June 2008
Dividend income : Deduction u/s.80M : Distribution of interim dividend before due date insufficient compliance of requirement.
By K. B. Bhujle, Advocate
Reading Time 3 mins
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25 Dividend income : Deduction u/s.80M of
Income-tax Act, 1961 : A.Y. 1997-98 : Distribution of dividend before due
date : Distribution of interim dividend before due date is in sufficient
compliance of the requirement.
[CIT v. Saumya Finance & Leasing Co. (P) Ltd., 215
CTR 359 (Bom.)]
For the A.Y. 1996-97, the assessee company had filed return
of income including dividend income of Rs.2,69,16,774 and had claimed a
deduction of Rs.2,19,97,105 u/s.80M of the Income-tax Act, 1961 on the basis
of the distribution of interim dividend of Rs.2,19,97,105 before the due date
for filing the return. The Assessing Officer disallowed the claim on the
ground that the condition of distribution of dividend before due date is not
satisfied. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, it was contended on behalf of the
Revenue that the interim dividend was declared by the assessee company in the
financial year 1997-98 and out of income accrued in the said year. It was
further contended that the dividend declared and paid in the subsequent year
could not be a permitted deduction from the income in a previous year, since
the said dividend was paid out of income accruing in the subsequent year.
The Bombay High Court upheld the decision of the Tribunal
and held as under :
“(i) On the bare reading of S. 80M it is clear that the
deduction as permitted is of an amount equal to so much of the amount of
income by way of dividend declared by the company as does not exceed the
amount of dividend distributed by the assessee on or before the due date. S.
80M does not provide for the nature of the dividend distributed by the
assessee company. It does not state that the nature of the dividend
distributed must be for the financial year under assessment.
(ii) Accepting the argument of the Revenue will amount to
laying down an additional restriction to the effect that the dividend
distributed by the assessee company must be for the financial year under
assessment. Laying down such restricting qualification will amount to doing
violence to the plain and clear meaning of the words as contained in S. 80M.
(iii) This is not a case where a literal construction to
be given to S. 80M would lead to an absurd result. The intention of the
Legislature while enacting S. 80M was clearly to ensure that the dividend
income received by the assessee company should be permitted as a deduction
only if it is redistributed as dividend income to its shareholders. The
section provided that the said distribution is to be made before the due
date of the filing of the returns. This has been done by the present
respondent and all the requirements of S. 80M are clearly met by them.”
