Ajit K. Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, West Bengal-IV, the following questions of law were referred to this court under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1968-69 : "(i) Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 80B(5) of the Income-tax Act, 1961, defining the term gross total income, the Tribunal was justified in holding that the relief under Section 80M of the said Act was admissible on the gross amount of the dividend without deducting therefrom the proportionate management expenses and interest paid for earning the dividend ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to change the method of valuation of its closing stock and in that view allowing the deduction of Rs. 23,06,452 claimed by the assessee ? (iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the cash payments on account of reimbursement of medical expenses of the employees could not be included in the value of benefit, amenity or perquisite for the purpose of disallowance in excess of the limits laid down under Section 40(c)(iii) or 40(a)(v) of the Income-tax Act, 1961 ?"
(2.) The second and third questions had been referred by the Tribunal under Section 256(1) of the Income-tax Act, 1961. The said reference came up before this court and was decided in favour of the assessee. The said decision is reported in CIT v. National and Grindlays Bank Ltd. It appears that, by mistake, the aforesaid questions have been again referred to this court under Section 256(2) of the Act. It further appears that there is some typographical mistake in the amount mentioned in question No. 1 in the earlier reference which is question No. 2 in the present reference. However, to avoid any controversy, we answer the second and third questions in the affirmative and in favour of the assessee.
(3.) So far as the first question is concerned, the facts are briefly as under : The assessee received a gross dividend during the accounting year relevant to the assessment year 1968-69 amounting to Rs. 3,02,662. Following the same basis as adopted in calculating the expenses and interest under Section 21 attributable to interest on securities, the proportionate expenses and interest to earn the dividend income was worked out at Rs. 1,25,529 and Rs. 1,20,933 respectively. Thus the net dividend left for the purpose of giving relief under Section 80M was only Rs. 56,200. The Income-tax Officer took the figure at Rs. 55,700 after deducting Rs. 500 under Section 80L of the Income-tax Act. The assessee went in appeal to the Appellate Assistant Commissioner. He held that there was no justification for apportioning any part of the expenses or interest payments against the income of the assessee from dividend and held that the assessee was entitled to deduction under Section 80M on the gross dividend amounting to Rs. 3,02,662. The Department went in appeal to the Tribunal. The Tribunal considered several decisions of the Supreme Court and this court and came to the conclusion that the Appellate Assistant Commissioner rightly allowed the relief under Section 80M on the gross amount of the dividend.;