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TMI Blog1987 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... le under section 80M(1) being 60 per cent of said amount. This came to Rs. 3,67,436. He allowed this deduction under section 80M(1) of the Act. The assessee went in appeal before the Commissioner of Income-tax (Appeals) and pleaded that calculation of 60 per cent under section 80M(1) should have been on Rs. 6,38,038 and not on Rs. 5,95,727 in view of the provisions of section 80AA of the Act. The assessee relied on an earlier decision of the Tribunal in some other case. The Commissioner of Income-tax (Appeals) accepted the submission of the assessee. The department is now in appeal before us and the only ground raised is that the learned Commissioner of Income-tax (Appeals) had erred in directing the Income-tax Officer to allow relief under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net dividends, what is meant is gross dividends as reduced by expenses for earning said dividends. 5. The decision of the Supreme Court in Cloth Traders (P.) Ltd.'s case was not accepted by the department. Hence section 80AA was inserted in the Act by the Finance (No. 2) Act, 1980 and its operation was made retrospective with effect from 1-4-1968. This section laid down that 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 contained in that section, the deduction under that section shall be computed with reference to the income by way of dividends as computed in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of dividends as computed in accordance with all the provisions of the Act excluding Chapter VIA. Hence the words used in sec. 80AA are " the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) ". 8. The learned representative of the assessee relies on the words " before making any deduction under this Chapter " in section 80AA to contend that in computing deduction under section 80M(1), no deduction of amount representing deduction allowed separately as deduction under section 80K should be made from the income by way of dividends as computed in accordance with the Act in spite of the fact that in sub-section (2) of section 80M there is an expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (Baroda) (P.) Ltd. interpreted words in sub-section (1) of section 80M as meaning net amount of dividends. There was no dispute even when the case of Cloth Traders (P.) Ltd. was decided that deduction contemplated by sub-section (2) of section 80M should be made from income by way of dividends in order to arrive at the amount of admissible deduction. Sub-section (2) of section 80M was an independent provision about which there was never any dispute. Consequently, there could not have been any intention to nullify the effect of said sub-section of section 80AA contains clarificatory provision regarding section 80M and clarification that was needed was only in respect of provisions in sub-section (1). Consequently, provisions of sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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