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PETITIONER: CLOTH TRADERS (P) LTD., ETC.

       Vs.

RESPONDENT: ADDL. COMMR. OF INCOME TAX, GUJARAT-I,ETC.

DATE OF JUDGMENT04/05/1979

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. DESAI, D.A. KOSHAL, A.D.

CITATION:  1979 AIR 1691            1979 SCR  (3) 984  1979 SCC  (3) 538  CITATOR INFO :  O          1985 SC1585  (1,TO,8,10,12,13,16,TO,18,19,2  RF         1992 SC 803  (21)

ACT:      Income Tax  Act, 1961  (43 of 1961)-Sections 85A & 80M- Whether rebate  of imcome  tax admissible  on the  amount of divident received  by the  assessee company  from an  Indian company or  whether confined  only  to  divident  income  as computed under  the Act  after making  the deduction  on the interest paid on borrowings for making the investments.

HEADNOTE:      The earliest  provision granting exemption of super-tax in respect  of intercorporate dividends was made as far back as 9th  December, 1933  in  a  Notification  issued  by  the Governor General in Council and it provided as follows:      "The Governor  General in  Council is pleased to exempt from super-tax.      (i)  so much  of the  income of  any  investment  trust company as  is derived  from  dividend  paid  by  any  other company which  has paid  or will pay super-tax in respect of the profits, out of which such dividends are paid."      This Notification  was followed  by a  provision  of  a similar kind granting exemption from super-tax in respect of certain specified  categories of  inter corporate  dividends introduced as  s. 56A  in the  Indian Income  Tax Act, 1922. When this  Act was repealed and the present Act enacted with effect from  1st April,  1962 s.  99,  sub-section  (1)  was introduced in  the present  Act exempting certain categories of income from super-tax and one of such categories was that set out  in cl.  (iv). Section  99, sub-section (i) cl. (iv) read as follows:           "99(1) Super  Tax shall  not  be  payable  by  any assessee in  respect of  the  following  amounts  which  are included in his total income-           (iv) if  the assessee  is a  company, any dividend received by  it from  an  Indian  Company,  subject  to  the provisions contained in the Fifth Schedule."      This provision  continued to  be  in  force  upto  31st March, 1965  subject to  a minor  inconsequential  amendment made by  Finance Act,  1964, but  by an  amendment  made  by

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Finance Act  10 of  1965,  the  provision  was  omitted  and Chapter VI-A  and s.  85A were introduced in the present Act with effect  from 1st April, 1965. Chapter VIA comprised ss. 80A to  80D providing for certain specified deductions to be made in  computing total  income while  s. 85A  provided for deduction of tax on inter-corporate dividends.      The original  Chapter VIA  and certain  other  sections including s.  85A were      deleted  from the present Act by Finance (No.2)  Act, 1967  with effect  from 1st April, 1968 and  replaced   by  a  new  Chapter  VIA  which  contains  a fasciculus of  sections from s. 80A to s. 80VV. Section 80A, sub-section (1) provides that 985 in computing  the total income of an assessee there shall be allowed from  his gross total income, in accordance with and subject to  the provisions  of Chapter  VIA, the  deductions specified in  s. 80C  to s. 80VV and sub-section (2) of that section imposes  a ceiling  on such  deductions by  enacting that the  aggregate amount  of such deductions shall not, in any case, exceed the gross total income of the assessee. The expression "gross  total income" is defined in cl. (5) of s. 80B to mean the total income computed in accordance with the provisions of  the Act  before making  any  deduction  under Chapter VIA  or under  s. 280.  O Section  80M  is  the  new section which  corresponds to  the repealed  s. 85A  and  it provides for  deduction in  respect of certain categories of inter-corporate dividends.  There  were  several  amendments made subsequently  in this section but they relate primarily to  the  percentage  of  the  income  to  be  allowed  as  a deduction.      One amendment  that was  made by Finance Act, 1968, was that the words "received by it" occurring in sub-section (1) of s. 80M were omitted with effect from 1st April, 1968. The Finance Act of 1968 also provided in sub-section (2) and (3) of s.  31 that  notwithstanding the  omission of s. 99, sub- section (1),  cl. (iv)  and s.  85A, the provisions of these sections shall  have and  be deemed  always to  have effect, subject to  the modification that the words "received by it" in the  opening part of these sections were deleted. The net effect of  these amendments  was that the words "received by it" following  upon the  words "dividend"  were omitted with retrospective effect  from s.  99 sub-section  (1), cl. (iv) and s.  85A and  s. 80M  was to  be read  as  if  the  words "received by  it" were  not in  the  opening  part  of  that section.      The Gujarat  High Court having taken a view against the assessees (appellants),  appeals were  preferred against the judgment relating  to the assessment years 1965-66 and 1966- 67 when s. 85A was in force.      In view  of the conflict of opinion between the view of the Gujarat  High Court,  and the  view taken by the Bombay, Madras and  Calcutta High  Courts, the  Income Tax Appellate Tribunal, referred  similar matters  under s. 257 of the Act to this Court.      In the  appeals and  references before  this Court, the question was  whether on  a true  interpretation of Sections 85A and  80M of  the Income  Tax Act, 1961, rebate of income tax is  admissible on the actual amount of dividend received by an  assessee, being a company, from an Indian company, or it is  confined only  to the  dividend income as computed in accordance with  the provisions  of the  Act, that  is after making  the   deductions  specified   in  s.   57  including deductions of the interest paid on borrowings for making the investments.      Allowing  the   appeals  and  answering  the  questions

