2003 (4) TMI 49

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..... of the Act as it then stood into section 80M of the Act ?" - Our answer to this question is in favour of the assessee-bank and against the Department
Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S. H. KAPADIA J.-By order dated January 29, 1981, the Tribunal has referred to this court under section 256(1) of the Income-tax Act, 1961, the following question of law (which has been reframed by us) concerning the assessment year 1970-71. The reference has been made at the instance of the Department. The assessee is Central Bank of India. The assessee-bank claimed reliefs under section 80M on the dividends amounting to Rs. 15,58,646. However, the Income-tax Officer deducted Rs. 15,04,220 .....

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..... ce, the Department has come by way of this reference. As stated above, by order dated January 29, 1981, the following question of law was referred to us for opinion. The question reads as follows: "Whether the assessee was entitled to deduction under section 80M on the basis of gross dividend or net dividend?" However, before us, there is no dispute that the deduction under section 80M is based on net dividend received. This point is squarely covered in favour of the Department by the judgment of the Bombay High Court in the case of CIT v. Maganlal Chhaganlal (P.) Ltd. [1999] 236 ITR 456, in which it has been held that deduction under section 80M has to be calculated with reference to the amount of interest computed in accordance with t .....

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..... numerous cases by this court, Chapter VI-A constitutes a separate code dealing with deductions to be made in computing total income. Section 80M refers to special deduction in respect of intercorporate dividends. As held by the Bombay High Court in the case of Maganlal Chhaganlal (P.) Ltd. [1999] 236 ITR 456, in order to compute deduction under section 80M, one has to compute the amount of dividend in accordance with the Act after deducting interest on monies borrowed for earning such income. The point to be noted is that deductions contemplated by section 80M referred to actual expenditure whereas, deductions contemplated by section 20(1) are estimated proportionate expenses and interest. Therefore, one cannot import deductions from inter .....

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