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TMI Blog2010 (7) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income ? (2) Whether Section 80AA clearly states that deduction under Section 80M has to be allowed only on the dividend income as computed under the provision of the Act after deducting the expenses incurred for earning the same under the head Income from other sources and not on the gross dividends received ? 2. The facts leading to this appeal are as follows: The Assessee is a housing finance company and is entitled to claim deduction under Section 36(1)(viii) of the Income Tax Act, 1961 (hereinafter, referred to as the Act). The Assessee claimed deduction under Section 36(1)(viii) on a total income which included dividend income of ₹ 5,41,41,490. The assessing authority observed the deduction under Section 80M cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is utilised for raising special reserve created for providing long -term finance for industrial or agricultural development in India, the Assessee is entitled to deductions not exceeding 40 per cent of the total income. Again, if benefit is granted under Section 80M deducting the dividend income from the total income, it would amount to double benefit. It is under these circumstances Section 80AA was introduced providing for calculating the net income in accordance with the Act. In those circumstances, both the lower appellate authorities were not justified in interfering with the order passed by the assessing authority. 4. Per Contra, Sri Parthasarathi, learned Counsel appearing for the Assessee submitted Chapter VI -A deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany formed and registered in India with the main object of carrying on the business of providing long -term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long -term finance (computed under the head Profits and gains of business or profession before making any deduction under this clause carried to such reserve account). 6. A careful reading of the aforesaid provisions makes it clear that in respect of any special reserve created by a financial corporation which is engaged in providing long -term finance for industrial or agricultural development in India, an amount not exceeding 40 per cent of the total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in the case of income of the nature referred to in els. (ii) and (iii) of Sub -section (2) of Section 56, deductions, so far as may be, in accordance with the provisions of Sub -clause (ii) of Clause (a) and Clause (c) of Section 30, Section 31 and Sub -sections (1) and (2) of Section 32 and subject to the provisions of Section 38; (ii-a) in the case of income in the nature of family pension, a deduction of a sum equal to thirty -three and one -third per cent of such income or fifteen thousand rupees, whichever is less. Explanation: For the purposes of this clause, family pension means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death; (iii) any other expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income under this Act, it is the net income after deducting the expenditure which is to be taken into consideration. This has nothing to do with calculating the total income for the purpose of Section 36(1)(viii). Section 36(1)(viii) is a deduction on the taxable income under the heading of Profits and gains . If the income of the Assessee includes dividend income, that section specifically states in computing the total income, the said dividend income should not be deducted i.e., in arriving at the total income, the income from the dividend is also to be taken into consideration and 40 per cent of that, the Assessee is entitled to deduction. Therefore, we do not see any justification to hold that because once benefit is conferr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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