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TMI Blog1985 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same proportion as the gross income from those sources. In this way, Rs. 92,726 was allocated against the dividend income amounting to Rs. 2,10,455. The dividend income was thus reduced to Rs. 1,17,729 and the rebate under section 235 was worked out on the basis of the gross dividend income less proportionate expenses deducted therefrom. The assessee was aggrieved by the assessment order of the Income-tax Officer and, therefore, went up in appeal before the Appellate Assistant Commissioner in which among other grievances raised was the grievance against the action of the Income-tax Officer in deducting proportionate expenses against the dividend income and determining the rebate under section 235 on the basis of gross dividend less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al did not find out the necessary facts whether all the shares were held as business assets or not. The Tribunal erred in deciding the controversy without ascertaining the basic and primary fact. He has also submitted that in the event some shares are held as investment, the expenses have to be apportioned and, accordingly, the relief under section 235 would not be allowable on the gross dividend. We are however unable to accept the contentions of Mr. Naha. During this year, the assessee started purchasing shares and selling the same. These transactions have been done through stock brokers. The assessee company was managing certain other companies from which it received managing agency commission and allowances. The Income-tax Officer fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the contention of the Revenue that the shares other than the shares of managed companies that were acquired in earlier years were shares for investment and not for the business, we are to observe that the assessee has apparently made no distinction between such shares acquired earlier and the shares purchased in the previous year. The Department has not made out a case that the shares acquired earlier formed a separate block of investment and were not part of the stock-in-trade in the business in dealing in shares started in the year. No doubt in the balance-sheet, all the shares are shown under the head 'Investments', but evidently that is so in order to comply with the requirements of the Companies Act. In any case, there is nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been affected by such proportionate allocation of the expenditure, but if dividend income is reduced by proportionate expenses, in that event, the relief available to the assessee under section 235 would also be reduced. In view of the findings of the Tribunal, we are unable to accept the contention of Mr. Naha that the Tribunal did not find out the basic or primary fact. In any event, the first question would be purely academic in view of our answer to the second question. We, therefore, answer the first question in the affirmative and in favour of the assessee. The second question relates to relief under section 235 of the Act. Section 235 of the Income-tax Act, 1961, which had been omitted by the Finance (No. 2) Act, 1971, corresponde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But the expression " that portion of the dividend " used in the latter part of the section refers to the words " attributable to the profits of the company assessed to agricultural income-tax " and, therefore, the construction suggested by Mr. Pal is not permissible or possible. This section gives relief to the shareholders who have received the dividends from the company, paying such dividend out of the profits and gains, where such profits and gains have been assessed to agricultural income-tax in the hands of the dividend paying company. The quantum of relief is also specified in the section itself. Our above view is also supported by the decision of the Kerala High Court in the case of CIT v. A. V. Thomas Co. Ltd. [1974] 96 ITR 343 at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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