SEN,J. - (1.) PURSUANT to the direction under s. 256 (2) of the IT Act,1961 ('the Act') the following questions were referred by the Tribunal: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the CIT (A) that thought the income from dividends has to be assessed under a separate head, expenses incurred for the purpose of earning income from investments in shares should be allowed against income from dividend from such shares? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the CIT (A) that deduction under s. 80M the I.T.Act,1961, should be allowed on the gross amount of dividend received by the assessee and not on the net amount of dividend computed after deducting the apportioned expenditure? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in upholding the order of the CIT (A) directing the AO to carry forward the unallowed deduction under s. 80M of the IT Act,1961, to the next assessment year in view of the provisions of s. 80A (2) , r/w s. 80B (5) of the IT Act,1961?"
(2.) THE facts, inter alia, as appear from the statement of case are that the assessee-company was engaged in the business of dealing in shares and securities, etc., and claimed deduction under s. 80M of the Act on the gross dividend of Rs. 2,51,550 and Rs. 3,10,700 on the shares held by it respectively for the assessment year 1985-86 and1986-87. In the course of assessment the ITO held that the part of the expenditure made by the assessee-company was atributable to earning of the dividend income and in the absence of any apportionment in the books of account the estimate of such expenditure at 5 per cent of the gross dividend of the two years was proper. He accordingly deducted a sum of Rs. 2,51,550 and Rs. 3,10,700 for the two assessment years respectively from the gross dividends and allowed the relief under s. 80M on the net dividend. Being aggrieved, the assessee-company came up in appeal before the CIT (A) . The assessee- company challenged the ITO's action and argued that the dividend income, though assessable under the head 'Income from other sources' arises out of its business actively and no apportionment of the expenses between the business income and income from other sources should be made. Two decisions of this Court were cited and relied upon on the behalf of the assessee-company before the CIT (A) . It was urged that introduction of s. 80AA of the Act has not altered the position of law vis-a-vis the computation of deduction under s. 80M in the case of a dealer in shares. The CIT(A) held that the assessee-company was doing business of dealing in shares and that the dividend income accruing in the course of such dealings should in its entirety be taken as relating to the business and no deduction under s. 57 (iii) of the Act should be made in such cases. Thus, the CIT by holding such a view directed the AOs to recomputed the unabsorbed deduction under s. 80M to be carried forward for each of the two years, in accordance with law.
(3.) THE revenue was not satisfied with the said direction of the CIT (A) and, hence, came up to the Tribunal. The Tribunal held that the view taken by the CIT (A) appeared to be correct and no interference was called for. Thus, the Tribunal dismissed the Revenue's appeals.;