TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 473
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....) of the Act dated 27.02.2017 is erroneous and prejudicial to the interest of the revenue, without appreciating that the assessment order cannot be said to be erroneous where the AO has taken one of the permissible views. The learned CIT ought to have appreciated that if two views are possible, revision u/s. 263 of the Act is not permissible. 1.2 The learned CIT has erred in law and on facts in holding that the order passed by the AO is not correct without appreciating that the AO has passed the order after enquiring and verifying the facts and documents on record, duly supported by various precedents including the judgements of the Hon'ble Supreme Court and Jurisdictional High Court which were available at the time of the assessment. 1.3 The learned CIT failed to appreciate and ought to have held that the action of the AO in allowing set-off of loss of current year against the dividend income received from specified foreign companies u/s. 115BBD of the Act is neither erroneous nor prejudicial to the interest of the Revenue inasmuch as if such dividend income is taxed in current year without allowing set-off u/s. 71 of the Act, assessee would be entitled to carry forward an....
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....which begins with non-obstante clause restricts allowability of only 'expenditure' or 'allowance' and thus, in the absence of any express provision for restriction on allowability of 'loss', the said business loss of current year is allowable to be set-off against such foreign dividend income as per provisions of section 71 of the Act; 3.3 The learned CIT ought to have appreciated that it is settled legal position that the term 'expenditure' and 'loss' are conceptually different and cannot be used interchangeably and thus, merely because restriction on allowability of 'expenditure' is provided u/s. 115BBD(2) of the Act, the same cannot be interpreted as loss' to be disallowed set off as provided under section 71 of the Act." 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a public limited company engaged in the business of manufacturing of chassis and vehicles for transport of goods and passengers including motor car and parts thereof. Besides this, assessee also provides finance for vehicles. The return of income for the A.Y.2012-13 was filed electronically by assesse....
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....ind that assessee had duly replied to these questionnaires vide its letter dated 28/10/2015 responding to various queries raised by the assessee more particularly the specific queries in respect of Question No.4,30 & 38 which are reproduced hereunder:- 4. Details of dividend income In connection with the information requested by your goodself at point no. 4, we enclose herewith details of dividend income earned during the year as Annexure 3. 22. Long term capital gains / (loss) In connection with information requested by your goodself at point no. 30, we enclose herewith statement giving requested details as Annexure 16. 30. Note on Jaguar business In connection with information requested by your good self at point no. 47, we enclose herewith a note on jaguar business as Annexure 20. Details of Dividend Received Sr. No. Particulars Amount in Rs. Exempt Dividend 1 Automobile Corporation of Goa Ltd. 4,37,64,738 2 Concorde Motors (I) Ltd. 24,48,120 3 Concorde Motors (I) Ltd.-Preference Shares 94,79,365 4 HV Axles Ltd. 22,95,00,000 5 HV Transmissions Ltd. 20,40,00,000 6 MetaJ Scrap Trading Corporation Ltd. 4,50,000 7 TA....
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....tionnaire, we draw your goodselfs kind attention to the details of long term capital gains/(loss) submitted earlier vide our letter dated 28.10.2015. Further to the said details of the long term capital gains/floss we enclose herewith the supporting documents for redemption of preference shares at far as Annexure 7, the documents for buy back of equity shares as Annexure 8 and sample documents for sale of Magna Dies being capital item as Annexure 9." 3.4. We find that assessee had filed all the supporting documents relating to redemption of preference shares of TML Holdings Pte Ltd., and further subscription of 2020000 cumulative preference shares of TML Holdings Singapore which are enclosed from pages 108 to 124 of the paper book filed before us. We find that the ld. AO on going through all these relevant documents had (a) allowed carry forward of long term capital loss of Rs. 1015,16,08,586/- to be carried forward under normal provisions of the Act by duly appreciating the fact that the loss of redemption of preference shares had occurred during the year only because of indexation benefit which is a statutory deduction available to the assessee; (b) setting off business loss wit....
