COMMISSIONER OF INCOME TAX vs G. B. J. SETH and C. G. J. SETH.

Sohani, J. - By this reference under s. 256(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, has referred the following question of law to the Court for its opinions :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessee, who is an AOP, is entitled to deduction as per cl. (c) of sub-s. (1) of s. 80L of the IT Act, 1961?"

The material facts giving rise to this reference, briefly, are as follows :

The assessees are executors of the Will of place Shri R. C. Jall and are assessed in respect of the income of the estate of the deceased in the status of an AOP. For the asst. yr. 1976-77, the assessees claim for deduction of dividend income was allowed by the ITO under s. 80L of the Act. That exemption was, however, withdrawn by the ITO in reassessment proceedings in compliance with the directions of the CIT under s. 263 of the Act. Aggrieved by the order, the assessee preferred an appeal before the CIT (Appeals), who uphold the assessees claim for deduction under s. 80L of the Act was admissible to an APO. The Revenue thereupon preferred an appeal before the Tribunal which was dismissed. Hence, at the instance of the Revenue aforesaid question of law has been referred to this Court for its opinion.

At the time of hearing, Shri Mukati, the ld. counsel for the Revenue, brought to our notice that s. 80L of the Act had been amended by the Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1-4-1972. Under the relevant provisions of cl. (c) of sub-s. (1) of s. 80L of the Act, as amended, deduction can be claimed in respect of interest on securities, dividends, etc, Only when the assessee in an AOP or a BOI, consisting in either case of husband and wife governed by the system of community of property in force in the Union Territories of Dadra and Nagar Haveli and Goa, Daman and Diu. In view of the amended provisions of cl. (c) of sub-s. (1) of s. 80L of the Act, deduction cannot be allowed to the assessee in respect of dividend income. The ld. counsel for the assessee, however, contended that the assessee could not have been assessed in the status of an AOP. But the question as to whether the assessee can be assessed in the status of an AOP has not been referred to us and it does not arise out of the order passed by the Tribunal. From the order passed by the Tribunal, it is clear that the assessee had never disputed that the assessee was liable to be assessed in the status of the AOP. The only claim made by the assessee was that the assessee was entitled to exemption under s. 80L of the Act in respect of dividend income. In our opinion, in view of the amended provisions of s. 80L of the Act, which have been given retrospective effect from 1-4-1972, it must be held that the Tribunal was not justified in holding that the assessee was entitled to deduction under cl. (c) of sub-s. (1) of s. 80L of the Act.

Our answer to the question referred to this Court is, therefore, in the negative and against the assessee. In the circumstances of he case, parties shall bear their own costs of this reference.