ACIT, Ludhiana V. M/s Vardhman Holdings Ltd., Ludhiana

ITA 525/CHANDI/2010

• Counselvise Citation: 52521514 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-08-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: SUBHASH AGGARWAL
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NOS. 524, 525, 527/CHD/2010 & 1137/CHD/2009 ASSESSMENT YEARS: 1994-95, 1995-96, 2000-01 & 1997- 98 THE ACIT, VS. M/S VARDHMAN HOLDINGS LTD., CIRCLE-1, LUDHIANA LUDHIANA PAN NO. AAACV5824C & ITA NOS. 351 & 526/CHD/2010 ASSESSMENT YEARS: 1996-97 & 1997-98 THE ACIT, VS. M/S VARDHMAN TEXTILES LTD., CIRCLE-1, LUDHIANA LUDHIANA PAN NO. AABCM4692E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.JAISHREE SHARMA RESPONDENT BY : SHRI SUBHASH AGGARWAL DATE OF HEARING : 29.08.2011 DATE OF PRONOUNCEMENT : 30.08.2011 ORDER PER BENCH THESE SIX APPEALS BY THE REVENUE ARE AGAINST THE S EPARATE ORDERS OF CIT(A)-I, LUDHIANA DATED 1.2.2010, 30.9.2009 AND 29 .1.2010 FOR VARIOUS ASSESSMENT YEARS AGAINST THE ORDER/S PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROU NDS OF APPEAL IN ALL THE APPEALS:- 1 THAT THE LD. CIT(A) ERRED IN LAW AND FACTS IN RESTRICTING THE DISALLOWANCE TO RS. 1,00,000/- IN E ACH ASSESSMENT YEAR AS AGAINST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS. 6,66,035/-, RS. 5,43,1 03/-, RS. 8,02,600/-, RS. 28,18,370/-, RS. 7,28,911/- & R S. 13,60,915/- FOR RESPECTIVE ASSESSMENT YEAR WHILE COMPUTING DIVIDEND INCOME FOR THE PURPOSE OF ALLOWI NG DEDUCTION U/S 80M OF THE INCOME TAX ACT, 1961. 2 THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NOS. 524, 525, 527/CHD/2010 & 1137/CHD/2009 3. THE FOUR APPEALS OF THE REVENUE RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. F OR THE PURPOSE OF THE DISPOSAL OF THE SAID APPEALS, A REFERENCE IS BEING MADE TO THE FACTS RELATING TO ASSESSMENT YEAR 1994-95 ATHOUGH IT IS CONTENDED BY THE LD. AR FOR THE ASSESSEE THAT THE FACTS IN ALL THE FOUR CAPTIONED A SSESSMENT YEARS ARE IDENTICAL. 4. THE BRIEF FACTS OF THE CASE ARE THAT IN THE RETU RN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAI MED DEDUCTION U/S 80M OF THE INCOME TAX ACT ON GROSS DIVIDED OF RS. 87,50 ,490/-. THE DIVIDED CLAIMED WAS EQUIVALENT TO THE GROSS DIVIDEND RECEIV ED BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT AS PER THE PROVISI ONS OF SECTION 80AA OF THE ACT, DEDUCTION U/S 80M OF THE ACT IS ADMISSIBLE ON THE QUANTUM OF NET DIVIDED RECEIVED DURING THE YEAR. WHEN CONFRONTED, THE COUNSEL FOR THE 3 ASSESSEE CONTENDED THAT NO SPECIFIC EXPENDITURE WAS INCURRED FOR EARNING THE SAID DIVIDEND AS THE INCOME HAD BEEN EARNED ON INVESTMENT MADE EARLIER. THE ASSESSING OFFICER VIDE ORDER DATED 29 .11.1996, DISALLOWED SUM OF RS. 11,81,025/- ON PROPORTIONATE BASIS. THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE CIT(A) VIDE ORDER DATED 31.3.199 7. THE TRIBUNAL IN ITA NO. 711/CHANDI/1997 RELATING TO ASSESSMENT YEAR 1994-95 AND ITA NO. 577/CHANDI/1999 RELATING