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TMI Blog1992 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ving deductions under sections 80L and 80M of the Income-tax Act, 1961, was deductible from the total income of the assessee in computing the chargeable profits in accordance with clause (viii) of rule 1 of the First Schedule to the Companies (Profits) Surtax Act, 1964 ? " The facts, as stated in the statement of the case, are that in respect of the assessment year 1971-72, the relevant previous year having ended on October 31, 1970, the assessee was liable to assessment under the Companies ( Profits ) Surtax Act, 1964. In respect of this year, the net chargeable profits were computed at Rs. 60,34,958. The assessee had claimed before the Surtax Officer that in computing the chargeable profits, dividend income of Rs. 2,51,350 was deductible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) income by way of dividends from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India . It may here be noticed that by the Finance Act, 1981, an Explanation to this rule 1(viii) was added with effect from April 1, 1981, which was in the following terms : " Explanation. - Notwithstanding anything contained in any clause of this rule, the amount of any income or profits and gains which is required to be excluded from the total income under that clause shall be only the amount of such income or profits and gains as computed in accordance with the provisions of the Income-tax Act (except Chapter VIA thereof), and in a case where any deduction is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Courts have come to the conclusion that, on a correct interpretation of the said rule 1(viii) of the First Schedule to the Surtax Act, it is only the net dividend which is included in the total income and, therefore, it is this amount which would be deductible while arriving at the figure of the chargeable profits. This conclusion has been arrived at by the Calcutta High Court in the case of CIT v. Hindustan Gum and Chemicals Ltd. [1990] 182 ITR 396; CIT v. Andhra Bank Ltd. [1990] 186 ITR 192 (AP); CIT v. R. B. Multanimal Modi and Sons [1991] 189 ITR 730 (All) and CIT v. Kil Kotagiri Tea and Coffee Estates Ltd. [1991] 191 ITR 283 (Ker). On a plain reading of the aforesaid rule it appears to us that the contention of the Revenue before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be excluded. We cannot agree with this submission. In our view, the said Explanation is explanatory. Even without recourse to the provisions of the Explanation, the substantive rule 1(viii) is clear and unambiguous and this is what has been also held by the Calcutta High Court in the case of Hindustan Gum and Chemicals Ltd. [1990] 182 ITR 396. There can be no manner of doubt that the Legislature provided only that amount to be excluded while determining the quantum of chargeable profits which amount has been included in the total income of the assessee. In other words, it is the net dividend and not the gross dividend which has to be excluded. For the foregoing reasons, the aforesaid question of law is answered in the negative and in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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