.55 lakhs and 60 per cent thereof, i.e., Rs. 93,435 alone, was allowed as a deduction. On a similar basis, the ITO worked out the admissible deduction under section 80M for the assessment years 1978-79 and 1979-80. The gross dividend for 1978-79 was Rs. 1.82 lakhs, deduction under section 80K Rs. 49,241, giving a balance of Rs. 1.33 lakhs and with reference to the ratio of expenses to income, the expenditure arrived at for earning the income was Rs. 88,031. Deducting this, net dividend came to Rs. 45,249 on which 60 per cent relief was Rs. 27,149. For the assessment year 1979-80, after deduction under section 80K of Rs. 43,666, the dividend income came to Rs. 1,92,714. The proportionate expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds expenditure, therefore, did not arise. Even if interest payments had to be considered, the Commissioner observed, having regard to the ratio of the decision of the Gujarat High Court in the case of Cotton Fabrics Ltd., the interest income was fully deductible under section 36 of the Act from the business income and there was no warrant for apportioning any expenditure for deduction from the gross dividends under section 80M. In any event, expenses had to be incurred and, according to the Commissioner, there was no relationship between incurring of the expenditure and earning of the dividend income and, therefore, he held on the facts that relief under section 80M had to be processed with reference to the gross dividends received. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO made the assessment, the retrospective amendment was not in existence. The amendment was introduced by the Finance (No. 2) Act, 1980 with retrospective effect from 1-4-1968. When the retrospective amendment came into force, it was clear that on the date the ITO made the assessment, there was a mistake apparent from the records since the provisions of the amendment were not applied which, it is deemed, he should have been bound to apply. [See in this regard the ratio of the judgment of the Supreme Court in S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149. Therefore, invocation of the provisions of section 154 was in order. 7. We have gone into the facts and at our instance details were filed to show that as on 31-3-1977 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Under the provisions of section 56(2)(i), dividend income has to be computed under the head ' Income from other sources '. Under the provisions of section 57(i), deduction has to be made of any reasonable sum paid by way of commission or by way of remuneration to a banker for the purpose of realising such dividend as also other expenditure laid out or expended wholly or exclusively for the purpose of making or earning such, income. In the present case, it was categorically stated that the bank has realised the dividends without collecting any charges. We have referred to the number of companies in which the assessee held shares which at the maximum was only 20. The dividends received were only from, of course, 3 or 4 companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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