TO ASSESSMENT YEAR 199 5-96 VIDE CONSOLIDATED ORDER DATED 31.1.2007 IN THE APPEAL FILED BY THE REVENUE HAD RESTORED THE ISSUE BACK TO THE FILE OF ASSESSIN G OFFICER. THE TRIBUNAL HAD RELIED UPON THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE CHANDIGARH TRIBUNAL IN THE CASE OF M/S PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. DCIT [102 ITD 1 (CHD) (SB)]. THE TRIBUNAL FURTHER IN THE APPEAL FILED BY THE ASSESSE E FOR THE ASSESSMENT YEARS 1993-94, 1994-95 IN ITA NOS 659 & 660/CHANDI/ 1997 VIDE ORDER DATED 25.5.2006 RELYING ON THE RATIO LAID DOWN BY T HE SPECIAL BENCH HAD REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OF FICER TO CONSIDER THE ACTUAL EXPENSES INCURRED BY THE ASSESSEE WHICH IN T URN WOULD BE DEDUCTED FROM THE GROSS DIVIDEND. SIMILARLY, THE TRIBUNAL IN ITA NO. 588/CHANDI/1999 RELATING TO ASSESSMENT YEAR 1995-96 VIDE ORDER DATED 24.9.2007 IN ASSESSEES CASE HAS ALSO REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO WORK OUT THE EXPENDITURE INCUR RED ON THE EARNING OF THE DIVIDEND INCOME. THE ASSESSEE HAS PLACED ON RE CORD THE COPIES OF THE RELEVANT ORDERS OF THE TRIBUNAL. SIMILAR DIRECTION S HAVE BEEN GIVEN BY THE TRIBUNAL IN THE APPEALS RELATING TO ASSESSMENT YEAR S 1997-98 VIDE ORDER DATED 25.1.2007 IN CROSS APPEALS FILED BY THE ASSES SEE AND REVENUE IN ITA NOS.566 & 484/CHANDI/2001. FURTHER, IN CROSS APPE ALS FILED BY THE ASSESSEE AND THE REVENUE RELATING TO ASSESSMENT YEA R 2000-01, THE TRIBUNAL IN ITA NO. 620/CHANDI/2005 VIDE ORDER DATE D 15.1.2007 AND ITA 4 NO. 639/CHD/2005 VIDE ORDER DATED 30/5/2008 HAD REM ITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE IS SUE IN LINE WITH THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE CHANDIGARH TR IBUNAL IN M/S PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. DCIT (SUPRA). PURSUANT THERETO, THE ORDERS WERE PASSED BY THE ASSESSING OF FICER. THE ASSESSING OFFICER HAS CATEGORICALLY HELD THAT NO DISALLOWANCE IS TO BE MADE ON ACCOUNT OF FINANCIAL EXPENSES. HOWEVER, AS PER THE ASSESSING OFFICER, SOME AMOUNT OF PERSONNEL, ADMINISTRATIVE AND OTHER EXPENSES ARE TO BE ATTRIBUTED TO THE EARNING OF DIVIDEND INCOME. THE PROPORTIONATE EXPENSES VIS-A-VIS THE DIVIDEND INCOME WERE WORKED OUT BY TH E ASSESSING OFFICER. THE ASSESSING OFFICER HAD COMPUTED THE PROPORTIONAT E EXPENSES AT RS. 6,60,035/- IN ASSESSMENT YEAR 1994-95 AGAINST DIVID END EARNED OF RS. 87,50,490/-. THE CIT(A) RESTRICTED THE DISALLOWANC E TO RS. 1 LAC FOLLOWING THE ORDER OF CIT(A), LUDHIANA IN ASSESSMENT YEAR 20 04-05 WHEREIN SUCH DISALLOWANCE OF RS. 1 LAC WAS MADE IN VIEW OF THE P ROVISIONS OF SECTION 14A OF THE ACT. 5. THE REVENUE IS IN APPEAL AGAINST THE SAID RESTRI CTION TO THE PROPORTIONATE EXPENSES ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME WHICH IN TURN IS EXEMPT UNDER THE PROVISIONS OF SEC TION 80M OF THE ACT. THE LD. AR FOR THE ASSESSEE FAIRLY ADMITTED THAT NO APPEALS HAVE BEEN FILED BY THE ASSESSEE IN THE CAPTIONED ASSESSMENT Y EARS AGAINST THE AFORESAID DISALLOWANCE OF RS. 1 LAC IN THE RESPECTI VE YEARS. 6. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE CIT(A) HAD RESTRICTED THE DISALLOWANCE TO RS. 1 LAC FOLLOWING THE DECISION IN ASSESSMENT YEAR 2004-05. IT WAS FURTHER POINTED OU T BY THE LD. DR THAT IN ASSESSMENT YEAR 2004-05, NO DISALLOWANCE WAS MADE U /S 80M OF THE ACT 5 BUT THE SAID DISALLOWANCE WAS IN VIEW OF THE PROVIS IONS OF SECTION 14A OF THE ACT. THE CONTENTION OF THE LD. DR FOR THE REVEN UE WAS THAT IN ALL THE ASSESSMENT YEARS IRRESPECTIVE OF THE DIVIDEND INCOM E EARNED / RECEIVED, DISALLOWANCE WAS RESTRICTED TO RS. 1 LAC U/S 80M OF THE ACT. THE LD. DR PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON' BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SISTER CONCERN OF THE ASS ESSEE REPORTED IN CIT V MAHAVIR SPINNING MILLS LTD [308 ITR 445 (P&H)] (NOW KNOWN AS M/S VARDHMAN TEXTILES LTD ), IN WHICH IT IS HELD THAT WHILE COMPUTING THE DEDUCTION U/S 80M OF THE ACT, PROPORTIONATE EXPENDI TURE ON ACCOUNT OF ADMINISTRATIVE, PERSONNEL AND INTEREST EXPENDITURE ARE TO BE DEDUCTED. THE SAID APPEAL RELATES TO ASSESSMENT YEAR 1997-98. THE LD. DR FAIRLY ADMITTED THAT IN ALL THE YEARS UNDER CONSIDERATION THE ASSESSING OFFICER HAD NOT MADE ANY DISALLOWANCE ON ACCOUNT OF FINANCI AL EXPENSES. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE INVESTMENT ON WHICH THE DIVIDEND INCOME HAS BEEN EARNED WAS OLD AND THE TOTAL DIVIDE ND WARRANTS RECEIVED BY THE ASSESSEE WERE ONLY 2 TO 3 ON THE SHARES HELD OF THE SISTER CONCERN. IT WAS THE CONTENTION OF THE LD. AR FOR THE ASSESSEE T HAT NO EXPENSES WERE INCURRED FOR EARNING THE AFORESAID DIVIDEND INCOME. THE LD. AR ALSO POINTED OUT THAT THE ASSESSEE DURING THE YEAR UNDER APPEAL WAS CARRYING ON MANUFACTURING / TRADING ACTIVITY IN ADDITION TO EAR NING OF DIVIDEND INCOME. THE LD. DR FOR THE REVENUE IN REJOINDER PLACED RELI ANCE ON THE RATIO LAID DOWN IN TATA INVESTMENT COMPANY [113 TTJ 512 (MUMBA I)]. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE IN THE CAPTIONED ASSESSMENT YEARS HAD RECE IVED DIVIDEND INCOME FROM ITS INVESTMENT IN SHARES OF THE DIFFERENT COMP ANIES AND ALSO FROM UTI. THE YEAR WISE DIVIDEND INCOME RECEIVED BY THE ASSESSEE WAS AS UNDER:- 6 ASSESSMENT YEAR DIVIDEND INCOME (IN RS. ) 1994-95 87,50,5491/- 1995-96 1,24,56,782/- 1997-98 1,93,67,794/- 2000-01 4,40,63,648/- 8. THE ASSESSEE HAS FURNISHED ON RECORD THE BREAK U P OF THE DIVIDEND INCOME FROM YEAR TO YEAR. THE PERUSAL OF THE AFOR ESAID DETAILS REVEAL THAT MAJOR DIVIDEND INCOME HAS BEEN RECEIVED FROM M/S M AHAVIR SPINNING MILS LTD (SUPRA), SISTER CONCERN OF THE ASSESSEE AN D UTI. THE ASSESSEE HAS ALSO INVESTED IN SHARES OF THE OTHER COMPANIES, ON WHICH IT HAS RECEIVED DIVIDEND INCOME, WHICH HAS BEEN DECLARED IN THE RES PECTIVE ASSESSMENT YEARS. 