- (1.) On an application under Section 256(2) of the Income-tax Act, 1961, this court has directed the Tribunal to refer the following question set out at page 2 of the paper book for the opinion of this court : "Whether, on the facts of the case though the assessee was only a partner of a firm to which the dividend arose on the shares held by the firm, the Tribunal was correct in law in holding that the assessee (a partner) would be entitled to deduction under Section 80M of the Income-tax Act, 1961, on account of share income by way of dividend from the firm?"
(2.) In pursuance of our direction, the Tribunal has referred the question for our opinion.
(3.) The assessee is a private limited company and is one of the partners in a firm, Kusum Investment and Finance Corporation. The firm had at different times purchased shares of different companies and those shares stood registered in the names of the different partners. Since the firm is not entitled under the law to get the shares registered in its name, the shares are purchased in the names of the partners. On those shares the firm received the dividend and the shares of the assessee-company by way of dividend came to Rs. 77,129 in the assessment year 1984-85, Rs. 1,17,276 in the assessment year 1985-86, which were assessed in its assessment as income from "other sources". While assessing this dividend income, the Income-tax Officer did not allow deduction under Section 80M of the Act taking the view that the shares were owned by the partnership firm and not by the assessee-company.;