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referred by the Tribunal in favour of the assessees: ^      HELD: 1.  The assessees are entitled to relief under s. 85A for  the assessment  years 1965-66,  1966-67 and 1967-68 and under  s. 80M for the assessment years 1968-69 and 1969- 70 in  respect of  the  entire  amount  of  dividend  income without  deductions  of  interest  paid  on  borrowings  for acquiring the shares.      [1006 B]      2. Sections  85A  and  80M  were  not  written  by  the Legislature on  a clean  slate, nor were they the outcome of any new  or innovative exercise of legislative judgment, but they were  preceded by similar provisions granting rebate of super-tax or  income tax  on inter-corporate  dividends  and these provisions as 986 interpreted by  the Courts  throw light  on the true meaning and content on ss. 85A and 80M. [99 F].      3.  It  is  clear  from  the  Notes  on  cl.  31  which subsequently became s. 31 of the Finance Act, 1968, that the amendments retrospectively  deleting the  words "received by it" from  the opening  part of  s. 99,  sub-section (1), cl. (iv) and  s. 85A were made with a view to widening the scope of the  relief granted  under these sections, as it was felt that the presence of these words might render these sections inapplicable in cases where the shares to which the dividend relates are  registered in  the name  of a person other than the  assessee  and  the  dividend  is,  therefore,  received strictly speaking,  by such  other person  and  not  by  the assessee. The  object of introducing these amendments was to widen the scope of the tax relief provided under s. 99, sub- section (1),  cl. (iv)  and s. 85A by making it available to the assessee  even though  the shares  to which the dividend related were  registered in  the name of a person other than the assessee  and not to narrow it down by restricting it to net dividend  computed  after  making  deductions  allowable under the provisions of the Act.      [998-E-G].      4. Even  after the  deletion of  the words "received by it", the  expressions "any  dividend from an Indian company" and "any  income by way of dividends from an Indian company" occurring in  the opening part of these sections continue to mean the  same thing,  namely, the  full amount  of dividend derived or obtained from an Indian company. The decisions of the Bombay,  Calcutta and  Madras High  Courts  interpreting these sections cannot, therefore, be said to be displaced by the retrospective  omission of  the words  "received by it." [998 H-999 B].      5. It  is clear  on a plain natural construction of the language of  s. 99 sub-section (1), cl. (iv), that it grants exemption from super-tax in respect of "any dividend from an Indian company"  and these  last mentioned words cannot mean anything else  than the full amount of dividend derived from an Indian  company. They cannot obviously mean dividend from an Indian company minus any expenses incurred in earning it, or less any other deduction allowable under the Act. [999 C- D].      6. The words, "the following amounts which are included in his  total income",  in the  opening part  of s. 99, sub- section (1)  do not  have any  limitative effect  so  as  to restrict "dividend  from an  Indian company"  in respect  of which  exemption  from  super-tax  is  granted  to  dividend computed in  accordance with  the provisions  of the Act and forming part  of the total income. The exemption from super- tax granted  under s.  99 sub-section  (1) is  not  only  in

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respect of  "dividend from an Indian company" referred to in cl. (iv),  but also  in respect  of other  items  of  income mentioned in clauses (i) to (iii) and (v).      [999 E].      7. The  legislature clearly  wanted to provide that the different categories  of income  mentioned in clauses (i) to (v) should be eligible for exemption from super-tax, only if they are  included in  the total  income and the Legislature could have  made such  a provision  separately in respect of each category  of income  in the  opening part  of s.99 sub- section  (1),  but  instead  of  adopting  such  legislative device, which  would have been both inapt and inelegant, the Legislature  chose   to  use  an  omnibus  expression,  "the following amounts  which are  included in his total income", which would  cover all  the different  items of income dealt with in clauses (i) to (v). [999 F-G]. 987      8. It  would, therefore, seem that though the exemption from super-tax  granted under clause (iv) of sub-section (i) of s.  99 would be applicable only if the particular item of income namely, "dividend from an Indian company’ is included in total  income, what  is exempted  is  "dividend  from  an Indian company"  which can  only mean  the  full  amount  of dividend received from an Indian company. [1000 B].      Commissioner of  Income Tax, Kerala v. South India Bank Ltd., 59 ITR 763; referred to.      9. Section  85A in  its opening part by using the words "where the  total income  of an  asessee.....  includes  any income by  way of  dividends, from  an Indian Company", lays down a  condition for  its applicability,  which is that the total income  must include  income by way of divdend from an Indian company.  It is only if this category of income forms a component part of total income that the provisions enacted in  the  section  is  attracted  and  the  assessee  becomes entitled to  rebate on  income calculated  with reference to the "income so incduded". [1001 F].      10. The  meaning of  the section  would become clear if the words  "income  by  way  of  dividends  from  an  Indian company",  are   substituted  for   the  words   "income  so included." Then  it would  be obvious  that  the  rebate  on income tax  is to be calculated by applying the average rate of tax  to the  "income by  way of  dividends from an Indian company" which  can only  mean the  full amount  of dividend received from an Indian company. [1002 B-C].      Commissioner  of  Income  Tax  v.  Indian  Guarantee  & General Insurance Co Ltd., 903 ITR 348 approved.      11. There  is a  close similarity between s. 85A and s. 80M so  far as  the opening  part of  the  two  sections  is concerned, but  in the  latter part,  there is  a difference inasmuch as  s. 85A  provides for  calculation of  rebate of income tax  on "income  so included",  while s. 80M provides for deduction of the whole or part of "such income by way of dividends". The  language employed  by the legislature in s. 80M leaves  no doubt that the deduction, whether whole or 60 per cent,  is to  be calculated with reference to the entire amount of income by way of dividends. [1002 D-E].      12. Section  80M occurs  in Chapter VIA which is headed "Deduction to  be  made  in  computing  total  income".  The marginal note  to the  section, indicates,  that it provides for  deduction   in  respect   of  certain   inter-corporate dividends. [1002 F, 1003 C].      13.  Section  80A  sub-section  (1)  provides  that  in computing the  total income  of an  assessee, the deductions specified in  s. 80C  to 80VV  shall be  made from his gross total income,  and gross  total  income,  according  to  the

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definition in  s.  80B,  cl.  (5)  means  the  total  income computed in accordance with the provisions of the Act before making any  deduction under  Chapter VIA  or under s. 280.O. What s.  80A, sub-section  (1) requires  is that  first  the total income  of the assessee must be computed in accordance with the  provisions of  the Act without taking into account the deductions  required to  be made  under Chapter  VIA  or under s.  280.O. and  then from  the gross total income thus computed, the deductions specified in s. 80C to 80VV must be made in order to arrive at the total income. But sub-section (2) of s. 80A provides that the aggregate 988 amount of  the deductions  required to be made under Chapter VIA shall  not exceed the gross total income of the assessee so that  the  total  income  arrived  at  after  making  the deductions specified  in s. 80C to 80VV from the gross total income can  never  be  a  minus  or  negative  figure.  This provision imposing  a ceiling on the deductions which may be made under sections 80C to 80VV clearly postulates that in a given case  the aggregate  amount of  these  deductions  may exceed the gross total income. [1002 G-1003 B].      14. The  words "where  the gross  total  income  of  an assessee....includes any  income by  way of dividends from a domestic company"  are  intended  only  to  provide  that  a particular category  of income,  namely, income  by  way  of dividends from  a domestic  company should  form a component part of the gross total income. These words merely prescribe a condition  for the  applicability of  the section  namely, that the  gross total  income must  include the  category of income described  by the  words "Income  by way of dividends from a domestic company". If the gross total income includes this particular  category of income, whatever be the quantum of such  income included,  the condition  would be satisfied and the  assessee would  be eligible  for deduction  of  the whole or 60 per cent of "such income". [1003 F-G].      15. The  words "such  income"  as  a  matter  of  plain grammar must  be substituted  by the words "income by way of dividends from  a domestic company", in order to arrive at a proper construction  of the  section and if that is done, it would be  obvious that  the deduction is to be in respect of the whole  or 60 per cent of the "income by way of dividends from a domestic company" which can only mean the full amount of dividends received from a domestic company. The deduction permissible  under   the  section   is,  therefore,   to  be calculated with  reference to  the full  amount of dividends received from  a domestic  company and not with reference to the dividend  income as  computed  in  accordance  with  the provisions of  the Act,  that is,  after  making  deductions provided under the Act. [1004 B-C].      16. If  the  Legislature  was  of  the  view  that  the deduction should  not be  in respect  of the  full amount of dividends received  from a  domestic company,  but it should only be  in respect of the amount of dividend computed after deducting allowable  expenditure, the legislature would have undoubtedly amended  s. 80M,  sub-section (1)  and made  its intention quite clear. [1005 C].      17. The  legislature in  fact amended  s.  80M  several times in respect of other matters subsequent to the decision of the  Bombay High  Court in  the New  Great Insurance Cols case and the decision of the Madras High Court in the Madras Auto Service’s  case, but  it did  not choose  to amend  the lannguage employed  in  s.  80M,  sub-section  (1)  for  the purpose of  overriding  the  interpretation  placed  by  the courts.  This   indicates  legislative  recognition  of  the interpretation placed  by the  Courts on  s. 85A and s. 80M.

