D.K. KAPUR J.
1. The question referred to us for the assessment year 1971-72 is :
'Whether, on the facts and in the circumstances of the case, the Tribunal were legally correct in holding that relief under section 80M of the Income-tax Act, 1961, is to be allowed with reference to the gross dividends without taking into consideration expenditure relating to these dividends ?'
2. This question was referred at a time when the preponderance of judicial opinion was to the effect that gross dividends were to be taken into consideration. Since then there has been an amendment to the Income-tax Act by the incorporation of section 80AA which is retrospective w.e.f. April 1, 1968. In view of the amendment, the question as referred to us has to be answered in the negative, in favor of the Department and against the assessed. However, two observations are necessary regarding this matter.
3. Firstly, the provisions of section 80AA are under challenge in the Supreme Court in some other proceedings. As the judgment has not been announced, learned counsel for the assessed contended that if the new provision is held ultra vires, then the case has to be decided in accordance with the Supreme Court's decision in Clot Traders (P.) Ltd. v. Addl. CIT : 118ITR243(SC) . We think we cannot wait for the judgment of the Supreme Court but we make an observation here that in case the provision is held ultra vires, the assessed will then be entitled to apply for a review in accordance with the decision given by the Supreme Court, or to move any other appropriate proceeding to give effect to that judgment qua itself.
4. The second point urged by the learned counsel for the assessed is that, in fact, there is no deduction to be made from the gross dividend on account of expenditure relating to the dividend in question. This contention is based on a factual statement that no interest had been incurred for earning the dividend and the said interest was worked out by the Income-tax Officer on an estimated basis at Rs. 46,013.
5. According to the learned counsel for the assessed, there was no interest incurred on earning dividend and so, in fact, no deduction had to be made from the gross dividend on this account. We do not find any discussion on this point in the Appellate Tribunal's order. It has been taken for granted that if any deduction has to be made or not made, it would be irrelevant because the gross dividend is to be deducted under section 80M. Since the legal position has now changed, it will be open to the assessed to show how much is the deduction (if any) to be made from the gross dividend. It will be open to the assessed to show before the Tribunal that no deduction has to be made on account of interest incurred for earning this gross dividend. In fact, the learned counsel for the assessed contended that the finding by the Appellate Assistant Commissioner was that no interest was to be deducted as no interest was incurred. The factual aspect of how much expenditure has to be deducted from the dividend will have to be decided by the Tribunal to give effect to the answer to the question given by us.
6. Parties to bear their own costs.