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....he order passed by the ld. AO was not passed on incorrect assumption of fact or incorrect application of law on the impugned subject. It was also pointed out that provisions of Section 263 of the Act could not be invoked for "inadequate enquiry". 3.8. We find that the ld. PCIT brushed aside all these technical contentions raised by the assessee and proceeded to set aside the order passed by the ld. AO by treating it as erroneous and prejudicial to the interest of the revenue with a direction to disallow the excess carry forward of long term capital loss and further direction to tax the foreign dividend income of Rs. 21,99,53,589/- separately @ 15%. 3.9. At the outset from the perusal of various pages in the paper book as narrated hereinabove, we find that assessee had duly furnished all the relevant documents on the impugned two issues before the ld. AO during the course of assessment proceedings together with the supporting documents. Admittedly, these replies were filed by the assessee before the ld. AO pursuant to specific queries raised by the ld. AO during the course of original assessment proceedings. Hence, it could be safely concluded that the ld. AO had carried out adequa....
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....decision in the case of Idea Cellular Ltd., vs. DCIT reported in 301 ITR 407 (Bom) by holding that if during the assessment proceedings, queries were raised and the assessee responded to the same, then even if the assessment order does not mention the same, it does not mean that the Assessing Officer has not applied his mind to the issue. Moreover, it is now very well settled that for invoking revisionary jurisdiction u/s.263 of the Act, the twin conditions should be cumulatively satisfied i.e. (a) the order of the ld. AO should be erroneous and (b) it should be prejudicial to the interest of the revenue. In the instant case, admittedly both the cumulative conditions are not satisfied at all. We hold that the order passed by the ld. AO - (a) was not based on an incorrect assumption of facts (b) was not based on an incorrect application of law on the impugned subject (c) was not in violation of any order circular, directions, instructions issued by the CBDT u/s.119 of the Act. Hence, in the peculiar facts and circumstances of the instant case, the order of the ld. AO could not be termed as erroneous at all. Reliance in this regard is placed on the decision of the Hon'ble Supr....
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....d of shares into another kind. It seems that only the allotment numbers of shares were changed in respect of 20,20,0000 shares. Ax the- said conversion was not covered under transfer in light of the provisions quoted above, the loss claimed in respect of 20,20,000 shares was notional only and required to be disallowed. This resulted in excess carry forward of Long Term Capital Losses to future years for set off from future LTC'G resulted in underassessment of income of Rs. 367,93,42,008/-. 6.2. In this connection we have to submit that during the year under consideration, the assessee Company, has made various investments and sale of investments in the ordinary course of its business which includes the following separate and distinct transactions :- a) On 19'h May 2011 - Redemption of 40,75,000 number of CRPS of US$ 100 each at Par which were invested in TML Holdings Pte Ltd Singapore (TMLHS') during the FY 2008-09 for an aggregate consideration of US$ 407.50 million (INR 1,832.90 crores) b) On 3r" August 2011 - Redemption of 29,80,000 number of CRPS of US$ 100 each at Par which were invested in TMLHS during FY 2008-09 for an aggregate consideration of US$ 298 mil....
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....m Capital Loss in IN'R 5,00,000 5,00,00,000 2,43,18,62,500 3,28,00,89,454 2,23,46,57,492 1,04,54,31,962 20,48,999 20,48,99,900 8,36,19,21,837 11,27,85,37,185 9,15,76,21,933 2,12,09,15,252 45,06,001 45,06,00,100 22,11,06,36,520 29,82,27,65,754 20,13,87,37,787 9,68,40,27,967 70,55,000 70,55,00,000 32,90,44,20,857 44,38,13,92,393 31,53,10,17,212 1285,03,75,181 6.4. During the course of the assessment proceeding, after examination of the aforesaid details submitted vide letter dated 28.10.2015. the Ld. AO vide Order Sheet Entry, further called for evidences in support of the above redemption of the CRPS and the proof of the receipt of the proceeds on the redemption'' transfer of CRPS. In support of the same the assessee company vide its letter dated 24.02.2016 (enclosed in Annexure 5 above) furnished the copy of the relevant Payment Authority and Discharge Form relating to the CRPS submitted to TMI.RS along with copy of the relevant share certificate and the Certificate of Foreign Inward Remittance issued by Citibank N'.A. evidencing (he receipt of the proceeds on redemption of of the factual paper book. The same is also summ....