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[1005 D-E].      18. Section  80K read with rule 20, s. 80MM, s. 80N and s. 80.O which occur in the same group of sections as s. 80M, use the same legislative formula as s. 80M and open with the identical  words   "where  the  gross  total  income  of  an assessee-includes any income." It appears on a plain reading of these  sections  that  the  deduction  admissible  is  in respect of the whole of the income 989 received by  the assessee  and not  in respect of the income computed after making the deductions provided under the Act. [1005 F-G]      Madras Auto Service v. Income Tax Officer, 101 ITR 589; approved.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 117-118 of 1975.      (From the  Judgment and  Order dated  28-11-1973 of the Gujarat High Court in I.T.R. No. 21 of 1972).                 TAX REFERENCE NO. 2 OF 1975      (From the Tax Reference made by the Income Tax Tribunal Ahmedabad against its order dated 7-7-1973 in I.T.A. No. 643 (AHD)/71-72).                TAX REFERENCE NOS. 6-9 OF 1975      (From the Tax Reference made by the Income Tax Tribunal Ahmedabad in  R. A.  Nos. 103-106/AHD/74-75  arising out  of I.T.A. Nos. 946-949/AHD/72-73 for Assessing years 1966-67 to 1969-70).                 TAX REFERENCE NO. 16 OF 1975      (From  the   Tax  Reference  made  by  the  Income  Tax Tribunal, Ahmedabad  in Reference Application No. 62/AHD/74- 75 arising out of I.T.A. No. 580/AHD/72-73).                 TAX REFERENCE NO. 18 OF 1975      (From  the   Tax  Reference  made  by  the  Income  Tax Appellate Tribunal,  Ahmedabad Bench in R.A. No. 271/AHD/74- 75 arising out of I.T.A. No. 2431/AHD/72-73 decided on 29-7- 74 assessment year 1969-70).                 CIVIL APPEAL NOS. 117-118/75      For the  Appellant : Mr. B. Sen, I. N. Shroff and H. S. Parihar.      For the  Respondent :  S. N.  Kacker, Sol.  Gen., B. B. Ahuja and Miss A. Subhashini.      For the  Interveners : (1) Ramakrishna Sons Ltd.: S. P. Mehta, T. A. Ramachandran and M/s. J. Ramachandran, (2) M/s. Jardine Henderson  Ltd.: Dr.  Debi Pal  and D. N. Gupta, (3) Indore Exporting  & Importing  Co. Ltd. : Dr. Debi Pal, Miss Bina Gupta  and Mr.  Praveen Kumar, and (4) Ketu Investments (P) Ltd.  : S.  T.  Desai,  Mrs.  A.  K.  Verma  and  J.  B. Dadachanji, K. J. John and Shri Narain.                 TAX REFERENCE NO. 2 OF 1975      For the  Appellant :  S. N.  Kacker, Sol.  Genl, S.  P. Nayar and Miss A. Subhashini. 990      For the  Respondent :  F. S. Nariman, I. N. Shroff, and H. S. Parihar.      For the  Interveners : (1) M/s. Jardine Henderson Ltd.: Dr. Debi  Pal and  D.  N.  Gupta,  (2)  Indore  Exporting  & Importing Co.  Ltd. :  Dr. Debi Pal, Miss Bina Gupta and Mr. Praveen Kumar,  and (3)  M/s. Ajay  Investment Co. : Praveen Kumar and Miss Bina Gupta.                TAX REFERENCE NOS. 6-9 OF 1975      For the Appellant : F. S. Nariman, I. N. Shroff, and H.

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S. Parihar.      For the  Respondent :  S. N. Kacker, Solicitor General, S. P. Nayar and Miss A. Subhashini.      For the  Intervener Central India Industries : Dr. Debi Pal, Miss Bina Gupta and Mr. Praveen Kumar.                 TAX REFERENCE No. 16 OF 1975      For the  Appellant  :  Mrs.  A.  K.  Verma  and  J.  B. Dadachanji, K. J. John and Shri Narain.      For the  Respondent : S. N. Kacker, Sol. Genl. and Miss A. Subhashini.      For the Interveners-Central India Industries : Dr. Debi Pal, Miss Bina Gupta and Mr. Praveen Kumar.                 TAX REFERENCE NO. 18 OF 1975      For the  Appellant :  S. P.  Mehta, K.  C. Patel,  Shri Narain, J.  B. Dadachanji,  Mrs. A.  K. Verma  and Miss Arti Mehta.      For the Respondent : Miss A. Subhashini.      For the  Intervener-Central India  Industries Ltd : Dr. Debi Pal, Miss Bina Gupta and Mr. Praveen Kumar.      The Judgment of the Court was delivered by      BHAGWATI,  J.-This  group  of  appeals  and  References raises a  short question of construction of sections 85A and 80M of  the Income Tax Act, 1961 (hereinafter referred to as the  present  Act).  The  question  is  whether  on  a  true interpretation of  these sections,  rebate of  income tax is admissible on  the actual  amount of divident received by an assessee, being  a company, from an Indian company, or it is confined  only   to  the  dividend  income  as  computed  in accordance with  the provisions  of the  Act, that is, after making the  deductions specified  in  section  57  including deduction of  the interest paid on borrowings for making the investments. The Gujarat High Court has taken a view against the assessee while a different view has been taken by the 991 Bombay, Madras  and Calcutta  High Courts.  The appeals  are preferred by  the assessee,  namely, Cloth  Traders (P) Ltd. against the  judgment of  the Gujarat  High Court  and  they relate to  the assessment  years 1965-66  and  1966-67  when section 85A  was in force. The Reference before us have been made directly  by the  Tribunal under section 257 of the Act in view  of the conflict of opinion amongst the High Courts. Out of  these References,  three are  at the instance of the assessees, namely,  C. V.  Mehta (P) Ltd., M/s. Distributors (Baroda) Pvt. Ltd., and H. K. (Investment) Co. Pvt. Ltd. and one is  at the  instance of  the Commissioner of Income-tax, Gujarat.  They   relate  to   different  assessment   years: assessment year  1969-70 in case of C. V. Mehta (P) Ltd. and Distributors (Baroda) Pvt. Ltd. and assessment years 1965-66 to 1969-70  in case  of H. K. (Investment) Co. Pvt. Ltd. The interpretation of  both sections  85A and 80M is involved in these  References   since  section   85A  with   some  minor alterations made in it from time to time was in force during the assessment  years 1965-66  to 1967-68  and  section  80M followed upon  it with  effect from  the commencement of the assessment year  1968-69 as  part of Chapter IVA. Though the language of  sections 85A and 80M is almost identical, there are some  verbal dissimilarities,  but as we shall presently point out, they do not make any difference in interpretation so far as the present question is concerned.      We are  concerned in  these appeals and References only with the interpretation of sections 85A and 80M but in order to arrive  at the  true interpretation of these sections, it is  necessary  to  refer  briefly  to  the  history  of  the legislation enacted  in these sections, since these sections were not  written by  the Legislature  on a clean slate, nor

