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2025 (8) TMI 909
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.... 2. For that on the facts and in the circumstances of the case and in law, the lower authorities failed to appreciate that amount of dividend assessable u/s 115-O read with 115-O(1A) was NIL and therefore the appellant ought to be granted credit/refund of the excess DDT of Rs. 22,38,770/- paid u/s 115-O of the Act. 3. For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before." 3. Brief facts of the case are that the assessee had filed the return of income which was processed by the CPC in which the total income was shown at Rs.69,79,860/- and deemed total income u/s 115JB of the Act was taken at Rs.82,63,998/- as shown by the assessee in the return of income. However, while giving credit of MAT, the claim of refund was reduced by Rs.17,338/- and the DDT (Dividend Distribution Tax) refund of Rs.22,38,770/- was not allowed as the MAT credit for income-tax amount of Rs.5,65,118/- only was allowed instead of Rs.5,82,072/- as claimed by the assessee as education cess of Rs.16,954/- was not treated as part of the MAT credit u/s 115JAA of the Act. In the course ....
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....referred by the assessee against the order dated 01.07.2016 passed u/s 250 of the Act by the Ld. Commissioner of Income Tax (Appeals)-2, Kolkata ['CIT(A)'] in relation to the rectification order passed u/s 154 of the Act dated 26.07.2014. 2. Ground No. 1 raised by the assessee is against the short grant of MAT credit of Rs. 16,954/- u/s 115JAA of the Act. The facts relating to the issue are that, the assessee had filed return of income in which it had declared total income of Rs. 69,79,860/- under the normal provisions on which the tax liability, including income tax and education cess, was Rs. 21,56,777/-. The assessee had declared book profit u/s 115JB of the Act at Rs. 82,63,998/-, on which the MAT liability (including education cess) was Rs. 15,74,705/-. The assessee had accordingly claimed MAT credit of Rs. 5,82,072/- (Rs.21,56,777 - Rs. 15,74,705). The CPC in the intimation however, allowed MAT credit of Rs. 5,65,118/- only, which resulted in short credit of Rs. 16,954/-. The assessee preferred a rectification application u/s 154 of the Act to rectify this mistake, which was rejected by the CPC. On appeal, the assessee pointed out to the Ld. CIT(A) that, the CPC appa....
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....ich the said portion of amount is to be utilized for their intended purpose, but such bifurcation does not change the character of payment i.e. 'tax'. The Hon'ble Tribunal accordingly directed that the MAT credit u/s 115JAA of the Act be allowed, after taking into account surcharge and education cess. The Hon'ble ITAT Hyderabad, in the case of Virtusa (India) Pvt. Ltd. vs DCIT (67 taxmnn.com 65) (Page Nos. 9-16 of Paperbook) also took note of the computation of total tax liability as designed in ITR-6- Part B - TTI by the CBDT. It noted that the tax liabilities for normal provisions as well as MAT was to be calculated with surcharge and education cess and that later on tax credit u/s 115JAA was to be allowed. This format notified by the CBDT, according to the Hon'ble Tribunal further supported the assessee's case that the MAT credit was to be allowed, being the difference of tax (including surcharge and education cess) u/s 115JB and the tax (including surcharge and education cess) as computed under normal provisions. Identical view has also been expressed by the Hon'ble ITAT Chennai in the case of Value Source Technologies Pvt. Ltd. vs DCIT (ITA No. 449/Mds/2016) (Page Nos. 17-28 o....
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....ceived by the domestic company during the financial year, if- (a) such dividend is received from its subsidiary; and (b) the subsidiary has paid the tax which is payable under this section on such dividend: (c) *** Provided that the same amount of dividend shall not be taken into account for reduction more than once; (ii) the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) of section 10. Explanation.-For the purposes of this sub-section, a company shall be a subsidiary of another company, if such other company, holds more than half in nominal value of the equity share capital of the company.] 8. On perusal of the above, it shall be noted that, u/s 115O(1) of the Act, an assessee company is required to pay additional income tax on the dividends distributed or paid by the company. Sub-section (1A) further provides that, the amount on which such additional income tax is payable shall be reduced by the amount of dividend received by the company during the financial year, if such dividend is received from the subsidiary and that subsidiary has paid ....
