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TMI Blog1982 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 67,257. The total income after deduction came to Rs. 44,839 which was rounded off to Rs. 44,840. The computation of the ITO is given below : "Gross Dividend Rs. 1,47,864 Less : Expenses towards audit fees, general charges, interest, loan and establishment charges debited to profit and loss account Rs. 35,768 ---------------------- Rs. 1,12,096 Less : @60 per cent on above under section 80M Rs. 67,257 ---------------------- Rs. 44,839 Rounded off to Rs. 44,840" 2. The assessee came in appeal before the Commissioner (Appeals) and urged that the ITO should have allowed deduction under section 80M of the Income-tax Act, 1961 ('the Act'), on the gross dividend of Rs. 1,47,864. The Commissioner (Appeals) accepted the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. After referring to the decisions in CIT v. Raghunandan Prasad Moody [1978] 115 ITR 519 (SC), CIT v. Cotton Fabrics Ltd. [1981] 131 ITR 99 (Guj.), CIT v. Bagyalakshmi Co. [1965] 55 ITR 660 (SC), CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC) and Lakshminarayan Ram Gopal Son Ltd. v. Government of Hyderabad [1954] 25 ITR 449 (SC) he stated that the income from dividend can be computed under section 56 after allowing deduction as enumerated under section 57(i). The assessee did not claim any collection charges and, therefore, the gross as well as net dividend of the assessee after the computation was the same. He specifically stated that section 57(iii) applies to all other income chargeable to income-tax under the head ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under that section shall be computed with reference to the income by way of such dividends as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) and not with reference to the gross amount of such dividends." "57. Deductions. --- The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely :--- (i) in the case of dividends, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend on behalf of the assessee ; (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 57(i) and the deduction under section 57(iii) is of general nature. 6. The note of the assessee containing several judicial pronouncements was looked into and it was found that income from other sources which includes income from dividend is assessable under section 56 of the Act. The deduction for income from other source is available in section 57. It is true that section 57(i) speaks of collection charges which could be deducted from gross dividend but it does not mean that other deductions under section 57(iii) are not available so far as income from dividend is concerned. The assessee has given some example in the note. The assessee has also cited the decision in Cotton Fabrics' case. The above decision is distinguishable on fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under section 57(iii). Section 37(1) provided for deduction of expenditure laid out or expended wholly and exclusively for the purpose of the business or profession in computing the income chargeable under the head 'Profits and gains of business or profession'. The language used in section 37(1) was 'laid out or expended---for the purpose of . . . making or earning such income' as set out in section 57(iii). The words in section 57(iii) being narrower, contended the revenue they cannot be given the same wide meaning as the words in section 37(1) and hence no deduction of expenditure could be claimed under section 57(iii) unless it was productive of income in the assessment year in question. This contention of the revenue undoubtedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne or that in fact any profit was earned. It is indeed difficult to see how, after this observation of the court, there can be any scope for controversy in regard to the interpretation of section 57(iii)." The assessee's argument that deduction in section 57(iii) is not available against dividend income is proved to be wrong by the decision of the Supreme Court in Raghunandan Prasad Moody. All the expenditure laid out or expended wholly and exclusively for the purpose of making or earning income is allowable under section 57(iii). Similar allowance as in the case of the assessee has been made in CIT v. Rampur Timber Turnery Co. Ltd. [1981] 129 ITR 58 (All.). 8. This is further clear from the speech of the Finance Minister in clauses 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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