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....redemption of preference shares squarely comes within the phrase "sale, exchange, or relinquishment of the asset" and is hence, liable for capital gains tax u/s. 45 r.w.s 2(47) of the Act. 6.8. Considering the above facts of the case, it is respectfully submitted to your Honour that the in the captioned notice, reliance placed upon the decision of the Hon'ble Mumbai Tribunal in the case of ACIT v. ABC Bearings Ltd. (44 SOT 338) (enclosed as Exhibit (VI of Case Laws Compilation) is purely distinguishable on facts. The said judgement specifically deals with conversion of the units of Unit Trust of India into 6.75% US 64 tax-free bonds as per the option given by the Government to the existing unit holders, whereas in assessee's case it is a clear-cut case of redemption/sale of shares for which consideration is received by the assessee company. 6.9. Therefore, it is submitted that as per the facts of the assessee company, the LTCL claimed on sale of 70.55,000 CRPS had been correctly allowed by the Ld AO in the assessment order dated 27.02.2017 and accordingly no adjustment by way of revision of the order is warranted. 3.12. Similarly, we find that assessee had made its sub....
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....of Business or Profession (23.19,44,19.948) (21,86.10,04,552) 2 Income from House Property 4,36,42,053 4,36,42.053 3. Capital Gains (STCG) 29,77,8 1,355 29,77,81,355 4 Income from Other Sources (including foreign dividend income of Rs. 22.20 crores) 35.79.20,941 35,79,20,941 Gross Total Income (22,49,50,75,599) (21,16,16,60,203) Total Income (22,49,50,75,599) (21,16,16,60,203) 7.4. There being Total Loss, the assessee company has not claimed any deduction under Chapter VI-A of the Act. The total assessed Loss of Rs. 21,16,16,60.203/- comprises of the following: a. Assessed Unabsorbed Depreciation - Rs. 13,16,80,13,056/- b. Assessed Unabsorbed Business Loss to be carry forward- Rs. 7,99,36,47, 147/- I. Set-off of loss u/s. 71 falling under Chapter Vii of the Act is a the absence of any restriction under the Act, the same cannot be ignored 7.5. In this regard, at the outset, we would like to invite your Honour's kind attention to the provisions of section 7 1 of the Act, based on which the assessee company had computed the Income for the year and filed Return of income. Section 71 of the Act as relevant for the year und....
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.... income are entitled for being set-off against the loss under the head ''Profits and Gains of Business or Profession " 7.7. Accordingly, during the year, the assessee company in its return of income, set-off the loss of Rs. 2,319.44 crores against Income from House Property - Rs. 4.36 crores. Capital Gains - Rs. 29.78 crores and Income from Other Sources Rs. 35,79 crores, thereby resulting in Total Loss of Rs. 2.249.51 crores which comprises of Unabsorbed Depreciation - Rs. 1.316.80 crores and Unabsorbed Business Loss- Rs. 9.32.71 crores; which is carried forward for set-off" against Other Income / Business Profits in future. In the assessment order dated 27.02.2017 the same has been examined and after giving effect to the additions and disallowances the loss for the year was assessed at Rs. 2.116. i 7 crores which comprises of Unabsorbed Depreciation-Rs. 1,316.80 crores and unabsorbed Business Loss - Rs. 799.37 crores 7.8. It is submitted that even 'Long term Capital Gains' is taxable at the rate of 20% or 10%, as the case may be, whereas business income is taxable at marginal rate of 30%, however, still set-off of such loss is permissible as per the provisions....