9. UNDER THE PROVISIONS OF SECTION 80M OF THE INCOM E TAX ACT, WHICH WERE ON STATUTE UP TO 31.3.2004, IT WAS PROVIDED TH AT WHERE THE GROSS DIVIDEND INCOME OF A DOMESTIC COMPANY, IN A PREVIOU S YEAR INCLUDED ANY INCOME BY WAY OF DIVIDEND FROM ANOTHER DOMESTIC COM PANY, WHILE COMPUTING THE TOTAL INCOME IN THE HANDS OF SUCH DOM ESTIC COMPANY, DEDUCTION OF AN AMOUNT EQUAL TO THE AMOUNT OF INCOM E RECEIVED BY WAY OF DIVIDEND FROM ANOTHER DOMESTIC COMPANY WAS TO BE AL LOWED AS DEDUCTION, SUBJECT TO THE CONDITION THAT THE SAID INCOME DID N OT EXCEED THE AMOUNT OF DIVIDEND DISTRIBUTED BY THE FIRST MENTIONED COMPANY ON OR BEFORE THE DUE DATE. THE SAID PROVISION OF SECTION 80M OF THE ACT WERE OMITTED BY THE FINANCE ACT, 2003 W.E.F. 1.4.2004. 10. THE SPECIAL BENCH OF THE CHANDIGARH TRIBUNAL IN PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD V DCIT [102 ITD (SB)(CHD.)] HAD HELD THAT FOR THE PURPOSES OF COMPUTING DEDUCTION U /S 80M OF THE ACT, NET 7 DIVIDEND INCOME AFTER DEDUCTING EXPENDITURE INCURRE D FOR THE PURPOSE OF EARNING THE SAME IS TO BE CONSIDERED. THE SPECIAL BENCH FURTHER HELD THAT ONLY ACTUAL EXPENDITURE INCURRED WAS TO BE TAKEN IN TO CONSIDERATION AND THERE WAS NO QUESTION OF TAKING EXPENDITURE ON ESTI MATE AND PRESUMPTION BASIS. IN THE FACTS OF THE CASE BEFORE THE SPECIAL BENCH, THE ISSUE WAS WHETHER THE SHARES ON WHICH DIVIDEND INCOME WAS EAR NED WERE ACQUIRED OUT OF BORROWED FUNDS AND DEDUCTION OF INTEREST PAI D IS WHETHER TO BE ALLOWED BEFORE COMPUTING DEDUCTION U/S 80M OF THE A CT. 11. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S MAHAVIR SPINNING MILLS LTD (SUPRA) (NOW KNOWN AS M/ S VARDHMAN TEXTILES LTD ), WHICH IS A SISTER CONCERN OF THE AS SESSEE HAVE LAID DOWN THE RATIO THAT WHILE COMPUTING THE DIVIDEND INCOME ELIG IBLE FOR DEDUCTION U/S 80M OF THE ACT, THE PROPORTIONATE MANAGEMENT EXPENS ES HAD TO BE DEDUCTED FROM THE GROSS DIVIDEND. THE HON'BLE PUNJ AB & HARYANA HIGH COURT HELD THAT IN VIEW OF THE JUDGMENT OF THE HON' BLE SUPREME COURT IN DISTRIBUTORS (BARODA) P. LTD [(1985) 155 ITR 120] A ND UNITED GENERAL TRUST LTD [(1993) 200 ITR 488 (SC)] QUESTION NO. ( III) HAS TO BE ANSWERED IN THE FAVOUR OF THE REVENUE. THE QUESTION NO.3 R AISED BY THE REVENUE WAS IN CONNECTION WITH THE DEDUCTION CLAIMED U/S 80 M OF THE ACT WHETHER THE SAME IS TO BE ALLOWED WITHOUT ALLOCATING PERSON NEL AND ADMINISTRATIVE AND FINANCIAL EXPENSES PROPORTIONATELY FOR COMPUTIN G THE NET DIVIDEND INCOME REFERRED TO IN SECTION 80AA OF THE INCOME TA X ACT. 12. IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICT IONAL HIGH COURT AND CIT(A) V MAHAVIR SPINNING MILLS LTD (SUPRA), WHICH IS THE SISTER CONCERN OF THE ASSESSEE AND ALSO DIVIDEND INCOME BY THE ASS ESSEE HAS BEEN EARNED FROM ITS INVESTMENT IN SHARES OF M/S MAHAVIR SPINN ING MILLS LTD., WE 8 HOLD THAT FOR COMPUTING DEDUCTION U/S 80M OF THE AC T, THE NET DIVIDEND AFTER ALLOCATING PROPORTIONATE EXPENSES ON ACCOUNT OF ADMINISTRATIVE AND PERSONNEL EXPENDITURE ALLOCATED FOR EARNING FOR SUC H DIVIDEND INCOME IS TO BE