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were they  the out come of any new or innovative exercise of legislative judgment,  but they  were  preceded  by  similar provisions granting  rebate of  super tax  or income  tax on inter-corporate   dividends    and   these   provisions   as interpreted by  the courts  throw light  on the true meaning and content of sections 85A and 80M.      The earliest  provision granting exemption of super-tax in respect of inter-corporate dividends was made as far back as 9th  December, 1933  in  a  Notification  issued  by  the Governor General in Council and it provided as follows:           "The Governor  General in  Council is  pleased  to exempt from super-tax-           (i) so  much of the income of any investment trust company as  is derived  from  dividend  paid  by  any  other company 992      which has  paid or will pay super-tax in respect of the profits out of which such dividends are paid." This provision  came up  for consideration before a Division Bench of  the High Court of Bombay in Commissioner of Income Tax v.  Industrial Investment  Trust  Co.  Ltd.(1)  and  the question was  whether  the  dividend  income  exempted  from super-tax was  the entire income by way of dividend received by an  investment trust  company or  the dividend  income as computed in  accordance with the provisions of the Act, that is, after deducting the expenses incurred in earning it. The High Court  of Bombay  held that  the "dividend income which was exempted  under the  notification would  be the dividend income received by the assessee and not the said income less any further  amounts", because  "the  notification  must  be regarded as  a self-contained  one and not controlled by any other provisions  of the  Act" and  there was "no warrant to construe the  word ’Income’  in the  notification  as  total income, nor  to qualify the dividend income specified in the said notification  as the  dividend  income  computed  under section 12  of the  Act". It  was thus  held that the entire amount of  dividend received  by an investment trust company would be  exempt  from  super-tax  and  not  the  amount  of dividend minus  the expenses  incurred in  earning it.  This Notification was  followed by  a provision of a similar kind granting exemption  from super-tax  in  respect  of  certain specified categories of inter-corporate dividends introduced as  section   56A  in   the  Indian   Income-tax  Act,  1922 (hereinafter referred  to as  the Old  Act) by  Finance Act, 1953. It  is not necessary to make any detailed reference to this provision  since there  is no  decided case  which  has considered this provision or expressed an opinion upon it.      When the  old Act  was repealed  and  the  present  Act enacted with  effect from  1st April, 1962, section 99, sub- section (1)  was introduced  in the  present  Act  exempting certain categories  of income from super-tax and one of such categories was that set out in clause (iv). Section 99, sub- section (1), clause (iv) read as follows:      "99(1)    Super-tax shall not payable by an assessee in respect of  the following  amounts which are included in his total income.        (iv)    if the  assessee is  a company,  any dividend received by  it from  an  Indian  company,  subject  to  the provisions contained in the Fifth Schedule". 993      This provision  continued to  be  in  force  upto  31st March, 1965  subject to  a minor  inconsequential  amendment made by  Finance Act,  1964. Now a question arose before the High Court of Bombay in Commissioner of Income Tax v. Indian Guarantee  &  General  Insurance  Co.  Ltd.(1)  whether  the

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exemption granted  under this provision was in regard to the entire amount  of dividend  received by the assessee from an Indian company  or it  was limited  to the  dividend  income computed in  accordance with  the provisions  of the Act and forming part  of total  income. The argument of the assessee based on  the words  ’any dividend  received by  it from  an Indian company’  was that it was the full amount of dividend received by  the assessee  which was  exempt from super-tax, while the  Revenue relying  on the  words "amounts which are included in his total income" contended that it was only the amount  of   dividend  computed   in  accordance   with  the provisions of the Act and forming part of total income which was  entitled   to  the  benefit  of  exemption  under  this provision. The  High Court  accepted the  contention of  the assessee and  pointed out  that on  a plain  reading of sub- clause (iv)  of sub-section  (1) of  section 99 it was clear that the  exemption from super-tax was granted in respect of "any dividend  received by  it from  an Indian  company" and these last  words,  according  to  their  plain  grammatical construction, could  mean only one thing, namely, the entire amount of  dividend received  by the assessee from an Indian company and nothing less. The High Court emphasised the word "received" following  immediately upon  the word  ’dividend’ and observed  that the use of this word also showed that the exemption was  in regard to the dividend received and not in regard to  the "dividend  received minus  the expenses". The High Court  pointed out  that the  words "amounts  which are included in his total income" in the opening part of section 99 sub-section  (1) did  not have any limitative effect, but they were used merely as a convenient mode of describing the different items  of income  set out in clauses (i) to (v) of that sub-section.  Clauses (i)  to (v) referred to different items of income which were sought to be exempted from super- tax under  subsection (1)  of section  99 and it was only if these items  of income  were included in the total income of the assessee  that the  question of exemption from super-tax would arise and hence the legislature used the general words "amounts which  are included  in his  total income"  in  the opening part  of sub-section (1) of section 99 as an omnibus formula  to   cover  these   different  items.  These  words according to the High Court were descriptive of the items of income included  in the  computation of the total income and were not indicative of the quantum 994 of the  amounts of  the different  items  included  in  such computation and  they did not, therefore, have the effect of cutting down  the plain  natural meaning  of the  words "any dividend received  by  it  from  an  Indian  company"  which represented the  quantum  of  income  in  respect  of  which exemption from super-tax was granted under the section. This view, observed  the High  Court, not only followed logically and  inevitably   from  the  words  used  in  the  statutory provision, but was also in consonance with the object of the legislation, which  was to  prevent double  taxation of  the amount of  dividend with  the view to encouraging investment by companies in the share capital of other companies. It may be  pointed  out  that  the  same  view  in  regard  to  the construction of clause (iv) of sub-section (1) of section 99 was taken  by the  Calcutta High  Court in  Commissioner  of Income-tax v.  Darbhanga Marketing  Co.(1) and  it was  held that under  that provision,  exemption  from  super-tax  was granted to  an assessee in respect of "any dividend received by it"  which meant  the full amount of dividend received by the assessee  and not "dividend received minus the amount of interest on  monies borrowed  for  earning  the  same".  The

