THE COMMISIONER OF INCOMETAX, KOCHI vs. THE FEDERAL BANK LTD

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ITA/208/2001HC KeralaKLHC01019178200105 February 2008Author: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was correct in not allowing any disallowance for estimated expenditure in computing the relief under Section 80M. The Court reasoned that the Assessing Officer had no basis for estimating expenditure and reducing the dividend income. The Tribunal had found that there was no justification for such an estimation. Given the small amount of dividend and disallowance involved, the Court found no ground to interfere with the Tribunal's order. Consequently, the appeals filed by the Revenue were dismissed. The Court noted that all other questions raised in the appeals, except the one pertaining to Section 80M, had already been decided in favour of the assessee in previous judgments.

What were the facts?

These are two connected appeals filed by the Revenue against the order of the Income-tax Appellate Tribunal (ITAT) for assessment years 1991-92 and 1992-93. The appeals concern the assessee, The Federal Bank Ltd., Alwaye. The primary dispute revolves around the allowance of relief under Section 80M of the Income-tax Act, 1961, which provides for a deduction of 60% of dividend income received from other companies. The Assessing Officer had made a partial disallowance, estimating some expenditure incurred in earning the dividend income. The ITAT had ruled against this estimation. The High Court notes that most issues were decided in favour of the assessee in the assessee's own case and similar previous decisions.

What were the issues?

1. Whether the Tribunal was justified in allowing the full claim for deduction under Section 80M of the Income-tax Act, 1961, without making any disallowance for estimated expenditure incurred in earning dividend income? The Revenue contended that the Assessing Officer was justified in making a partial disallowance of the claim under Section 80M by estimating some expenditure incurred by the assessee for earning the dividend income. The Revenue argued that it is not possible for a company to earn dividend income without incurring some expenditure. The Assessee contended that there was no basis for the Assessing Officer to estimate expenditure and reduce the dividend income for the purpose of calculating the relief under Section 80M. The Assessee relied on the Tribunal's finding that no such estimation was warranted.

Which sections of the Income-tax Act were involved?

Section 80M

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Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR TUESDAY, THE 5TH FEBRUARY 2008 / 16TH MAGHA 1929 ITA.No. 208 of 2001() --------------------- AGAINST THE ORDER DATED 15.6.2001 IN COCH. IN ITA.876/1993 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- THE FEDERAL BANK LTD., ALWAYE. BY ADV. SRI.P.BALACHANDRAN SMT.PREETHA S.NAIR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 05/02/2008, ALONG WITH ITA NO. 209 OF 2001 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 208 & 209 OF 2001 -------------------------------------------- Dated this the 5th day of February, 2008

JUDGMENT C.N. Ramachandran Nair,J. These two connected appeals filed by the Revenue arise from the order of the Income-tax Appellate Tribunal for the assessment years 1991-92 and 1992-93. All the questions raised except the one pertaining to allowance under Section 80M of the I.T. Act stand decided by this Court in the assessee's own case reported in COMMISSIONER OF INCOME TAX V. NEDUNGADI BANK LTD., 264 I.T.R. 545 and later decisions in I.T.A.No. 73 and 191 of 2001. We therefore answer all questions except the one pertaining to part disallowance under Section 80M in favour of the assessee and against the revenue and consequently revenue's appeals are dismissed on these issues.

2.

The only remaining question pertains to computation of relief under Section 80M which provides for 60% of the deduction of 2 dividend received from other companies. The assessing officer made recomputation making partial disallowance of the claim on the ground that assessee would have incurred some expenditure for earing dividend income. The Tribunal found that there is no basis for estimating expenditure and reducing the same from the dividend income in respect of which Section 80M relief is claimed by the assessee. Having regard to the small amount of dividend and disallowance involved, we do not find any ground to interfere with the order of the Tribunal. We accordingly dismiss both the appeals. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk

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