ADOPTED, FOR COMPUTING THE DEDUCTION U/S 80M OF THE ACT. IN THE FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER HAD HELD THAT NO PART OF THE FINANCIAL EXPENSES WERE ATTRIBUTABLE TO THE INVESTM ENT IN THE SHARES OF COMPANIES FROM WHICH DIVIDEND INCOME WAS EARNED AN D AS SUCH NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. T HE LD. AR FOR THE ASSESSEE VEHEMENTLY STRESSED THAT IN VIEW OF THE RA TIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V HERO CYCLES LTD [32 ITR 518(P&H), WHICH IN TURN HAS BEEN RELIED UPON IN CIT (A) V METALMAN AUTO PVT LTD [336 ITR 434 (P&H)], NO SUCH DISALLOWANCE I S WARRANTED. WE FIND MERIT IN THE PLEA OF THE LD. DR FOR THE REVENUE THA T THE RATIO IN THE AFORESAID DECISIONS OF THE HON'BLE PUNJAB & HARYAN A HIGH COURT WAS IN CONNECTION WITH DISALLOWANCE OF FINANCIAL EXPENSES AND NOT ADMINISTRATIVE AND PERSONNEL EXPENSES. 13. NOW COMING TO THE ISSUE IN HAND. THE LD. AR FO R THE ASSESSEE HAS STRESSED TIME AND AGAIN THAT NO EXPENDITURE WERE IN CURRED FOR EARNING THE SAID DIVIDEND INCOME. WE FIND NO MERIT IN THE STAN D OF THE ASSESSEE IN VIEW OF THE INVESTMENTS MADE BY THE ASSESSEE COMPAN Y WHEREIN BESIDES THE BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE, MAJOR SOURCE OF INCOME IS BY WAY OF EARNING DIVIDEND INCOME OF INVESTMENT MADE IN SHARES OF ITS SISTER CONCERN AND UNITS OF UTI. THE CLAIM OF THE ASSESSEE IS THAT ALL THE ABOVESAID INVESTMENTS HAVE BEEN MADE IN THE EARLIER YEARS. HOWEVER, NO DISALLOWANCE IS BEING MADE ON ACCOUNT OF FINANCIAL EXPENSES, BUT PROPORTIONATE DISALLOWANCE IS WARRANTED OUT OF ADMI NISTRATIVE AND PERSONNEL EXPENDITURE. IN VIEW OF THE FAILURE ON T HE PART OF THE ASSESSEE TO 9 FURNISH THE REQUISITE DETAILS OF THE EXPENSES ATTRI BUTABLE TO EARNING OF DIVIDEND INCOME AND FOLLOWING THE RATIO LAID DOWN B Y THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V MAHAVIR SPINNING MILL S LTD (SUPRA), THERE IS NO OPTION LEFT BUT ESTIMATE SUCH EXPENDITURE WHI CH IS ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME. AS POINTED OUT BY US I N THE PARAS HEREINABOVE, THE ASSESSEE HAD EARNED VARYING DIVIDE ND INCOME/S IN THE CAPTIONED ASSESSMENT YEARS AND THE ASSESSING OFFICE R HAD COMPUTED THE PROPORTIONATE EXPENSES FOR EARNING THE SAID DIVIDEN D INCOME IN THE RESPECTIVE YEARS AS UNDER:- ASSESSMENT YEAR DIVIDEND INCOME DISALLOWANCE (IN RS. ) BY AO (IN RS.) 1994-95 87,50,5491/- 6,66,035/- 1995-96 1,24,56,782/- 5,43,103/- 1997-98 1,93,67,794/- 29,18,670/- 2000-01 4,40,63,648/- 8,02,600/- 14. THE LD. AR FOR THE ASSESSEE HAS FURNISHED ON RE CORD THE TABULATED CHART IN WHICH HE HAS CLAIMED THAT NO ISSUE VIS-A-V IS THE COMPUTATION OF DEDUCTION U/S 80M OF THE ACT IS PENDING IN INTERVEN ING YEARS I.E. 1996-97, 1998-99 AND 1999-2000. IN THE TOTALITY OF FACTS AN D CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE FACT THAT ASSESSEE HAS EARN ED VARYING DIVIDEND INCOME IN THE CAPTIONED ASSESSMENT YEARS, THE RESTR ICTION OF DISALLOWANCE AT RS. 1 LAC BY THE CIT(A) IN ALL THE CAPTIONED YEA RS IS NOT CORRECT. WE UPHOLD THE DISALLOWANCE OF RS. 1 LAC FOR ASSESSMENT YEAR 1994-95 BUT RESTRICT THE SAME TO RS. 1.5 LAC FOR ASSESSMENT YEA R 1995-96, RS. 2 LACS EACH IN ASSESSMENT YEARS 1997-98 AND 2000-01. WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE IN ASSESSMENT YEAR 199 4-95 AND PARTLY ALLOW IN ASSESSMENT YEARS 1995-96, 1996-97 AND 2000-01. 