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Civil Petition No. 101 of 1977, decided on 3rd March, 1980.

(On appeal from the judgment dated 5th November, 1976 of the Lahore High Court in T. R. No. 270 of 1972).

‑‑ Art. 185 (3) read with Income‑tax Act (XI of 1922), S. 4 (3) (xv)‑Contention that High Court's view that statutory exemptions have to be allowed from gross amount of dividend before allowing deductible interest etc. is not correct‑High Court, expressing same view as expressed by Supreme Court in Muhammadi Steam Ship Co. Ltd. v. Commissioner of Income‑tax P L D 1966 S C 828 case, held, cannot be considered fit for grant ‑of leave to appeal.

Muhammadi Steam Ship Co. Ltd. v. Commissioner of Income‑tax P L D 1966 S C 828 ref.,

Sh. Abdul Haque,. Senior Advocate Supreme Court, Riazul Haq Sh., Advocate Supreme Court and Iftikharuddin. Ahmad, Advocate‑oil‑Record for Petitioner.

Nemo for Respondent.

Date of hearing : 3rd March, 1980,

The respondent is a Director of the Colony Group of Companies having several sources of income including property, dividend etc‑ The Income‑tax Officer took into account the total amount of dividend received by the respondent without allowing statutory exemptions under section 4 (3) (xv) of the Income‑tax Act as there was a net loss and no income from dividend during the relevant assessment year 1967‑68.

Aggrieved by the Income‑tax Officer's order, the assessee‑respondent filed an appeal before the Income‑tax Appellate Tribunal, Lahore, which accepted the appeal on the following observations :‑

"The issue centres round the interpretation' of section 4 (3) (xv) of the Income‑tax Act. The precise issue come up for consideration before a Bench of the Tribunal of which I was a member in the case reported as (1972) 25 Taxation (Trib.) 21 and it was held that by placing the exemption in section 4 (3) the intention of the Legislature appeared to be to exclude a specified portion of the dividend income from total income itself and as such from all consideration for purposes of Income‑tax Act. It was thus ruled that part of dividend income which is statutorily exempt should first be excluded from the gross dividend receipts and only thereafter the provisions of section 12 be applied to work out the net dividend income. Following this decision the Income‑tax Officer is directed to first allow the statutory rebate on' the dividend income and thereafter compute the net loss."

The Commissioner of Income‑fax (petitioner herein) then referred the following question of law in the High Court, Lahore, under section 66 (1) of Income‑tax Act :‑

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that statutory exemption of 10% of dividend should be first allowed from the gross dividend before allowing the deduct able expenses like interest etc."

The Division Bench of the Lahore High Court by its judgment dated 5th November, 1976 answered the question in the affirmative upholding the view expressed by the Appellate Tribunal. This petition is directed against t the said order.

Sh. Abdul Haque, learned counsel for the petitioner, has submitted that the view of the High Court, that the statutory exemptions are to be allowed from the gross amount of dividend before allowing the deductable interest etc., is not correct. However we find that this Court has taken the same view as that expressed by the High Court in Muhammadi Steam‑ ship Co. Ltd. v. Commissioner of Income‑tax (P L D 1966 S C 828).

We do not consider this case to be a fit one for grant of leave to appeal, which is, accordingly, dismissed hereby.

Appeal dismissed.

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