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Calcutta High  Court observed:  "The expressions  ’which are included in  his total income’ in sub-section (1) of section 99 and ’incomes forming part of total income’ in the heading are descriptive  of the items included in the computation of the total  income and  not indicative  of the quantum of the amounts  included   under  the   different  items   in   the computation of  total income.  Such a  construction of these expressions would  be in  harmony wit the obvious meaning of the expression  ’dividend received’".  The decision  of  the Bombay High  Court in  Industrial Investment Trust Co’s case (supra) was  strongly relied upon by the Calcutta High Court in coming  to this  decision  and  the  view  taken  by  the Calcutta High  Court was  noted with  approval by the Bombay High Court in New Great Insurace Co’s case (supra). The same view was also taken by the Madras High Court in Commissioner of Income-tax  v. Madras  Motor and  General  Insurance  Co. Ltd.(2) and  it was  approved in  later decision of the same Court in  Madras Auto  Service v. Income-tax Officer (3). It would, thus, be seen that notwithstanding the words "amounts which are  included in his total income" in the opening part of sub-section (1) of section 99, all the three High Courts, namely, Bombay,  Calcutta and  Madras took the view that the entire amount  of dividend  received by the assessee from an Indian Company was exempt from 995 super-tax and  the exemption  was not  limited  to  dividend income computed in accordance with the provisions of the Act and forming part of the total income.      Section 99,  sub-section (1)  however remained in force only upto the close of the assessment year 1964-65 and by an amendment made  by Finance  Act 10 of 1965, section 99, sub- section (1)  was omitted  and Chapter  VI-A and  section 85A were introduced  in the  present Act  with effect  from  1st April, 1965.  Chapter VI-A  comprised sections  80A and  80D providing for  certain specified  deductions to  be made  in computing total  income while  section 85A,  in  so  far  as material, provides as follows:           "85A.  DEDUCTION   OF   TAX   ON   INTER-CORPORATE DIVIDENDS:-Where the  total income  of an  assessee being  a company includes  any income by way of dividends received by it from  an Indian  company or  a company which has made the prescribed arrangements  for the  declaration and payment of dividends (including  dividends on preference shares) within India, the  assessee shall  be entitled  to a deduction from the income-tax  with which  it is  chargeable on  its  total income for  any assessment  year of so much of the amount of income-tax calculated  at the  average rate of income-tax on the income  so included (other than any such income on which no income-tax  is payable  under the provisions of this Act) as exceeds an amount of twenty-five per cent thereon;.. " There were  some amendments  made in  section 85A by Finance Act, 1966  but they are not material for our present purpose and we  need not  refer to them. Section 85A also came to be considered by  the  Bombay  High  Court  in  the  New  Great Insurance Co’s  case (supra)  because two  of the assessment years with which the Bombay High Court was concerned in that case were  assessment years 1965-66 and 1966-67 when section 85A was  in force.  The Bombay  High Court  pointed out that except for  some minor verbal changes section 85A was almost in the  same terms  as section  99, sub-section  (1), clause (iv), the  only real  differences being  that the  exemption granted under  section 99,  sub-section (1), clause (iv) was in regerd  to super-tax,  while the  deduction allowed under section  85A   was  in   regard  to   income-tax.  The  same interpretation was,  therefore, placed  on section 85A as in

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the case  of section  99 sub-section (1), clause (iv) and it was held  that under  section 85A,  the  assessee  would  be entitled to de- 996 duction of  income-tax  in  respect  of  the  whole  of  the dividend received  from an  Indian company.  The  expression "where the  total income ........ includes any income by way of dividends"  in  the  opening  part  of  section  85A  was construed as  referring to  the category of income by way of dividends received  from an  Indian company  so that if this particular category of income is included in the computation of total  income,  the  assessee  would  be  entitled  to  a deduction of  so much of the amount of income tax calculated at the average rate of incometax on the "income so included" as exceeds an amount of twenty-five per cent of such income. The words  "income so  included" were  read to  mean not the quantum of  the "income by way of dividends" included in the total income  but the  income falling within the category of "income by way of dividends from an Indian company" included in the  total income. Thus the view taken by the Bombay High Court  was  that  under  Section  85A  also,  the  deduction admissible was in respect of the entire dividend received by the assessee  from an  Indian company  and not in respect of dividend  income   minus  deductions   allowable  under  the provisions of the Act in computing the total income.      The original  Chapter VI-A  and certain  other sections including section  85A were  deleted from the present Act by Finance (No.  2) Act,  1967 with effect from 1st April, 1968 and  replaced  by  a  new  Chapter  VI-A  which  contains  a fasciculous of  sections from  section 80A  to section 80VV. Section 80A,  sub-section (1) provides that in computing the total income  of an assessee there shall be allowed from his gross total  income, in  accordance with  and subject to the provisions of  Chapter  VI-A,  the  deduction  specified  in section 80C  to section  80VV and  sub-section (2)  of  that section imposes  a ceiling  on such  deductions by  enacting that the  aggregate amount  of such deductions shall not, in any case, exceed the gross total income of the assessee. The expression "gross  total income" is defined in clause (5) of section 80B  to mean the total income computed in accordance with the  provisions of  the Act before making any deduction under Chapter  VI-A or  under section  280.O. Section 80M is the new  section which  corresponds to  the repealed section 85A and  it provides  for deduction  in respect  of  certain categories  of   inter-corporate  dividends.   It   is   the interpretation of this section which constitutes the subject matter of controversy between the parties and hence it would be desirable  to set  it out  in extenso.  This section  has undergone changes  from time  to time  since the date of its enactment and  we will,  therefore, reproduce it in the form in which  it was  during the  assessment years  1968-69  and 1969-70  being  the  assessment  years  with  which  we  are concerned in these cases: 997           "80 M.  DEDUCTION IN  RESPECT  OF  CERTAIN  INTER- CORPORATE DIVIDENDS:      (1) Where the gross total income of an assessee being a company includes  any income by way of dividends received by it from  a domestic company, there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to-           (a) where the assessee is a foreign company-                (i)  in respect  of such  income  by  way  of dividends received by it from an Indian company which is not