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.... which is exempted from payment of income tax or is not an income within the contemplation of law, he can certainly make such claim before the concerned authority for refund and he must be given that refund on being satisfied that refund is due and payable. The Hon'ble Court held that, non-grant of the refund, in their view, would be in breach of Article 265 of the Constitution of India. Following the said judgment, several judicial forums have held that any excess tax erroneously or inadvertently paid by the assessee is to be refunded back, where the corresponding income is found to be exempt from tax or not taxable at all. - Grasim Industries Ltd. vs ACIT (154 taxmann.com 164) (Bom HC) - United Spirits Ltd. vs ACIT (156 taxmann.com 497) (Kar HC) - Interglobe Enterprises (P.) Ltd. vs PCIT (148 taxmann.com 121) (Del HC) 10. In view of the above decisions (supra), the assesse has demonstrated that, there was no DDT liability payable during the year and even the CPC/Ld. CIT(A) had not assessed any DDT liability u/s 115O for the relevant AY 2012-13 and in that view of the matter, when admittedly the DDT liability is NIL, the AO/CPC is obligated to r....
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....n 1 Clause 5 while defining the expression 'assessed tax'. For the sake of convenience, the said explanation 1 to Section 234B is reproduced hereunder: "In this Section, "assessed tax" means the tax on the total income determined under sub-section (1) of Section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of- (i) Any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; (ii) Any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) Any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) Any deduction, from the Indian income tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) Any tax credit allowed to be set of in accordance with the provisions of section 115JAA [or section 115JD]." From the afor....
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....d was allowed while in AY 2016-17 the Ld. CIT(A) had granted relief to the assessee on the same issue. 8. We have considered the submissions made. As regards Ground no. 1, since the credit for tax paid against MAT is on the basis of the past taxes paid and education cess, which was earlier being held as an allowable deduction as the same was being claimed as not forming part of tax; however, the same controversy has been settled by the Hon'ble Supreme Court in the case of Joint Commissioner of Income-tax vs. Sesa Goa Ltd. [2023] 155 taxmann.com 342 (SC)/[2023] 295 Taxman 236 (SC)/[2024] 460 ITR 4 (SC)[15-09-2023] wherein the Learned counsel for the respondent very fairly states that in view of the subsequent amendments in the Income-tax Act, 1961, "Education Cess" cannot be allowed as an expenditure, the impugned judgment has been set aside and the appeal has been allowed, holding that the "Education Cess" cannot be allowed as an expenditure. Thus, in view of the amendment in section 40(a)(ii) of the Act which does not allow any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of or otherwise on t....
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.... the equity share capital of the company as per Explanation below sub-section (1A) to section 115-O of the Act. The assessee has filed copy of confirmation letter dated 20.06.2016 provided by the GMMCO Ltd. confirming the payment of dividend to the assessee along with copies of challans evidencing the payment of DDT on the dividend paid and the relevant extracts of audited financial statements of GMMCO Ltd. for AY 2012-13 have also been enclosed at pages 45 to 54 of the paper book filed before us. Since the subsidiary had paid the dividend subsequent to the filing of the return by the assessee, it was submitted that the same could not be considered while filing the return of income. 10. We have considered the submissions made. In view of the provisions of sub-section (1A) of section 115-O of the Act, this ground of appeal is allowed and the assessee is directed to submit necessary evidence regarding the dividend received from the subsidiary and the DDT paid by the subsidiary and the Ld. AO is directed to allow the necessary refund in view of the finding of Hon'ble Gujarat High Court in the case of Torrent (P.) Ltd. (supra) reproduced as under: "13. Coming to the mer....
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.... and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences." In the case of Saraswati Industrial Syndicate Ltd. v. CIT AIR 1991 SC 70, the Apex Court on the question of amalgamation of two companies observed as under : "Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity." The effect of this legal proposition would be that by virtue of deeming fiction of amalgamation relating back to the date envisaged in the scheme, transaction of payment of dividend by the transferor company to other three companies would not retain the ....
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.... in the case of New Shorrock Spg. & Mfg. Co. Ltd. (supra), facts were that the assessee company had on 25.5.72 declared its dividend for the year 1971. One Mafatlal Gagalbhai and Co. Pvt. Ltd. case (supra) holding shares in the assessee company received dividend in respect of its holdings in the assessee company. On 27th October 1972, a proposal was initiated for amalgamation of Mafatlal Gagalbhai and Co. (P.) Ltd. case (supra) with the assessee company. Petitions for such purpose were filed before the Bombay High Court and the Gujarat High Court. By the orders passed on 24th September 1973 and 26th September 1973, the said High Courts sanctioned the amalgamation scheme. Under both these orders, amalgamation came into effect from 1st April 1972. In the assessment year 1973-74, the assessee company was sought to be taxed in respect of the dividend income received by Mafatlal Gagalbhai and Co. Ltd. The contention of the assessee was that Mafatlal Gagalbhai and Co. Ltd. having ceased to exist with effect from 1st April 1972, by virtue of the orders of amalgamation, the assessee company could not be taxed for the dividend distributed in favour of Mafatlal Gagalbhai & Company. The Bomba....