TMI Blog2010 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... eded to reopen the assessment on a plainly extraneous ground. - assessing officer has clearly acted in excess of the restraints on his jurisdiction to reopen an assessment in exercise of the powers under Section 147 read with Section 148 – notice u/s 148 quashed. - 200 OF 2010 - - - Dated:- 11-2-2010 - DR. D.Y.CHANDRACHUD J.P. DEVADHAR, JJ. Mr. Percy J. Pardiwala, Senior Advocate with Mr. Jitendra Jain i/b Mr. Atul K. Jasani for the Petitioner. Mr. J.S. Saluja for the Respondents. JUDGEMENT Per Dr. D.Y. Chandrachud, J. Rule, made returnable forthwith. By consent of the learned counsel and at their request the matter is taken up for hearing and final disposal. 2. The assessee in the present case challenges the reopening of assessment for Assessment Year 2003-04 in pursuance of a notice dated 28th March, 2008 issued by the Deputy Commissioner of Income Tax, 10(2) Mumbai. The controversy in the petition under Article 226 falls in a narrow compass. During the course of Assessment Year 2003-04, Section 80M of the Income Tax Act, 1961 was on the statute book and read thus: "80M. Deduction in respect of certain intercorporate dividends. (1) Where the gross to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which the total income of the assessee was determined at Rs. 2.77 Crores and the assessee was allowed a deduction to the extent of Rs.5.31 Crores under Section 80M. Of the total dividend received in the amount of Rs.5.59 Crores, the assessing officer made a disallowance of Rs.27.95 lacs, thus confining the deduction to an amount of Rs.5.31 Crores as noted above. The assessee filed an appeal before the CIT(A). The CIT(A) by an order dated 3rd November, 2006 restricted the disallowance of expenditure incurred for earning dividend income upto 2% of the dividend income. Both the assessee and the revenue carried the decision of the CIT(A), in appeal to the ITAT. In the meantime, the First Respondent passed an order on 17th October, 2008 to give effect to the order of the CIT(A) by which the disallowance under Section 80M was restricted to Rs.11.18 lacs as against the original disallowance of Rs.27.95 lacs. The ITAT by its order dated 10th September, 2009 deleted the disallowance made with regard to the deduction claimed by the Petitioner under Section 80M of the Act. Consequently, the Petitioner was held to be entitled to a deduction without any disallowance as had been made in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was in conformity with the decisions of the Tribunal in the case of Silvassa Industries [Silvassa Industries Pvt. Ltd. v. DCIT as per ITA No.462/M/02 decided on 10th May, 2002.and in the case of Kaikobad Byramjee Sons [ITO v. M/s. Kaikobad Byramjee Sons Agency Pvt. Ltd. (ITA No.4102/Mum/2001).] dated 7th October, 2004. Learned counsel submitted that these decisions were followed and affirmed by the Tribunal on 18th July, 2007 in its decision in the case of Castle Investment and Industries Pvt. Limited v. ITO [ITA 1713/Mum/2006.]. Consequently, the order of assessment was consistent with the law laid down by the Tribunal which had not been reversed or set aside. In the circumstances, it was submitted that the assessee was entitled to a deduction under Section 80M for Assessment Year 200304 but this would be restricted to the amount of the dividend declared upto the due date of the filing of the return. 7. Counsel appearing on behalf of the revenue on the other hand submitted that the assessee had distributed dividend after the due date of 1st April, 2003 under Section 115-O and was, therefore, liable to pay additional tax under that provision. In the circumstances, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t insofar as is material held that Section 115-O(5) does not in any way restrict the allowability of the claim under Section 80M. Under Section 80-M what is claimed as a deduction is the dividend received by the company. Dividends declared, distributed or paid are not claimed as a deduction under Section 80-M though they constitute an out flow of funds from the company. Section 80-M imposes a monetary restriction on the amount that may be claimed by way of a deduction by providing that the amount of claim cannot exceed the dividend distributed by the assessee by the due date. Though the judgment of the Tribunal in Castle Investment was dated 18th July, 2007 (the order of assessment being dated 28th February, 2006) it is necessary to note that the decision followed the earlier decision of the Tribunal dated 10th May, 2002 in the case of Silvassa Industries and the decision dated 7th October, 2004 in M/s. Kaikobad Byramjee (supra). The decision of the Tribunal in Castle Investment (supra) was affirmed by a Division Bench of this Court on 22nd July, 2008 in ITA 1557 of 2007. 11. The provisions of Section 147 of the Act empower the assessing officer to reopen an assessment or issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the inference is drawn that the assessee has forfeited the right to claim a deduction under Section 80M. The reasons which have been recorded by the assessing officer are ex facie extraneous to the question as to whether the assessee would be entitled to a deduction under Section 80M. Section 80-M, it may be noted, forms a part of the provisions of Chapter VIA of the Income Tax Act, 1961. Chapter VIA is distributed in several parts. Part A deals with the general provisions and consists of Sections 80-A and 80-B. Part B deals with deductions with respect to certain payments and comprises of Section 80-C to 80-GGC. Part C of Chapter VI-A provides for deductions in respect of certain incomes. Section 80-M as it then stood during the course of assessment year 2003-04 formed a part of Part C of Chapter VI-A. Under Section 80-M the deduction is not in respect of the amount declared or distributed by way of dividend. The deduction that was stipulated under Section 80-M was in respect of dividend received by a domestic company from another domestic company. The extent of the deduction was, however, subject to a monetary ceiling, the ceiling being that the deduction should not exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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