Section 80M — the law in short
What the courts have decided on section 80M, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Vijay Industries v CIT
Supreme CourtHelps taxpayer
Is my section 80HH deduction 20 per cent of the undertaking's gross profits and gains, or of the income left after depreciation?
Of gross profits and gains, for the years before section 80AB applied. A three judge bench of the Supreme Court held that section 80HH allows a deduction of 20 per cent of profits and gains, and that profits and gains is conceptually different from income; read with section 80A the deduction is of gross profits and gains, before computing income under sections 30 to 43D, so depreciation and investment allowance are not first deducted. Motilal Pesticides, which had equated the language of section 80HH with that of section 80M, was held erroneous and overruled. Section 80AB is prospective from 1 April 1981 and did not apply to assessment years 1979-80 and 1980-81.
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Distributors (Baroda) Pvt Ltd v Union of India
Supreme CourtHelps department
Is my inter-corporate dividend deduction worked out on the gross dividend I received, or on the dividend after deducting the interest I paid to buy the shares?
On the net figure. A five-judge bench of the Supreme Court held that the deduction under section 80M is not from gross total income but from 'such income by way of dividends', which means the dividend income as computed under the Act and included in gross total income, after the expenditure attributable to earning it. Cloth Traders, which had held otherwise, was overruled as manifestly wrong and inconsistent with Cambay Electric Supply. Section 80AA, enacted retrospectively to reverse Cloth Traders, was therefore merely declaratory of the law as it always stood, and its validity did not arise. The writ petition was dismissed.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.