Commissioner of Income Tax vs Emcete and Sons (P.) Ltd.

Ramaprasada Rao, J.—The question referred to us, at the instance of the department, is as follows :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee-company is eligible

for deduction u/s 80M of the Income Tax Act, 1961, on the gross dividend income of Rs. 2,43,705 ?

The assessee-company earned a gross total income which included income by way of dividends from various domestic companies. The year of

assessment in question is 1968-69. That the assessee-company received such inter-corporate dividends is not in dispute. What the Appellate

Tribunal did was that it accepted the assessee''s case that the relief to which the assessee is entitled would be 50 per cent. of the gross total income

disclosed by it and that the expenses, interest, etc., incurred by the company need not be deducted for the purposes of arriving at the relief to

which the assessee would be entitled u/s 80M of the Income Tax Act, 1961 (hereinafter called ""the Act"").

The revenue sought for a reference as indicated already. Mr. Rangaswamy, the learned counsel for the department, says that the expression

gross total income"" appearing in Section 80M of the Act should not be literally understood and interpreted and it has to be read in conjunction

with the definition of ""gross total income"" appearing in Section 80B(5) of the Act. In this sense, he would say that the gross total income means

total income computed in accordance with the provisions of this Act before making any deductions under this Chapter (Chapter VI-A) or u/s 280-

O of the Act. On the other hand, the learned counsel for the assessee maintains that a literal and liberal interpretation to the expression ""gross total

income"" has to be given and it has been so given in two decisions of our court in Commissioner of Income Tax Vs. Madras Motor and General

Insurance Co. Ltd., and Madras Auto Service Vs. Income Tax Officer, . It would have been necessary for us to consider the distinction sought to

be made out by the learned counsel for the revenue, but for the fact that we are bound by the two decisions as above, Which directly apply to the

facts of this case. In Commissioner of Income Tax Vs. Madras Motor and General Insurance Co. Ltd., Ramanujam and Ramaswami JJ., after

reviewing the earlier provisions, came to the conclusion that the benefit to which the assessee would be entitled would be 50 per cent. of the gross

total income without deducting the expenses, etc., connected with the earning of such income. A similar view was also expressed in Madras Auto

Service Vs. Income Tax Officer, . But it has to be noticed that squarely the two Bench decisions referred to did not consider the import of the

expression ""gross total income"" appearing in Section 80M of the Act. They were concerned in one case with Section 99(1)(iv) and in the other

case with Section 80K of the Act. But, in our view, those decisions would apply with equal force to the facts of this case also. We are of the view

that the expression ""gross total income"" appearing in/section 80M should be understood in the manner in which this court interpreted a similar

expression appearing in Section 99(1)(iv) and the present Section 80M of the Act. Therefore, it is unnecessary to go into the question further. The

Appellate Tribunal came to the correct conclusion. The question is answered against the department. The tax case is dismissed with costs.

Counsel''s fee Rs. 250.