Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the guarantee commission should be assessed to tax as business income and the expenses incurred on items of depreciation, legal expenses, payment of urban land tax, property tax, interest and loss under s. 32, constitute deduction under s. 37(1) of the IT Act ?

High Court Of Madras

CIT vs. Amalgamations Ltd.

Sections 28(i), 37(1), 5

Asst. Year 1979-80

A. Abdul Hadi & N.V. Balasubramanian, JJ.

Tax Case No. 947 of 1985 and Ref. No. 478 of 1985

26th March, 1997

Counsel Appeared

C.V. Rajan, for the Revenue : P.P.S. Janarthana Raja, for the Assessee

JUDGMENT

N.V. BALASUBRAMANIAN, J. :

At the instance of the Revenue, the Tribunal has stated a case and referred the following questions of law under s. 256(1) of the IT Act, 1961, for the opinion of this Court for the asst. yr. 1979-80 :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the guarantee commission should be assessed to tax as business income and the expenses incurred on items of depreciation, legal expenses, payment of urban land tax, property tax, interest and loss under s. 32, constitute deduction under s. 37(1) of the IT Act ?

2. Whether the Tribunal was right in holding that only the net dividend income after deduction of tax deducted at source from abroad, should be brought to tax and not the gross dividend ?”

Mr. P.P.S. Janarthana Raja, learned counsel for the assessee, has undertaken to file vakalat on 26th Feb., 1977, and at the time of hearing he has stated that he will file vakalat within a period of one week. Recording the said undertaking, learned counsel for the assessee is directed to file vakalat within one week.

Insofar as the first question is concerned, Mr. C.V. Rajan, learned counsel for the Revenue, has fairly stated that the issue raised in this question is covered against the Revenue by the decision of this Court in the assessee’s own case in CIT vs. Amalgamations (P) Ltd. (1977) 108 ITR 895 (Mad), wherein this Court has held that the guarantee commission and the miscellaneous income received should be assessed under the head “Business”. Following the decision of this Court rendered in the assessee’s own case, we answer the first question referred to us in the affirmative and against the Revenue.

Insofar as the second question is concerned, the point that arises is whether the gross dividend income should be brought to tax or the net dividend after deduction of tax deducted at source from abroad should be brought to tax. This Court in A.F.W. Low vs. CIT (1995) 124 CTR (Mad) 298 : (1995) 211 ITR 213 (Mad), has held that only the gross dividend income that should be brought to tax. Mr. P.P.S. Janarthana Raja, fairly concedes that the above decision would fully apply to the facts of the present case. Hence, the view of the Tribunal that the net dividend should be brought to tax is not sustainable in law. Following the decision in A.F.W. Low vs. CIT (supra), we answer the second question in the negative and in favour of the Revenue. There will be no order as to costs.

[Citation: 236 ITR 430]

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