DISTRIBUTORS (BARODA) PVT. LTD. vs UNION OF INDIA AND TWO ORS.

The Supreme Court interpreted Sections 80M(1) and 80AA of the Income Tax Act, 1961, holding that deductions for inter-corporate dividends must be calculated based on the full amount of the dividend received, rather than a reduced amount. The Court clarified that Section 80AA is not retrospective in operation and emphasized the importance of consistency in judicial decisions under Article 141 of the Constitution. The ruling overruled previous interpretations that conflicted with this understanding, thereby establishing a clear legal principle regarding the computation of dividend income for tax purposes.