10 15. IN THE RESULT, APPEAL OF THE REVENUE IN ASSESSM ENT YEAR 1994-95 IS DISMISSED AND APPEALS RELATING TO ASSESSMENT YEARS 1995-96, 1996-97 AND 2000-01 ARE PARTLY ALLOWED. ITA NOS. 351 & 526/CHD/2010 ( ACIT VS. M/S VARDHMA N TEXTILES LTD ) 16. THE FACTS IN THE CASE ARE THAT THE ASSESSEE BEF ORE US WAS FORMERLY KNOWN AS M/S MAHAVIR SPINNING MILLS LTD. THE CAPTIO NED YEARS IN APPEAL BEFORE US ARE ASSESSMENT YEARS 1996-97 & 1997-98. WE FIND THAT THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF THE ASSESSEE REPORTED IN 308 ITR 445 (P&H) RELATES TO ASSESSMENT YEAR 1997- 98. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN AN A PPEAL FILED BY THE REVENUE AGAINST THE ORDER OF TRIBUNAL HAD HELD THAT PROPORTIONATE MANAGEMENT EXPENSES HAD TO BE DEDUCTED FROM GROSS DIVIDEND. 17. THE AFORESAID RATIO IS IN RELATION TO THE APPEA LS BEFORE US RELATING TO ASSESSMENT YEAR 1997-98. SIMILAR ISSUE IS RAISED B Y THE REVENUE IN THE APPEAL RELATING TO ASSESSMENT YEAR 1996-97. APPLYI NG THE ABOVE SAID RATIO LAID DOWN IN THE APPEALS FILED BY THE SISTER CONCER N OF THE PRESENT ASSESSEE I.E. M/S VARDHMAN HOLDINGS LTD, IN PARAS HEREIN ABO VE, WE HAVE HELD THAT PROPORTIONATE EXPENSES HAVE TO BE ALLOCATED TO THE EARNING OF DIVIDEND INCOME WHICH IN TURN IS DETERMINED FOR COMPUTING TH E DEDUCTION U/S 80M OF THE ACT AS NET DIVIDEND INCOME IS ELIGIBLE FOR T HE AFORESAID DEDUCTION U/S 80M OF THE ACT. IN VIEW THEREOF AND IN VIEW OF OUR DELIBERATION IN THE PARAS HEREINABOVE, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE PROPORTIONATE EXPENSES ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME AT RS. 2 LACS IN EACH YEAR IN VIEW OF THE FACT THAT TH E ASSESSEE HAD EARNED DIVIDEND INCOME OF RS. 1.91 CRORES IN ASSESSMENT YE AR 1996-97 AND RS. 11 1.96 CRORES IN ASSESSMENT YEAR 1997-98. THE AFORES AID DIVIDEND IS EARNED ON ITS INVESTMENT IN SHARES OF SISTER CONCERN, UTI AND ALSO INVESTMENT IN SHARES OF DIFFERENT INDIAN COMPANIES. THE GROUND O F APPEAL RAISED BY THE REVENUE IN ITA NOS. 351/CHD/2010 AND 526/CHD/2010 A RE THUS PARTLY ALLOWED. THUS, BOTH THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. 18. IN THE RESULT APPEAL OF THE REVENUE IN ITA NO. 524/CHD/2010 FOR ASSESSMENT YEAR 1996-97 IS DISMISSED AND APPEALS IN ITA NOS. 525, 527, 1137/CHD/2009 AND IN ITA NOS. 351/CHD/2010 & 526/CH D/2010 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2011. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH AUGUST, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH