Law:

Section:

Section 80M, read with section 161 of the Income-tax Act, 1961 and section 77 of the Companies Act, 1956 - Deductions - Intercorporate dividends - Assessment years 1973-74, 1974-75 and 1975-76 - Assessees were trustees of T Co.'s Staff Pension Fund Trust and sole beneficiary of such trust was T Co. - Assessees received dividend from said company, i.e., T Co. - Whether assessees were entitled to deduction under section 80M in respect of dividend income received by them from T Co. which was paid over to such company itself - Held, yes FACTS The assessees were trustees of T. Co. Staff Pension Fund Trust. The original beneficiaries of the said company were four persons and the relevant trust deed provided, inter alia, that after payment of pension to the aforesaid four persons the balance income of the trust had to be paid to company T. The said beneficiaries having died, the entire income became payable to the said company T which, thus, became the sole beneficiary and continued to be so in the relevant assessment years also. In the relevant assessment years 1973-74 to 1975-76, the assessees had been assessed as an AOP and the income that was taxed was dividend from the company T. In each of the assessments, the ITO granted deduction under section 80M equivalent to 60 per cent of the said dividend income. Subsequently, the Commissioner, exercising his powers under section 263, held that the said deduction was not available, since the assessees were only assessed as an AOP and section 80M provides deduction only if the dividend income is received by a company. On appeal, though the Tribunal held in the first part of its order that since the assessees were an AOP, deduction section 80M was not allowable in computing its total income; in the latter part it held that the determination of the tax must be in like manner and to the same extent as if recoverable from the beneficiary, viz., the above said company T, and, hence, deduction under section 80M was allowable in view of the decision in CIT v. H.E.H. Mir Osman Ali Bahadur [1966] 59 ITR 666 (SC). On reference, the revenue contended that the Tribunal was not right in allowing the deduction under section 80M when the…

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