Iii) Whether In The Facts And Circumstances Of The Case, The Tribunal Is Right In Allowing The Deduction Under Section 80M On The Dividend Received From The Uni v. Wheels India Ltd., [2005] 275 Itr 319 Wherein A Division Bench Of This Court, In Which One Of Us Was A Party (P.d.dinakaran,J.), Held As Follows

IN THE HIGH COURT OF JUDICATURE AT MADRAS Date: 8.2.2006 THE HONOURABLE MR. JUSTICE P.D.DINAKARAN and THE HONOURABLE MR. JUSTICE P.P.S.JANARTHANA RAJA Tax Case (A) No.92 of 2003 Commissioner of Income Tax Coimbatore... Appellant M/s.Lakshmi Mills Co. LtdCoimbatore... Respondent PRAYER:Tax Case Appeal under Section 260A of the Income Tax Act1961 against the order of the Income Tax Appellate Tribunal, Madras`C' Bench dated 24.3.2003 in ITA No.2772/Mds/94 for the assessmentyear 1991-92. For Appellant:Mr.N.MuralikumaranSenior Standing Counselfor Income Tax CasesFor Respondent :Mr.M.P.Senthil Kumar The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal dated 24.3.2003 in ITA No.2772/Mds/94. 2.1. The relevant facts may be noticed in brief: The Revenue isthe appellant. The assessment year involved is 1991-92. Theassessee filed return of income admitting an income of Rs.1.58Lakhs. The Assessing Officer (i) added the excise duty on theraw materials, as also the excise duty payable on the finished goodsin respect of the closing stock; (ii) disallowed the speculativeloss that arose on account of sale of units within one month ofpurchase; and (iii) disallowed the dividend received from the units https://hcservices.ecourts.gov.in/hcservices/ till the date of sale on the ground that it was a speculative incomeand had set off the speculative loss against the same. 3. On appeal at the instance of the assessee, the Commissionerof Income-tax (Appeals) allowed the appeal on the above issues. Onfurther appeal by the Revenue, the Tribunal confirmed the order ofthe Commissioner of Income Tax (Appeals). 4. The aggrieved Revenue preferred the present appeal raisingthe following substantial questions of law:"(i) Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatexcise duty on raw materials used in the closingstock as well as on the finished goods will notform part of the value of the closing stock? (ii) Whether in the facts and circumstances ofthe case, the Tribunal was right in holding thatloss on account of sale of the unit within onemonth of its purchase is not a speculative loss?and (iii) Whether in the facts and circumstances ofthe case, the Tribunal is right in allowing thededuction under Section 80M on the dividendreceived from the units till date of the sale?" 5.1. With respect to the first question of law, viz., whether inthe facts and circumstances of the case, the Tribunal was right inholding that excise duty on raw materials used in the closing stockas well as on the finished goods will not form part of the value ofthe closing stock, it is fairly submitted by the learned counsel forthe appellant that the issue raised in the above question is coveredagainst the Revenue by the decision of this Court in Commissioner ofIncome Tax V. Wheels India Ltd., [2005] 275 ITR 319 wherein aDivision Bench of this Court, in which one of us was a party(P.D.DINAKARAN,J.), held as follows: "The object of Section 80HHC is required to bekept in mind while considering that section. Thegeneral definition of the word "turnover" or thedefinition under the sales tax laws or the caselaw dealing with the definition of turnover underthe State levy cannot be imported into Section80HHC of the Act, particularly, when suchexpressions are incorporated and explained in theprovision itself. Sales tax and excise duty arenot to be included in the total turnover whilecomputing the deduction under Section 80HHC." 5.2. In the above said decision, the decision of Bombay HighCourt reported in CIT V. Sudarshan Chemicals Industries Limited,[2000] 245 ITR 769 was also referred, wherein it has been held asfollows: "That the total turnover cannot include the sales taxand the excise duty and total turnover should berestricted only to such receipts which have an elementof profit in it and it would be only the sale pricewhich should be the relevant figure." 5.2. In the above said decision, the decision of Bombay HighCourt reported in CIT V. Sudarshan Chemicals Industries Limited,[2000] 245 ITR 769 was also referred, wherein it has been held asfollows: "That the total turnover cannot include the sales taxand the excise duty and total turnover should berestricted only to such receipts which have an elementof profit in it and it would be only the sale pricewhich should be the relevant figure." 5.3. In the light of the above proposition of law, we find noinfirmity in the order of the Tribunal on this issue. Accordingly,the first question of law raised in this appeal is answered againstthe Revenue and in favour of the assessee. 6.1. With respect to the second question of law, viz., whetherin the facts and circumstances of the case, the Tribunal was right inholding that loss on account of sale of the unit within one month ofits purchase is not a speculative loss, it is fairly conceded by thelearned counsel for the Revenue that the issue raised in thisquestion is covered against the Revenue by the decision of this Courtin APOLLO TYRES LTD. Vs. COMMISSIONER OF INCOME TAX, [2002] 255 ITR273, wherein it is held as under: "Even though section 32(3) of the Unit Trust of India Act,1963, creates a fiction to make the UTI a deemed company anddistribution of income received by the unitholder a deemeddividend for the purposes of the Income-tax Act, by virtue ofthose provisions it cannot be said that the section also makesthe unit of the UTI a deemed share. The deeming provision insection 32(3) should be confined only to deeming the UTI acompany and the income from units a dividend. In the absenceof any specific deeming provision in regard to the units asshares it would be erroneous to extend the provisions ofsection 32(3) for the purpose of holding the unit a share. Accordingly, that buying and selling of units by the assessee-company could not be treated as a speculative business. TheExplanation to section 73 of the Income-tax Act did not apply.Loss in buying and selling of units of the UTI was businessloss not speculation loss." 6.2. Following the aforesaid decision of the Apex Court, we donot find any infirmity in the order of the Tribunal and as such, weuphold the same. 7.1. With respect to the third question of law, viz., whether inthe facts and circumstances of the case, the Tribunal is right in https://hcservices.ecourts.gov.in/hcservices/ allowing the deduction under Section 80M on the dividend receivedfrom the units till date of the sale, Mr.N.Muralikumaran, learnedSenior Standing Counsel for the Revenue fairly submits that the sameis only consequential to second question of law. 7.2. As we have already held that income from units of UnitTrust of India was not a speculation income, the same has to betreated as inter-corporate dividend for the purpose of Section 80M ofthe Act. The decision of the Tribunal in this regard, in ourconsidered opinion, needs no interference. In the result, finding no infirmity in the order of theTribunal, this tax case is dismissed. No costs. sasi Sd/Asst.Registrar /true copy/ Sub Asst.Registrar To1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai 600 090 (with records) 2. The Secretary, Central Board of Direct Taxes, New Delhi3. The Commissioner of Income-tax (Appeals), Coimbatore. 4. The Commissioner of Income Tax, Coimbatore.5. The Deputy Commissioner of Income-tax, Spl.Range I, Coimbatore. +1 CC to Mr.Philip George, Advocate, SR No.5604 MS(CO)BG/28.2.2006 Tax Case (A) No.92 of 2003