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TMI Blog1981 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the income from dividend as computed under the provisions of sections 56 and 57 after deducting the appropriate interest on borrowings utilised for investment in shares in respect of which dividend income was earned by the assessee and not on the gross amount of dividend actually received by the assessee ? " The assessment years under consideration are assessment years 1967-68, 1968-69 and 1969-70. The relevant previous years are the financial years ended on 31st March, 1967, 31st March, 1968, and 31st March, 1969, respectively. The assessee is a limited company and the question is about what is known as inter-corporate dividends. The Tribunal in its order followed the decision of the Gujarat High Court in Addl. CIT v. Cloth Traders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idend income which was to be taken into account and not the net dividend income after deducting interest, etc. As a result of the legislative amendment by way of insertion of s. 80AA, it is clear that the effect of the Gujarat decision will operate with effect from 1st April, 1968. In its decision in Cloth Traders (P.) Ltd.'s case [1979] 118 ITR 243, the Supreme Court has clearly pointed out that s. 85A and s. 80M are both in identical terms though applicable to different assessment years. Section 80AA says : " Where any deduction is required to be allowed under section 80M in respect of any income by way of dividends from a domestic company which is included in the gross total income of the assessee, then, notwithstanding anything contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act will be with reference to the net dividend income and not with reference to the gross dividend income. Under these circumstances, we answer the question referred to us as follows: With reference to assessment year 1967-68, the relief under s. 85A will be with reference to the gross dividend income of the assessee. With reference to the assessment years 1968-69 and 1969-70, the relief under s. 80M will be computed on the income from dividend as computed under the I.T. Act without giving any relief under Chap. VI-A of the Act, that is, on the net income as computed under the provisions of the Act. The question is thus answered in favour of the assessee and against the Revenue so far as assessment year 1967-68 is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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