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TMI Blog1988 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 78. Two questions are common for the assessment years 1975-76 and 1977-78 and one question pertains to the assessment year 1975-76. We deal with these questions in that order. Taking up the three questions which are common for the assessment years 1974-75, 1975-76 and 1977-78, learned standing counsel for the Revenue fairly represented that all these three questions are covered by decision of this court in Referred Case No. 18 of 1980 dated November 7, 1984. The first question, it is said, is covered against the Revenue (sic) the second question, it appears, is covered against the assessee (sic) and the third question, it is said, is covered against the Revenue. Having regard to this representation, we answer questions Nos. 1 and 3 in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1975-76 and 1977-78. It is stated that these amounts are not set apart against any known or existing liability but they represent ad hoc reserve created for the purpose of meeting the future requirements. Learned counsel for the assessee, Mr. M. J. Swamy, therefore, contended that the sums in question should be regarded as "other reserves" for the purpose of the Second Schedule to the Act. Learned standing counsel submits that these were in the nature of provisions and should not, therefore, be regarded as "other reserves". If the assessee had separately ascertained the debts which had actually become bad and debited the same to the profit and loss account, we do not see how the sums set apart to meet future contingencies could be rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1977-78, the assesseecompany received dividends from other companies (which are popularly called inter-corporate dividends) to the extent of Rs. 88,025. While computing the income under the Income-tax Act, the deductions specified in Chapter VI-A were allowed. On account of the inter-corporate dividends, the deduction allowed was Rs. 51,015 so that in the total income computed for the income-tax purposes, the portion of the inter-corporate dividends included was only Rs. 34,010. For the purpose of computation of chargeable profits under the Surtax Act, the assessee claimed that from out of the total income computed under the Income-tax Act, the gross dividends of Rs. 88,025 received should be excluded, notwithstanding the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a chequered history. Under the Income-tax Act, the initial contention that gross dividend should be excluded for the purpose of determining the total income was accepted notwithstanding the fact that only a portion of the dividend was subjected to tax. The Supreme Court upheld the above position in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243. As soon as the Supreme Court decided the matter, an Ordinance was passed and section 80A of the Income-tax Act, 1961, was introduced to the effect that what could be deducted under Chapter VI-A of the Income-tax Act is only the net income which ultimately suffered tax and not the gross dividend. That Ordinance was given retrospective effect with effect from April 1, 1968. The Ordinance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto force only on April 1, 1981, and will be operative from the assessment year 1981-82 onwards and it cannot be applied for the earlier assessment years. He relied upon a decision of the Calcutta High Court in CIT v. Jiyajeerao Cotton Mills Ltd. [1985] 154 ITR 323, which is directly on the point. The Calcutta High Court had taken note of the fact that the Explanation added by the Finance Act, 1981, cannot be construed as clarifying the legislative intent. The High Court observed that it declares the legislative intent to exempt from surtax the amount of dividends which has actually been included in the total income from the assessment year 1981-82. We would have had no difficulty in respectfully agreeing with the judgment of the Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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