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such a company as is referred to in section 10B and which is mainly engaged  in  a  priority  industry......80%  of  such income                (ii) in respect  of such  income  by  way  of dividends other  than the dividends referred to in subclause (i)......... 65% of such income.           (b)  where the  assessee is  domestic  company  in respect of  any such  income by  way of dividends.... 60% of such income." There were  several amendments  made  subsequently  in  this section but  they relate  primarily to the percentage of the income to  be allowed  as a  deduction and  do not  have any bearing on  the question  of interpretation posed before us. One amendment  is, however,  material and  that was  made by Finance Act  1968  by  which  the  words  "received  by  it" occurring in  sub-section (1)  of section  80M were  omitted with effect  from 1st  April, 1968.  The Finance Act of 1968 also provided in sub-sections (2) and (3) of section 31 that notwithstanding the omission of section 99, sub-section (1), clause  (iv)  and  section  85A,  the  provisions  of  those sections shall  have and  be deemed  always to  have effect, subject to  the modification that the words "received by it" in the  opening part of those sections were deleted. The net effect of  these amendments  was that the words "received by it" following  upon the  word "dividend"  were omitted  with retrospective  effect  from  section  99,  sub-section  (1), clause (iv) and section 85A and section 998 80M was to be read as if the words "received by it" were not in the opening part of that section.      We shall presently consider the language of section 80M for the  purpose of arriving at its true interpretation, but before we  do so,  we must  refer to an argument advanced on behalf of  the Revenue  that whatever  might have  been  the interpretation placed  on section 99, subsection (1), clause (iv) by  the Bombay,  Calcutta and Madras High Courts and on section 85A  by the  Bombay High  Court, it cannot hold good any more  in view of the retrospective deletion of the words "received by  it" in the opening part of these sections. The argument was  that the decisions of the Bombay, Calcutta and Madras High  Courts upholding  the view  that the  exemption from super-tax  under section  99, sub-section  (1),  clause (iv) and  the deduction of income-tax under section 85A were admissible in  respect of  the  entire  amount  of  dividend received by an assessee without any deduction, were based on the words  "received by  it"  and  since  these  words  were retrospectively omitted,  these decisions could no longer be regarded as  valid. We  do not  think this contention of the Revenue can be sustained if we have regard to the object and purpose for  which the  words "received by it" were deleted. It is  clear from  the Notes on clause 31 which subsequently became  section  31  of  the  Finance  Act,  1968  that  the amendments retrospectively  deleting the  words "received by it" from  the opening  part of  section 99, sub-section (1), clause (iv)  and section  85A  were  made  with  a  view  to widening scope  of the  relief granted under these sections, as it was felt that the presence of these words might render those sections  inapplicable in  cases where  the shares  to which the  dividend relates  are registered in the name of a person  other   than  the  assessee  and  the  dividend  is, therefore, received, strictly speaking, by such other person and not  by the  assessee. The  object of  introducing these amendments was to widen the scope of the tax relief provided under section  99, sub-section  (1), clause (iv) and section 85A by  making it  available to the assessee even though the

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shares to  which the dividend related were registered in the name of  a person  other than the assessee and not to narrow it down  by restricting  it to  not dividend  computed after making deductions  allowed under  the provisions of the Act. The omission  of  the  words  "received  by  it"  does  not, therefore, make  any difference  in  the  interpretation  of section 99,  sub-section (1), clause (iv) and section 85A so far as  the present  question is  concerned. Even  after the deletion of the words "received by it", the expressions "any dividend from  an Indian  company" and "any income by way of dividends from  an Indian  company" occurring in the opening part of these sections continue to mean the 999 same thing,  namely the  full amount  of dividend derived or moving from  an Indian company. The decisions of the Bombay, Calcutta and  Madras High Courts interpreting these sections cannot,  therefore,   be  said   to  be   displaced  by  the retrospective omission of the words "received by it".      So far  as section  99, sub-section (1), clause (iv) is concerned, we  have no  doubt that the interpretation placed on this  provision by  the Bombay,  Calcutta and Madras High Courts is  correct. The  reasoning given  by the Bombay High Court  in   New  Great   Insurance  Co.’s  case  (supra)  is unexceptionable and  we find ourselves in agreement with it. It is  clear on a plain natural construction of the language of this provision that it grants exemption from super-tax in respect of  "any dividend from the Indian company" and these last mentioned words cannot mean anything else than the full amount of  dividend derived  from an  Indian  company.  They cannot obviously  mean dividend from an Indian company minus any expenses  incurred in  earning it,  or  less  any  other deduction allowable  under the Act. It is no doubt true that the opening part of section 99, sub-section (1) contains the words "the following amounts which are included in his total income", but  these words  do not have any limitative effect so as  to restrict  "dividend from  an  Indian  company"  in respect of  which exemption from super-tax is granted to net dividend computed  in accordance  with the provisions of the Act and  forming part of the total income. It may be noticed that the  ememption from  supr-tax granted under section 99, sub-section (1)  is not only in respect of "dividend from an Indian company"  is not referred to in clause (iv), but also in respect of other items of income mentioned in clauses (i) to (iii) and (v). The Legislature clearly and understandably wanted to  provide that  the different  categories of income mentioned in  clauses (i)  to (v)  should  be  eligible  for exemption from  super-tax only  if they  are included in the total income  and the  Legislature could  have made  such  a provision separately  in respect  of each category of income in the  opening part  of section  99, sub-section  (1),  but instead of  adopting such  legislative device,  which  would have been both inapt and inelegant, the Legislature chose to use an  omnibus expression  "the following amounts which are included in  his total  income", which  would cover  all the different items  of income  dealt with in clause (i) to (v). These words  were introduced  merely  to  provide  that  the category of income in respect of which exemption from super- tax is claimed must be included in the total income and they were not  intended to  refer to  the quantum  of such income included in the total income for exempting it from supertax: they were  descriptive of  items of  income included  in the total 1000 income and were not indicative of the quantum of the amounts included under  different items  in the  computation of  the

