TaxTMI 
TaxTMI 
2014 (12) TMI 553
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.... the facts and in the circumstances of the case, the period of limitation with reference to the alleged error was required to be computed with reference to the order u/s 143(3)passed on 29-12-2006 which had not abated pursuant to the search and in that view of the matter the order passed under Section 263 dated 22.03.2013 be held to be passed beyond the period of limitation. 4) For that on the facts and in the circumstances of the case, the CIT was unjustified in holding the order erroneous for the alleged short payment of dividend distribution tax on the wrong understanding of the legal provisions of the Companies Act, 1956 concerning declaration and payment of dividend. 5) For that on the facts and in the circumstances of the case, the CIT was unjustified in holding the order erroneous for the alleged short payment of dividend distribution tax on the wrong understanding of the legal provisions of the Companies Act, 1956 concerning declaration and payment of dividend. 6) For that on the facts and in the circumstances of the case, the CIT failed to appreciate that under the Companies Act, 1956 the Board has only the power to recommend the rate of dividend but the power to ....
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.... (3) The share holder has approved dividend of 5% amounting to Rs. 62,00,000/- in the Annual General Meeting. (4) As per sub section (3) of section 115O tax was required to be paid on the amount declared, distributed or paid by a domestic company by way of dividend. (5) Accordingly we have paid ax on distributed profit of Rs. 62,00,000/-. (6) That we have written back of proposed dividend for financial year 2003-04 in the Financial year 2004-05 amounting to Rs. 62,00,000/- and accordingly we have also written back corporate dividend tax on above written back of Proposed Dividend amounting to Rs. 7,75,000/-. (7) That there is no short payment of dividend tax of Rs. 7,75,000/-. As per law and needs no revision in as much as his order is neither erroneous nor prejudicial to the interest of revenue. The proceedings initiated, therefore may be kindly dropped." 5. The ld. CIT was not convinced by the explanation submitted by the asessee. He decided the issue against the assessee and concluded as under :- "III.5. According to the provisions of section 115O of the Income tax Act 1961 after declaration of dividend by the company, dividend tax becomes payable on the w....
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....was made in the accounts for proposed dividend of Rs. 1.24 crores and company had made provision of Rs. 15.50 lakhs for dividend tax thereon. The Board of the company has recommended the dividend @Re.1. The ld. Counsel of the assessee submitted that the Annual General Meeting in this case was extended after due approval. The Annual General Meeting was actually held on 30.12.2004. In the AGM the shareholders approved dividend @.50p amounting to Rs. 62 lakhs and on this sum dividend tax came to Rs. 7.75 lakhs. The ld. Counsel submitted that it was this sum which was paid by the assessee company as dividend tax. The ld.counsel submitted that this was perfectly in accordance with law. The ld. Counsel referred to the provision of section 115O of the Act. He submitted that dividend tax is due on any amount declared, distributed or paid by any company. He submitted that in this case dividend was declared on 30.12.2004, when the AGM was held and the share holders approved dividend. The ld. Counsel submitted that provision of dividend in the accounts or any recommendation by the Board of Directors for the proposed dividend cannot be termed as declaration of dividend. For this proposition th....
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....dend or distribution of dividend or payment of dividend whichever is earlier. In the present case before us the dividend was declared in the Annual General Meeting on 30.12.2004, when the AGM was held. The provision for dividend made in the accounts or the recommendation of the Board of Directors regarding the proposed dividend cannot be considered as declaration of dividend. In this regard we may also gainfully refer to section 205 and 217 of the Companies Act, 1951. As per regulations 85 Table A of Schedule-I of the Companies Act, the company in the general meeting may declare dividend. It is only u/s 205(1)(A) that the power to declare interim dividend has been conferred to the Board of Directors. Hence it is only the interim dividend that can be declared by the Board of Directors. But the issue before us does not relate to interim dividend but it relates to declaration of dividend which can be made only by the company in the AGM on the recommendation of Board of Directors. Hence since the Annual General Meeting took place on 30.12.2004 and in the said AGM Rs. 62 lakhs was declared and the dividend distribution tax thereon came to Rs. 7.75 lakhs. We are of the considered opinion....