9911796707
TMI Blog2016 (7) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-assessee to disclose truly and fully all material facts necessary for the assessment, the impugned Notices are without jurisdiction. Further, our attention was invited to the assessment orders passed in regular assessment proceedings in each of the five assessment years. We find that each of them discusses the issue raised in the reasons in support of the impugned notices namely, the quantum of expenses to be deducted from the gross dividend for allowing the benefit of Section 80M of the Act. It was on consideration of this very issue that the Assessing Officer in all the five assessment years held that 1% of the gross dividend received would be deductible for the purposes of claiming benefit under Section 80M of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding further with the impugned Notices dated 11th January, 2000. 3. In its return of income filed for all the five assessment years, the petitioner had claimed deduction under Section 80M of the Act in respect of gross dividend received. In its return of income it had claimed expenses for earning the dividend at ₹ 20,000/per year. The Assessing Officer in his orders passed under Section 143(3) of the Act in regular assessment proceedings, on consideration as reflected in his orders, while allowing the claim for deduction under Section 80M of the Act, reduced the deduction by increasing the expenses to 1% to gross dividend income. 4. Being aggrieved, the petitioner carried the issue in appeal to CIT(A) in all the five assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 31.03.1989 as against ₹ 308.41 crores during the year ending 31.03.1988. The interest payment was made in respect of interest bearing borrowed fund of ₹ 4141.82 crores. The assessee had non interest bearing fund in the form of paid up share capital of ₹ 80.05 crores besides reserves and surplus of ₹ 304.52 crores totaling to ₹ 384.57 crores as on 31.03.1989 against ₹ 320.85 crores as on 31.03.1988. In the computation of income under the head Income From Other Sources the gross dividend income of ₹ 6.61 crores was offered without reducing any expenditure either in the form of interest expenditure or administrative cost incurred for the purpose of earning dividend. Accordingly, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund is deposited and investments are made and loans are advanced to various customers in various forms out of such fund. The assessee claimed entire interest expenditure of ₹ 330.71 crores u/s 36(1)(iii) on the plea that it was incurred for the purpose of business. This action of the assessee resulted in claiming interest on borrowed fund which was utilized for the purpose of making investments in shares and units of mutual funds, income from which is assessable under the head Income from other sources u/s 36(1)(iii). The Honourable Bombay High Court in its judgment in the case of Commissioner of Income Tax Vs. Manganlal (P) Ltd. 236 ITR 456 held that the deduction under section 80M has to be calculated with reference to amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was justified and held as in accordance with law. An identical decision was rendered by Honourable Calcutta High Court in the case of Indian City Properties Ltd. Vs. CIT (Central) Calcutta. In all above decisions, the courts held that where it is not possible to directly link the expenditure to specific income, proportionate expenditure attributable to earn such income is to be determined and apportioned for arriving at deduction that is to be allowed against the respective income. Consequent to Honourable Bombay High Court judgment (236 ITR 456), the interest expenditure incurred on borrowed funds has to be proportionally apportioned against the dividend income as a part of the borrowed fund was utilized for investment in shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll material facts necessary for assessment. In the above view and bearing in mind that the assessments were finalized for each of the five years under Section 143(3) of the Act, the proviso to Section 147 of the Act would be applicable. Therefore, in the absence of any allegations of failure on the part of the petitioner-assessee to disclose truly and fully all material facts necessary for the assessment, the impugned Notices are without jurisdiction. 8. Further, our attention was invited to the assessment orders passed in regular assessment proceedings in each of the five assessment years. We find that each of them discusses the issue raised in the reasons in support of the impugned notices namely, the quantum of expenses to be deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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