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total income.  It would,  therefore, seem  that  though  the exemption from  super-tax granted  under clause (iv) of sub- section (1)  of section  99 would  be applicable only if the particular item  of income, namely, "dividend from an Indian company" is  included in  the total income, what is exempted is "dividend from an Indian company" which can only mean the full amount of dividend received from an Indian company.      This view  which we  are taking is clearly supported by the decision  of this  court in  Commissioner of Income-tax, Kerala v.  South Indian  Bank Ltd.(1) where the question was so as to the true interpretation of a notification issued by the Central  Government under  section 60A  of the  old  Act which was in the following terms:           "No income-tax  shall be payable by an assessee on the interest  receivable on  the following  income-tax  free loans issued  by the  former Govermnent  of Travancore or by the former Government of Cochin, provided that such interest is  received   within  the   territories  of  the  State  of Travancore Cochin  and is not brought into any other part of the taxable  territories to which the said Act applies. Such interest shall,  however, be included in the total income of the assessee  for the  purposes of  section 16 of the Indian Income-tax Act, 1922."      The argument of the Revenue was that the exemption from income tax granted under this notification was in respect of interest  receivable   on  securities   minus  the  expenses incurred in  earning it  and not  in respect  of the  entire amount of  interest because  it  was  only  that  amount  of interest arrived  at after  computation in  accordance  with section 8  of the  old Act which was includible in the total income and  liable to  bear tax  and the  exemption from tax could, therefore,  only be  in respect  of such amount. This argument was  negatived by  the Court and it was pointed out by Subba Rao, J., that: "this notification does not refer to the provisions of section 8 of the Income-tax Act at all. It gives a  total exemption  from income-tax  to an assessee in respect of  the interest receivable on income-tax free loans mentioned therein.  It gives  that exemption  subject to two conditions, namely, (i) that the interest is received within the territories  of the State of Travancore Cochin, and (ii) that it  is not  brought into  any other part of the taxable territories. It  includes the  said exempted interest in the total 1001 income of  the assessee for the purpose of section 16 of the Income-tax A  Act. Shortly  stated, the  notification  is  a self-contained one; it provides an exemption from income-tax payable by  an assessee  on a  particular  class  of  income subject to  specified conditions.  Therefore,  there  is  no scope for  controlling the  provisions of  the  notification with reference  to section  8 of  the  Income-tax  Act.  The expression "interest receivable on income-tax free loans" is clear and  unambiguous. Though  the point of time from which the exemption  works is  when  it  is  received  within  the territories of  the  State  of  Travancore-Cochin,  what  is exempted is  the interest  receivable. "Interest receivable" can only  mean the  amount of interest calculated as per the terms of  the securities.  It cannot obviously mean interest receivable minus the amount spent in receiving the same." It may be  noted  that  the  last  part  of  this  notification provided for inclusion "of such interest", that is, interest in respect  of which  exemption from tax was granted, in the total income  of the  assessee and obviously this would have to  be   done  after  computation  in  accordance  with  the provisions of  section 8 of the old Act. But even so, it was

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held that  the exemption  from tax  was in  respect  of  the entire amount  of interest  received on  the securities. The reasoning adopted in this decision clearly supports the view we are  taking in  regard to the construction of clause (iv) of sub-section  (1) of  section 99 and we must hold that the decisions of the Bombay, Calcutta and Madras High Courts lay down  the   correct  law   on  the  interpretation  of  this provision.      The next  provision we  must consider  is  section  85A which came  in the  wake of  section  99,  sub-section  (1), clause (iv).  This section  lays down  a condition  for  its applicability in  its opening part by using the words "where the total  income of  an assessee-includes any income by way of dividends  from an Indian company". The condition is that the total  income must  include income  by way  of dividends from an  Indian company.  It is  only if  this  category  of income from  a component  part  of  total  income  that  the provision enacted  in  the  section  is  attracted  and  the assessee becomes  entitled to  rebate on  income  calculated with reference  to the "income so included". The argument of the Revenue  was that  the words  "income so  included" must mean the  quantum of the income included in the total income and, therefore,  rebate on  income tax granted under section 85A can  only be  in respect  of dividend income computed in accordance with  the provisions  of the Act and forming part of the total income and not in respect of the full amount of dividend received  by the assessee. This argument is, in our opinion, fallacious.  It is  based on  a misreading  of  the words "income  so included" and ignores the context in which these words occur. If the opening part of the section refers to inclusion of the      8-409 SCI/79 1002 particular category  of income  denoted by the words "income by way  of dividends  from an Indian company", the words "so included" cannot have reference to the quantum of the income included, but  they must  be held  T.D.  r.f.  only  to  the category of  income included,  that is,  income  by  way  of dividends from an Indian company. The meaning of the section would become clear if we substitute the words "income by way of dividends  from an  Indian company" for the words "income so included".  Then it would be obvious-indeed it would need no argument  to hold-that  the rebate on income tax is to be calculated by  applying the  average  rate  of  tax  to  the "income by  way of  dividends from  an Indian company" which can only  mean the  full amount of dividend received from an Indian company.  This was  the view taken by the Bombay High Court in  the New  Great Insurance  Co.’s case  and we  find ourselves in agreement with it.      We must  now turn  to  consider  section  80M  for  the purpose of  arriving at  its true interpretation. There is a close similarity  between section 85A and section 80M so far as the  opening part  of the  two section  is concerned, but when we  come to  the latter  part, we  find that there is a difference, inasmuch as section 85A provides for calculation of rebate  of income  tax on  "income  so  included",  while section 80M  provides for  deduction of the whole or part of "such income  by way  of dividends".  Even if  there by  any doubt or  ambiguity in  regard h to the meaning of the words "income so included" in section 85A, though we do ’not think that there  is any  scope for  such doubt  or ambiguity, the language employed  by the Legislature in section 80M is much clearer and leaves no doubt that deduction, whether whole or 60 percent, is to be calculated with reference to the entire amount of  income  by  way  of  dividends  received  from  a

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domestic company.  Section 80M  occurs in Chapter VI-A which is headed  "Deduction to be made in computing total income". Section 80A,  sub-section (  1 )  provides that in computing the total income of an assessee, the deductions specified in sections 80  to 80  VV shall  be made  from his  gross total income and  gross total  income, according to the definition in section  80B, clause (5), means the total income computed in accordance  with the  provisions of the Act before making any deduction  under Chapter  VI A  or under  section 280.O. What section  80 A,  sub-section (1)  requires is that first the total  income  of  the  assessee  must  be  computed  in accordance with  the provisions  of the  Act without  taking into account  the  deductions  required  to  be  made  under Chapter VI-A  or under section 280.O and then from the gross total income  thus computed,  the  deductions  specified  in sections 80  to 80 VV must be made in order to arrive at the total income. But sub- 1003 section (2)  of section  80 A  provides that  the  aggregate amount of  the deductions  required to be made under Chapter VI-A shall not exceed the gross total income of the assessee so that  the  total  income  arrived  at  after  making  the deductions specified  in sections 80 to 80 VV from the gross total income  can never  be a minus or negative figure. This provision imposing  a ceiling  on the deduction which may be made under  sections 80 to 80 VV clearly postulate that in a given case  the aggregate  amount of  these  deductions  may exceed the  gross total income. It is in the context of this background that we have to determine the true interpretation of section  80 M,  which, as  the marginal  note  indicates, provides for  deduction in respect of certain intercorporate dividends. Section  80 M,  sub-section (1)  opens  with  the words "Where  the gross total income of an assessee-includes any income  by way of dividends From a domestic company" and proceeds to  say that  in such a case there shall be allowed in computing  the total  income of  the assessee a deduction "from such income by way of dividends" of an amount equal to the whole  of such  income or 60 per cent of such income, as the case  may be,  depending on  the nature  of the domestic company from  which  the  income  by  way  of  dividends  is received. Now  the words  "such income  by way of dividends" must  be  referable  to  the  income  by  way  of  dividends mentioned earlier  and  that  would  be  income  by  way  of dividends from  a domestic  company which is included in the gross total income. The whole of such income that is, income by way  of dividends from domestic company or 60 per cent of such income,  as the  case may  be, would be deductible from the gross  total income  for arriving at the total income of the assessee.  The words "where the gross total income of an assessee.... includes  any income by way of dividends from a domestic company"  are  intended  only  to  provide  that  a particular category  of income,  namely, income  by  way  of dividends from  a domestic  company, should form a component part of the gross total income. These words merely prescribe a condition  for the  applicability of  the section, namely, that the  gross total  income must  include the  category of income described  by the  words "income  by way of dividends from a domestic company." If the gross total income includes this particular  category of income, whatever be the quantum of such  income included,  the condition  would be satisfied and the  assessee would  be eligible  for deduction  of  the whole or  60 per  cent of  "such income".  Now, if the words "where the  gross total  income of  an assessee-includes any income by  way of  dividends from a domestic company" in the opening part  of the  section refer only to the inclusion of

