Law:

Section:

Section 37(1), read with section 56, of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee-company was deriving income from purchasing and selling shares, dividends thereon as well as income from other business - Tribunal's finding was that there was nothing to show that assessee held any shares as investments - Whether expenses incurred by assessee were allowable under the head 'Business income' and could not be apportioned under various sources of income in proportion of gross income from those sources - Held, yes Section 235 [omitted with effect from 1-4-1972] of the Income-tax Act, 1961 - Relief to shareholder in respect of agricultural income-tax attributable to dividends - Whether relief under section 235 was available on gross dividend - Held, yes Facts The assessee-company was doing business in tea and gunnies and was also having income from managing agency commission, allowances, dividend, etc. During the previous year relevant to the assessment year 1962-63, the assessee-company started the business of purchase and sale of shares. While computing the assessee's income, the ITO apportioned the expenses under the various sources of income in the same proportion as the gross total income from those sources. Thus, he also allocated expenses under the head 'Income from other sources' in respect of dividend income and the rebate under section 235 was worked out on the basis of the gross dividend income less proportionate expenses deducted therefrom. The AAC upheld the ITO's order. The Tribunal, however, held that the rebate under section 235 would be available on the gross amount of the dividend without deducting therefrom the proportionate expenses. On reference: Held It was held in CIT v. New India Investment Corpn. Ltd. [1978] 113 ITR 778 (Ker.) that where an assessee was holding shares and securities as its stock-in-trade and dividend was received by the assessee from such stock-in-trade and none of the holding of the assessee were held by way of investment only and the assessee had incurred expenditure to earn its income, then the dividend earned by the assessee, though assessable under a particular head, i.e., 'Income from…

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