TaxTMI 
TaxTMI 
2014 (5) TMI 313
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....l gain of Rs. 9,11,480 and thus reopening of the assessment is nothing but a change of opinion by the Assessing Officer. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in disallowing the claim of the appellant amounting to Rs. 22,52,250 under section 80M in respect of dividend received on 24.9.2002, from Asian Electronics Ltd. amounting to Rs. 22,55,600 (gross) on which tax was deducted amounting to Rs. 2,36,838 which was distributed by the appellant on 29.10.2003 i.e., before due date of filing return of income." 2. Facts in brief:- The assessee company is engaged in the business of purchase and sale of shares and securities and investments in mutual funds. For the assessment year 2003-04, the assessee had filed its return of income on 27th November 2003, declaring total income of Rs. 3,94,444, after claiming deduction of Rs. 22,54,250 under section 80M. Thereafter, the assessment was finally completed under section 143(3), wherein, the claim of deduction under section 80M, was allowed after deducting proportionate expenditure of Rs. 2,12,704. The said assessment order also stood confirmed by the learned Commissioner (Appeals) vide o....
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....for which deduction under section 80M was claimed. These details were as under:- "With reference to the above, we are submitting the details of dividend paid as follows:- Copy of the Bank Statement evidencing the distribution of Dividend for which deduction u/s 80M has been claimed - copy of the Bank Statement of Bank of India, Panchpakadi Branch, attached for dividend paid and receipt." 4. The Assessing Officer disposed of the assessee's objection vide interim order dated 2nd December 2008. The Assessing Officer noted that the assessee has received dividend of Rs. 22,55,600 from Asian Electronics Ltd. on 24th September 2002 i.e., during the relevant assessment year 2003-04. However, the assessee had made the payment of dividend of Rs. 22,50,000, only on 29th October 2003 i.e., before the due date of filing of the return of income for the assessment year 2003-04. Thus, the dividend was not declared out of the profits of the assessment year 2002-03, which has ended on 31st March 2003. The dividend which had been declared on 29th October 2003, is a dividend declared during the financial year 2003-04, which falls in the assessment year 2004-05. Thus, the assessee is not entit....
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....ceived the dividend of Rs. 22,55,600 on 24th September 2002, and out of that it has distributed the dividend to its shareholders on 29th October 2003, which is before the due date of filing of the return of income for the assessment year 2003-04. The assessee could not distribute the dividend before 31st March 2003, as, on that date, there was a loss and, therefore, the directors, in their report, stated that no dividend can be distributed at the year end to conserve the resources. After considering the profitability of the company, the dividend was distributed and the same was claimed as deduction under section 80M, as it was paid before the due date of filing of the return of income for the assessment year 2003-04, which was on 31st October 2003. 7. The learned Commissioner (Appeals) held that the deduction in respect of certain inter-corporate dividend under section 80M, may have been claimed in the assessment year 2003-04, wherein the provisions of section 115-O(5) were not applicable. The deduction under section 80M was discontinued only from the assessment year 2004-05. On the other hand, there was a specific provisions of section 115-O(5) which categorically provides that....
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....r (Appeals) and submitted that the provisions of section 115-O have been specifically brought on statute from the assessment year 2003-04, which provides that any dividend which has been distributed after 1st April 2003, the same shall be charged to additional income tax and if such tax has not been paid, no deduction shall be provided under any provisions of the Act. Thus, not only the re-opening is valid but also on merits the order of the Assessing Officer as well as the learned Commissioner (Appeals) is legally correct. 10. We have carefully considered the rival contentions, perused the relevant findings of the authorities below and the material available on record. The assessee has received dividend of Rs. 22,55,600 from Asian Electronics Ltd., on 24th September 2002, which was in the financial year 2002-03, relevant for the assessment year 2003-04. Upto 31st March 2003, the assessee could not distribute the dividend to the shareholders as per the decision taken by the directors. The dividend was distributed to the shareholders only on 29th October 2003, as per the details mentioned above. The assessee's contention has been that the said distribution of the dividend has bee....
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....essment year 2004-05. Thus, any domestic company which has received the dividend income from another domestic company and has distributed such dividend on / or before the due date of filing of the return of income [as specified in section 139(1)], then deduction under section 80M has to be allowed. In the present case, there is no dispute that the assessee has received dividend income and such dividend has been distributed before the due date of filing of the return of income. 12. The controversy in the present case is, whether the provisions of section 115-O, which has been brought in the statute by the Finance Act, 2003, w.e.f. 1st April 2003, can be said to be applicable in the present case inasmuch as to deny the statutory deduction under section 80M, which was applicable in this year. Section 115-O, as it stood in the statute w.e.f. 1st April 2003, reads as under:- "1[Chapter XII-D Special provisions relating to tax on distributed profits of domestic companies Tax on distributed profits of domestic companies. 115-O.2[(1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-....
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....fits is to be treated as final payment of tax in respect of such declared / distributed dividend and no further credit of such tax paid can be claimed; and lastly, no deduction under any other provision of the Act shall be allowed to the company or a shareholder in respect of the amount which has been subjected to tax on the dividend declared or distributed. Thus, sub-section (5) only restricts the claim of deduction in respect of the amount paid on dividend distributed. 14. The purpose of section 115-O was to tax the dividend at the time of declaration / distribution and, therefore, such dividend is not taxed in the hands of the shareholder. This is clear from the provisions of section 10(33)((1) which was applicable on 1st April 2003 and later on in section 10(34) w.e.f. 1st April 2004. This section exempts dividend which has been referred in section 115-O i.e., it is treated as exempt in the hands of the recipients. The Revenue's contention that sub-section (5) of section 115-O, bars the deduction under any other provisions of the Act by this overriding clause, is not correct. The bar which has been provided in sub-section (5) is only with respect to the deduction of the amou....
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....dividend income has been specifically used for some other purpose. This has not been controverted by the Assessing Officer. He is only drawing a presumption that this amount of dividend distributed is out of the profits of the assessment year 2004-05 and not assessment year 2003-04. There is no material on record to this conclusion of the Assessing Officer, especially when in the original round of scrutiny proceedings under section 143(3), the assessee's contention has been accepted. Thus, the findings of the Assessing Officer and learned Commissioner (Appeals) cannot be affirmed, sans any contrary material on record. Accordingly, in view of the aforesaid observation, we hold that the assessee's claim of deduction under section 80M, is clearly allowable as the same is within the mandate of section 80M, as all the conditions mentioned therein stands fulfilled for which there is no dispute by the Department. We have already held that in this case, provisions of section 115-O will not negate the assessee's claim for deduction under section 80M in this year, as the provisions of section 115-0 is for different purpose altogether. Thus, the appeal preferred by the assessee is allowed on ....