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the category  of income  denoted by the words "income by way of dividends from a domestic company" and not to the quantum of the income so included, 1004 the words "such income" cannot have reference to the quantum of the income included, but they must be held referable only to the  category of  the income included, that is, income by way of  dividends from  a domestic  company. The words "such income" as  a matter of plain grammar must be substituted by the words  "income by  way  of  dividends  from  a  domestic company" in  order to arrive at a proper construction of the section and  if that  is done,  it would be obvious that the deduction is to be in respect of the whole or 60 per cent of the "income  by way  of dividends  from a  domestic company" which can  only mean  the full  amount of dividends received from a domestic company. The deduction permissible under the section is,  therefore, to  be calculated  with reference to the full  amount  of  dividends  received  from  a  domestic company and  not with  reference to  the dividend  income as computed in  accordance with the provisions of the Act, that is, after making deductions provided under the Act. This was the view  taken by  the Madras  High Court  in  Madras  Auto Service v.  Income-tax officer  Madras(1) and  it meets with our approval.  It is  true that  the Gujarat  High Court has taken a  contrary view  in Cloth Traders Pvt. Ltd. v. Commr. Of Income-tax, Gujarat, which is the subject matter of Civil Appeals Nos.  117 and  118 of 1975, but we think it proceeds on an  erroneous interpretation  of the  language of section 80M, sub-section  (1). It  wrongly construes the words "such income" to  be referable to the quantum of income includible in the  gross total  income, overlooking  the fact  that the opening words in the section, namely, "where the gross total income  of   an  assessee-includes  any  income  by  way  of dividends  from  a  domestic  company"  refer  only  to  the inclusion of the category  of income by way of dividend from a domestic  company and  they  are  not  indicative  of  the quantum of the income included in the gross total income. It is true  that on  this view  the deduction in respect of the income by way of dividends from a company falling within cl. (a) of  sub-section (1)  of s. 80M may exceed the quantum of such income  included in  the gross  total income,  but that possibility is  indeed contemplated  and taken  care  of  by section  80A,   sub-section  (2)  which  provides  that  the aggregate amount  of the  deductions shall  not in  any case exceed the gross total income of the assessee.      We may  point out  that even though the consistent view taken by  the Bombay,  Madras and  Calcutta High  Courts  in regard to  the inter  pretation of  section 99,  sub-section (1), clause (iv) was that the exemption From super-tax under that provision was admissible in respect of      (1) 101 I. T. R. 589. 1005 the full amount of dividends received from an Indian company and A  was not  limited  to  the  dividend  income  computed accordance with  the provisions  of the Act and forming part of total  income and  the same  view was taken by the Bombay High Court  in the  New Great  Insurance Co. case (supra) in regard to  the interpretation  of s. 85A which contained the opening words  "where  the  total  income  of  an  assessee- includes any  income by  way of  dividends  from  an  Indian company", similar to the opening words in sub-section (1) of section 80M  and the  Madras High Court also placed the same interpretation on  section 80M,  sub-section ( 1 ) in Madras Auto Service case (supra), the legislature did not choose to make any  amendment in  the language  of section  80M,  sub-

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section (1)  with a  view to setting at naught this judicial interpretation. If  the legislature was of the view that the deduction should  not be  in respect  of the  full amount of dividends received  from a  domestic company,  but it should only be in respect of the amount of dividends computed after deducting allowable  expenditure, we  have no doubt that the legislature would  have amended section 80M, sub-section (1) and made  its intention quite clear. The legislature in fact amended section  80M  several  times  in  respect  of  other matters subsequent  to the decision of the Bombay High Court in the  New Great  Insurance Co.’s  case and the decision of the Madras High Court in the Madras Auto Service’s case, but it did  not choose to amend the language employed in s. 80M, sub-s.(1) for  the purpose  of overriding the interpretation placed  by   the  courts.   This  would   seem  to  indicate legislative recognition  of the interpretation placed by the courts on s. 85A and s. 80M and it is a circumstance, though not of  much weight,  which lends support to the view we are taking in regard to the interpretation of s. 80M.      We may  also in  this connection  refer to  section 80K read with  Rule 20,  section 80 MM, section 80 N and section 80 o  which occur  in the  same group of sections as section 80-M. These  sections use  the same  legislative formula  as section 80-M  and open  with the  identical words "where the gross total  income of an assessee .. includes any income... ". It  appears on  a plain reading of these secions that the deduction admissible  is in  respect of  the  whole  of  the income received  by the  assessee and  not in respect of the income computed  after making  the deductions provided under the  Act.   Vide  Madras   Auto  Service  case  (supra)  and Additional Commissioner  of Income  Tax  v.  Isthmian  India Maritime P.  Ltd.(1). We derive considerable support for our view from the analogy of these sections. H      (1) (1978) 1131. T. R. 570 (Mad.) 1006      We, therefore,  allow Civil Appeals Nos. 117 and 118 of 1975 and  answer the  question referred  to the  Tribunal in those appeals  in favour  of the  assessee and  against  the Revenue. The  questions referred  by  the  Tribunal  in  Tax References Nos.  2, 6  to 9,  16 and  18 of  1975  are  also answered in  favour of the assessee and against the Revenue. We hold  that the  assessees in these appeals and References are entitled  to relief under section 85A for the assessment years 1965-66, 1966-67 and 1967-68 under section 80M for the assessment years  1968-69 and  1969-70  in  respect  of  the entire amount  of the  dividend income  without deduction of interest paid  on borrowings  for acquiring  the shares. The Commissioner will  pay the  costs of  the  appeals  and  the references to the respective assessees. N.V.K.                                      Appeals allowed. 1007