Bombay H.C : Whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of s. 80MM, the Tribunal erred in law in holding that the relief admissible to the assessee under that section is required to be restricted to the net income and not with reference to the actual amount of income by way of consulting fees received, amounting to Rs. 3,27,350 (asst. yr. 1972-73), Rs. 4,99,170 (asst. yr. 1973-74) and Rs. 67,448 (asst. yr. 1974-75) ?

High Court Of Bombay

Industrial Consulting Bureau (P) Ltd. vs. CIT

Section 80MM

Asst. Year 1972-73, 1973-74, 1974-75

T.D. Sugla & D.R. Dhanuka, JJ.

IT Ref. No. 159 of 1977

8th March, 1991

Counsel Appeared

Dilip Dwarkadas with N. A. Dalvi, i/b M/s Manilal Kher Ambalal & Co., for the Assessee: Dr. V. Balasubramanian with Pradeep S. Jetley & K. C. Sidhwa, for the Revenue.

T. D. SUGLA, J. :

The reference is at the instance of the assessee. The asst. yrs. involved are 1972-73, 1973-74 and 1974-75. By its order dt. February 3, 1976, under s. 256(1) of the IT Act, 1961, the Tribunal has referred to this Court the following question of law: “Whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of s. 80MM, the Tribunal erred in law in holding that the relief admissible to the assessee under that section is required to be restricted to the net income and not with reference to the actual amount of income by way of consulting fees received, amounting to Rs. 3,27,350 (asst. yr. 1972-73), Rs. 4,99,170 (asst. yr. 1973-74) and Rs. 67,448 (asst. yr. 1974-75) ?”

2. It is stated by Shri Dilip Dwarkadas, learned counsel for the assessee, that the issue before the Supreme Court in the case of Distributors (Baroda) (P) Ltd. vs. Union of India (1985) 47 CTR (SC) 349: (1985) 155 ITR 120 (SC) involved the interpretation of s. 80M and not s. 80MM. He pointed out that our Court, in an unreported judgment in the case of CIT vs. Banque National de Paris (IT Ref. No. 597 of 1976 decided on July 19, 1990 ), was also dealing with the interpretation of r. 1 (x) of the First Schedule to the Surtax Act, 1964. His submission is that the question herein is not covered by the decision of the Supreme Court or of our Court. Placing reliance on the Madras High Court decisions in the cases of CIT vs. Madras Motor & General Insurance Co. Ltd. (1986) 51 CTR (Mad) 71:(1986) 159 ITR 601 (Mad)and CIT vs. K. S. Narayanan (1986) 159 ITR 618 (Mad) and the Calcutta High Court decision in the case of Pilani Investment Corporation Ltd vs. CIT (1986) 55 CTR (Cal) 30:(1987) 165 ITR 138 (Cal), he submitted that the Supreme Court decision in Distributors (Baroda) (P) Ltd. vs. Union of India (supra), must be held limited to the interpretation of s. 80M.

3. We, however, find that all these decisions have been considered by our Court in the unreported judgment in CIT vs. Banque National de Pari (IT Ref. No. 597 of 1976). It cannot be disputed that the language of s. 80MM is similar, if not identical, with that of r. 1(x) of the First Schedule to the Companies (Profits) Surtax Act, 1964. Moreover, the Supreme Court itself recently in the case of CIT vs. (P) K. Jhaveri (1990) 181 ITR 79 has, following its earlier decision in Distributors (Baroda) (P) Ltd. vs. Union of India (supra), held that the interpretation given to s. 80M in that case was applicable to s. 80K also. Reliance placed by Shri Dilip Dwarkadas on the Board’s Circular No. 341 dt. May 10, 1982, reported in ((1982) 137 ITR (St.)) 4, is of no consequence as the said circular was issued on the basis of the Supreme Court’s earlier decision in the case of Cloth Traders (P) Ltd. vs. Addl. CIT (1979) 10 CTR (SC) 393:(1979) 118 ITR 243 (SC) which now stands overruled by the Supreme Court’s subsequent decision in Distributors (Baroda) (P) Ltd. vs. Union of India (supra). In that view of the matter, it has to be held that, on the basis of the interpretation of the language used in s. 80MM, the relief is to be allowed on the net income and not on the gross income.

4. Accordingly, the question of law referred to us is answered in the negative and in favour of the Revenue. No order as to costs.

[Citation : 189 ITR 346]

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