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....ub-section (I). (3) In this section,- d) "dividends " shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof; (ii) "specified foreign company" means a foreign company in which the Indian company holds twenty-six per cent or more in nominal value of the equity share capital of the company. " 7.14. The above section clearly provides that where the Total Income of the assessee includes income by way of dividend declared, distributed or paid by a specified foreign company, then such dividend income shall be subject to tax at 15% (plus applicable surcharge and cess) and balance part of Total Income, i.e. as reduced by above foreign dividend income won id be subjected to the prevailing rate of tax had there been no income by way of foreign dividend income. 7.15. The term "Total Income" is defined in section 2(25) of the Act. which reads as under: "Total Income" weans the total amount of income referred to in section 5, computed in the manner laid down in this Act [Emphasis supplied] " From the above, your Honour will appreciate that here the reference to section 5 is only for inclusion of income from w....
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.... 15% to foreign dividend income, does not arise. II Express provision for restriction for set-off of loss whenever intended has been specifically provided in the Act. In the absence of any express provision u/s.115BBD of the Act, the set off of loss against the Dividend In come referred it/s 115BBD of the Act is allowable as per law, 7.20. It is submitted that sub-section (2) of section 115BBD of the Act begins with a non-obstante clause stating that no deduction in respect of any expenditure or allowance shall be allowed to the assessee in computing its income by way of dividend, which means that no deduction towards any expenditure or allowance in relation to that dividend will be allowed. 7.21. It is submitted that the assessee company has not claimed any expenditure or allowance in computing its foreign dividend income offered to tax under the head ''Income from Other Sources "which is sei-off against "Profits and Gains of Business or Profession" as provided u/s. 71 of the Act. 7.22. In light of the above discussion on the provisions of the Act, we submit that sub-section (2) to section 115BBD of the Act only provides that no deduction of any expenditure or allo....
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....er section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-lax payable shall be the aggregate of- (1) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent: and the amount of income-tax with which the assessee would have been chargeable had his Total Income been reduced by She amount of income referred to the clause (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure ^allowance's hall _be_ allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (I). " (emphasis supplied) 7.27. The Legislature observed that there was uncertainty prevailing on the issue of set-off of losses against income referred in section 1 15BBE of the Act and the judicial forums and courts in some eases took a view that losses shall not be allowed to be set-off against income referred in section! 15BBEofthe Act. Also the then prevailing language of the abov....
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....ot available to the assessee. 7.33.It is also submitted that whenever any income is proposed to be taxed on gross basis at specified rates without grant of any deduction towards expenditure or allowance or set-off of loss, then it is expressly provided in the body of the section or the section is suitably amended otherwise. Hence, it is submitted that since, sub-section (2) to section 115BBD of the Act does not categorically provide that no deduction would be allowed for set-off of losses, it is to be construed that set-off of loss is available as deduction while computing foreign dividend income. 7.34. We would like to draw your Honour's kind attention to the Explanatory Memorandum to Finance Act. 2011 for the rationale behind introducing section 115BBD of the Act for taxing certain dividends received from foreign companies. ''Under the existing provisions of the Income-tax Act, dividend received from foreign companies is taxable in the hands of the resident shareholder at his applicable marginal rate of tax. Therefore, in case of Indian companies which receive foreign dividend, such dividend is taxable at the rate of thirty per cent plus applicable surcharge and....
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....te of tax. if the Total Income as computed in the manner laid down under the Act includes foreign dividend income. 7.39. Thus, it is submitted that section 115BBD of the Act being an incentive provision is a beneficial legislation and is to be construed liberally to grant benefit to the taxpayer to fulfill the mandate of legislation which is to repatriate foreign dividends. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (196 ITR 188). wherein it is held as under; "The provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; since the provision for pro/noting economic growth has to be interpreted liberally, restrictions on it too has to be construed so as to advance the objective of the provisions and not to frustrate it." 7.40. Considering the above, we humbly submit that the said provisions of section 115BBD of the Act be interpreted liberally and the assessee company be allowed to set-off the Business Loss during the year against the foreign dividend income offered lo lax under Income from Other sources. 7.41. Thus, it is submitted that t....