TMI Blog2014 (5) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... as received in September 2002 to its shareholders on 29th October 2003 - The assessee had the time limit for such distribution up to the date of filing of the return of income - the presumption can be drawn that the dividend has been distributed out of the same quantum of dividend received only, unless something is brought on record that the said dividend income has been specifically used for some other purpose. This has not been controverted by the AO - 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 the conclusion of the AO, especially when in the original round of scrutiny proceedings u/s 143(3), the assessee’s contention has been accepted - the assessee’s claim of deduction u/s 80M is clearly allowable as the same is within the mandate of section 80M, as all the conditions mentioned stands fulfilled for which there is no dispute by the Department - provisions of section 115-O will not negate the assessee’s claim for deduction u/s 80M in the year, as the provisions of section 115-0 is for different purpose altogether – Decided in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the assessment order u/s 143(3) dated 30.11.2005 that, while determining taxable under normal provisions, the assessee company was allowed deduction of Rs. 22,55,750 u/s 80M. As per sub-section (1) of section 115-O of the I.T. Act, 1961, in the case of domestic company, any amount declared, distributed or paid by such company by way of dividends on or after 01.04.2003, whether out of current or accumulated profits shall be charged to additional income tax (hereafter referred to as tax on distributed profits) at the rate of 12.5%. And as per sub-section (5) of section 115-O, no deduction under any other provisions of this Act shall be allowed to the company or a shareholder in respect of the amount which has been charged to tax under sub-section (1) of the section 115-O or tax thereon. As the dividend of Rs. 22,55,750 was subject to tax under sub-section (1) of the 115-O, no deduction u/s 80M is allowable to the assessee in view of the specific provisions contained in sub-section (5) of section 115-O. In view of the above, I have reasons to believe that income chargeable to tax has escaped the assessment and the assessment is required to be re-opened u/s 147 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction under section 80M which was allowed earlier. 5. Before the learned Commissioner (Appeals), the assessee submitted that in the case of the assessee, section 115-O cannot be held to be applicable and, therefore, the assessee had correctly claimed deduction under section 80M, which was applicable for the assessment year 2003-04. Moreover, the re-opening has been done on the ground of change of opinion on the same set of facts without bringing any new material on record, therefore, such re-opening is not valid in view of the decision of the Hon'ble Supreme Court in CIT v/s Kalvinator of India Ltd. [2010] 320 ITR 561 (SC). The learned Commissioner (Appeals), on the ground of re-opening of the case, held that the re-opening proceedings have been validly initiated as the Assessing Officer has disposed off the assessee s objection on merits and further there was an under assessment by claiming impermissible deduction in this year. 6. On merits, the assessee had submitted that the provisions of section 80M does not provide that the dividend distributed must be of during the financial year relevant for the assessment year under appeal. The law provides that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear provisions of sectioni 115-O(5), deduction under section 80M cannot be allowed as the assessee company, while declaring the dividend was liable for dividend distribution tax under section 115-O(1). In this case, the dividend was distributed in the assessment year 2004-05, wherein the clear cut provisions of section 115-O was applicable. Accordingly, he affirmed the action of the Assessing Officer. 8. Before us, the learned Counsel for the assessee submitted that, first of all, in the course of the original assessment proceedings, the Assessing Officer has allowed the claim of deduction under section 80M, in the order passed under section 143, therefore, the re-opening under section 147, for withdrawing the claim, without any material on record is nothing but change of opinion , which is not permissible in law. Otherwise, on merits also, he submitted that there is no dispute with regard to the fact that the assessee had received dividend of Rs. 22,55,600 from Asian Electronics Ltd. from 24th September 2002, which was falling within the relevant assessment year 2003-04. Thereafter, the assessee has distributed the dividend to the shareholders on 29th October 2003, which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the Revenue s case is that the provisions of section 115-O, have been brought in the statute w.e.f. 1st April 2003 i.e., assessment year 2003-04, which clearly provides that the dividend distributed will be subject to additional tax and no deduction shall be allowed under any other provisions of the Act, which has been clearly expressed in sub-section (5) of section 115-O. 11. Section 80M, prior to its omission w.e.f. 1st February 2004, read as under:- 80M. Deduction in respect of certain inter-corporate dividends (1) where the gross total dividends from another domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction nof an amount equal to so much of the amount of income by way of dividend from another domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date. (2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of 3[twelve and one-half per cent.] (2) Notwithstanding that no income tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central Government within fourteen days from the date of - (a) Declaration of any dividend; or (b) Distribution of any dividend; or (c) Payment of any dividend Whichever is earliest. (4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to the company or a shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M and the tax which is to be charged on distributed profits of domestic companies. 15. It the present case, it is very important to note that it is not the case of the Department that the additional tax is to be levied on the dividend distributed by the domestic company, which has been received by the assessee or the dividend income has been claimed as exempt as such or the deduction of any tax paid on dividend has been claimed. Here the assessee has not been claiming any exemption on dividend as an exempt income in its hand either under section 10(33) or 10(34). The assessee s claim of deduction under section 80M, is entirely on a different footing i.e., it has received the dividend and the same has been distributed. Otherwise also, once the deduction is allowable under specific section, which is on an altogether different footing, the same cannot be withdrawn by any other section unless the conditions mentioned under any overriding section have been infringed. The purpose and intent of section 115-O is entirely different inasmuch as it sought to tax the dividend at the time of declaration / distribution / payment and such payment of tax cannot be claimed as deduction under any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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