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TMI Blog2008 (6) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. P.K.R. Menon for the respondent. JUDGMENT The judgment of the court was delivered by C.N. RAMACHANDRAN NAIR, J. - The appellant, a scheduled bank, claimeddeduction of 4/5th of the dividend income received from theUnit Trust of India under proviso (a) to Section 80 M(1) ofthe Income Tax Act for the assessment year 1994-95. TheAssessing Officer however restricted the deduction to 4/5 th of 60% of the dividend income from the Unit Trust bytaking the view that 'such income' referred to in proviso(a) above referred means 60% of dividend incomementioned in sub-clause (i) of Section 80 M(1) of the Act.Even though, the First Appellate Authority allowed theappeal holding that the appellant is entitled to deductionof 60% on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment corporation or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), sixty per cent of the income by way of dividends from another domestic company; (ii) in the case of any other domestic company, so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date; Provided that where any domestic company receives any income by way of dividend from the units of the Unit Trust of India established under the Unit Trust of India Act,1963 (52 of 1963), such domestic company shall, subject to the aforesaid provisions, be eligible for deduction to the extent of- (a) four-fift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and public financial institutions and Section 25 companies were entitled to deduction of only 60% of the dividend income including dividend received from U.T.I. The purpose of introduction of the proviso is explained in the Notes on Clauses of Finance Bill, 1993 as follows [1993] 200 ITR (St.) 32,121): "Clause 16 seeks to amend sub-section (1) of section 80M of the Income tax Act relating to deduction in respect of certain intercorporate dividends. The proposed amendment seeks to insert a proviso in sub-section(1) of section 80M so as to withdraw the deduction under that section in respect of dividend income received by a domestic company from the units of the Unit Trust of India in a phased manner. The amount of deduction shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso makes any difference or not. The Senior Counsel appearing for the Revenue contended that 'subject to the aforesaid provisions' refers to the limits on relief covered by clauses (i) and (ii) of Section 80M(1) or in other words, provisos (a) and (b) are a further restriction or limitation on the reliefs provided in clause (i) and (ii) of the main provision. We are unable to agree with this argument because the purpose of introduction of proviso as stated in the Explanatory Note attached to the Finance Bill is to take away deduction for dividend income from Unit Trust of India in a phased manner. In the first year, 1994-95, the relief provided was up to 4/5th of dividend income received from Unit Trust of India. For the next year 1995-96, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue that admissible deduction for dividend income from Unit Trust of India for the year 1994-95 is only 4/5 th of 60% of such income is rejected. We hold that the deduction under main section available to dividend income from the Unit Trust of India is subject to the limit contained only in clause(a) to the proviso for the year 1994-95. So the assessee is entitled to deduction of 4/5th of the dividend income received from the Unit Trust of India. For the year 1995-96, the limitation is only what is provided in clause (b) of the proviso to Section 80M(1) of the Act. Consequently, we allow the appeal by reversing the order of the Tribunal and restoring the order of the First Appellate Authority in favour of the assessee. - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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