JUDGMENT :

Ranjan Gogoi, J.

1. The appellant Company, incorporated in the year 1932, is engaged in the business of manufacture of steel furniture, security equipments, typewriters, electrical equipments and a host of other related products. It is also a promoter of various other companies and invests its funds in such companies in order to maintain control of such concerns as sister concerns.

2. The issue in the present appeal relates to the admissibility or otherwise of deduction of expenditure incurred in earning dividend income which is not includible in the total income of the Assessee by virtue of the provisions of Section 10(33) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) as in force during the relevant Assessment Year i.e. 2002-2003.

3. For the Assessment Year 2002-2003, the appellant – Company filed its return declaring a total loss of Rs.45,90,39,210/-. In the said return, it had shown income by way of dividend from companies and income from units of mutual funds to the extent of Rs.34,34,78,686. Dividend income to the extent of 98% of the said amount was contributed by the Godrej group companies whereas only 0.05% thereof amounting to Rs.1,71,000/-came