Sabyasachi Mukharji, J. - (1.) This reference relates to the assessment year 1968-69. We have been referred the following question under Section 256(1) of the I.T. Act, 1961: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to relief under Section 86A of the Income-tax Act, 1961, on the gross amount of dividends received from statutory corporations which was held to be 'Interest on securities' within the meaning of Section 18 of the said Act ?"
(2.) As we have mentioned before, the relevant assessment year is 1968-69, for which the previous year is 1967. Now, in deciding this appeal, the Tribunal has referred to its decision in the previous appeal. We may incidentally point out that the question that fell for decision in the previous appeal for the years 1964-65 to 1967-68, which came up in appeal, was the same question for the year 1968-69, when the Tribunal gave its decision and in the instant decision, the Tribunal has followed the said previous decision. It has accepted that the said decision would be applicable to the instant case. But there is no reference to the said previous decision.
(3.) Therefore, in order to determine this question we will have to refer to the decision of the Tribunal for the assessment years 1964-65 to 1967-68, in Income-tax Appeal Nos. 956 to 959 (Cal) of 1972-73. There the Tribunal observed as follows: "For the assessment years 1965-66 to 1966-67, it is Section 86A which applies. The provisions relating to the imposition of super-tax were deleted from the Act, w.e.f. April 1, 1965. Consequently it became necessary to allow relief to the assessees deriving income from tax-free securities. This was provided by the insertion of Section 86A by Act 10 of 1965 w.e.f. April 1, 1965. The said section reads as under : '86A. Deduction from tax on certain securities.--Where there is included in the total income of au assessee- (i) the interest due on any security of the Central Government issued or declared to be income-tax free, or (ii) the interest due on any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government, the assessee shall be entitled to a deduction from the amount of income-tax with which he is chargeable on his total income, of an amount equal to the income-tax calculated on the amount so included at the average rate of income-tax or at the rate of twenty-five per cent., whichever is less.' (changed to 27 1/2% w.e.f. April 1, 1965). The above section lays down that the assessee shall be entitled to relief on the amount so included in its total income. The amount so included is the interest due on any security of the State Government issued income-tax free. Here also we would hold that the assessee would be entitled to the necessary relief on the entire amount of interest. The principle would be the same as decided by the Supreme Court in the case of CIT v. South Indian Bank Ltd. and by the Calcutta High Court in CIT v. Darbhanga Marketing Co. Ltd. We may state that the principle laid down by the Calcutta High Court in the above case with reference to Section 99(1)(iv) of the Act was applied by the Tribunal in its various decisions relating to the interpretation of Section 85A of the Act also which was inserted by the same Act 10 of 1965 w.e.f. April 1, 1965, after the omission of Section 99 with the abolition of super-tax. The language of Section 85A is more or less similar to that of Section 86A. Section 85A also says that where the total income of an assessee being a company includes any income by way of dividends received by it from an Indian company, etc., the assessee shall be entitled to a deduction from income-tax calculated in a particular manner on the income so included. This language was interpreted by the Tribunal following the decision of the Calcutta High Court in the manner that the relief was to be allowed on the entire amount of dividend and not on the net amount of dividend after deducting the expenses incurred in earning the same. Respectfully, following the above decisions, we hold that even for the subsequent three years, i. e., assessment years 1965-66 to 1967-68, the assessee is entitled to relief on the gross amount of interest. We, therefore, direct the ITO to recompute the amount of tax and allow the necessary relief to the assessee.";