(Appeals by special leave from the judgment and order, dated November, 30, 1976, of the Bombay High Court in Income Tax Reference No.72 of 1976).

Income-tax---

----Inter-corporate dividend---Relief in respect of dividends received from domestic company---Quantum---Proportionate management expenses to be deducted from gross dividend---Indian Income Tax Act, 1961, Ss. 80AA & 80M---[CIT v. United General Trust P. Ltd. (1979) 119 ITR 664 reversed].

From the decision of the Bombay High Court in CIT v. United General Trust P. Ltd. (1979) 119 ITR 664 refusing to call for the statement of case on the question whether the assessee would be entitled to the deduction under section 80M of the Income Tax Act, 1961, on the gross dividend received from a domestic company before deduction of the proportionate management expenses, the Department preferred an appeal to the Supreme Court. The Supreme Court allowed the appeal and deeming the Department's application under section 256(2) to have been allowed and a reference made;, answered the question in favour of the Department, viz., to the effect that the proportionate management expenses had to be deducted from the gross dividend for the purpose of the relief under section 80M.

Distributors (Baroda) P. Ltd. v. Union of India (1985) 155 ITR 120 (SC) applied.

CIT v. United General Trust P. Ltd. (1979) 119 ITR 664 reversed.

B.B. Ahuja, Senior Advocate (Anil Srivastava and P. Parameswaran with him) for Appellant.

S. Ganesh and Mrs. Anjali K. Verma, Advocate (of M/s. Dadachanji & CO., Advocates) for Respondent.

JUDGMENT

Both counsel for the Revenue and the Assessee are agreed that the only question which was sought to be raised by the Revenue, but which was not allowed by the High Court is concluded against the Assessee and in favour of the Revenue by the decision of this Court in Distributors (Baroda) P. Ltd. v. Union of India (1985) 155 ITR 120. Indeed, the same result follows from section 80AA introduced by the Finance (No.2) Act, 1980, with retrospective effect from April 1, 1968.

For the above reason, the appeals are allowed. The application under section 256(2) of the Income Tax Act made by the Revenue shall be deemed to have been allowed, as reference made and answered in the manner indicated above.

We may clarify that the assessment years concerned herein are 1970-71, 1971-72 and 1972-73.

M.B.A./2298/TAppeals allowed.