M/s. Exide Industries Ltd., , Kolkata V. D.C.I.T.,Circle-1(1), Kolkata

CO 1/KOL/2020

AI Insights

The case involves Exide Industries Limited, which appealed against the order of the CIT(Appeals) concerning the additional depreciation claimed under section 32(1)(iia) of the Income Tax Act, 1961, for the assessment year 2015-16. The Tribunal found that the CIT(Appeals) correctly allowed the claim for the balance amount of additional depreciation in the subsequent financial year, as per the provisions added by the Finance Act, 2015. Additionally, the assessee's Cross Objection sought a reduction in the DDT rate on dividends paid to Chloride Eastern Limited, a Singapore tax resident, arguing it should be 10% as per the India-Singapore Tax Treaty instead of the 16.995% applied. The Tribunal, referencing a Special Bench decision, held that the DDT should be charged at the rate specified in section 115-O of the Act, not at the treaty rate.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129042 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 05-01-2020
• Other Referred Cases: Birla Corporation Limited vs. DCIT, Century Enka Limited vs. DCIT, Apollo Tyres Limited vs. ACIT, CIT vs. Bajaj Tempo Limited, DCIT vs. Total Oil India Private Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PLETHORA OF JUDGMENTS
• Keywords: Depreciation; Double taxation relief; Additional depreciation
• Section: 143(3); 32(1)(iia)

Judgement Text

ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Dr. Manish Borad, Accountant Member & Shri Sonjoy Sarma, Judicial Member I.T.A. No. 207/KOL/2019 Assessment Year: 2015-2016 Assistant Commissioner of Income Tax,....Appellant Circle-1(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 -Vs.- Exide Industries Limited,.......................Respondent 59E, Exide House, Chowringhee Road, Kolkata-700020 [PAN:AAACE6641E] & C.O. No. 01/KOL/2020 (arising out of ITA No. 207/KOL/2019) Assessment Year: 2015-2016 Exide Industries Limited,.................Cross Objector 59E, Exide House, Chowringhee Road, Kolkata-700020 [PAN:AAACE6641E] & Assistant Commissioner of Income Tax,...Respondent Circle-1(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: Shri G. Hukugha Sema, CIT, appeared on behalf of the Revenue Shri Anup Sinha, A.R, appeared on behalf of the assessee ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 2 Date of concluding the hearing : June 06, 2023 Date of pronouncing the order : August 10, 2023 O R D E R Per Dr. Manish Borad, Accountant Member:- This appeal at the instance of Revenue for assessment year 2015-16 is directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Kolkata dated 11.10.2018, which is arising out of the order under section 143(3) of the Act on 27.12.2017 framed by ld. DCIT, Circle-1(1), Kolkata. 2. The Revenue has raised the following ground of appeal:- “That on the facts and circumstances of the case and on law ld. CIT(A) has erred in granting relief u/s 32(1)(iia) of the I.T. Act, on account of brought forward unabsorbed portion, of additional depreciation of Rs.2,86,20,208/- (Rs.3,79,10,416/- minus Rs.92,90,208/-)”. 3. The assessee has filed Cross Objection bearing C.O. No.01/KOL/2020, wherein the assessee has raised the following grounds:- (1) That on the facts and in the circumstances of the case and in law, the rate of Dividend Distribution Tax (hereinafter referred to as ‘DDT’) paid by the respondent assessee on dividend distributed / paid to Chloride Eastern Limited (Singapore) ought to have been restricted to 10 percent as per the provisions of Article 10(2) of the India-Singapore Tax Treaty (herein after referred to as Tax Treaty’) instead of 16.995 percent at which the respondent assessee had paid the DDT as per the provision of section 115-0 of the Income-tax Act, 1961 (hereinafter referred to as the Act’) and as such, the assessee would be eligible for refund under the ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 3 provisions of section 237 of the Act read with the aforesaid Article of the relevant Tax Treaty for the previous year relevant to the assessment year (2) That on the facts and in the circumstances of the case and in law, the Education Cess paid by the respondent assessee company on income tax ought to have been allowed under section 37(1) of the of the Income-tax Act, 1961 while arriving at the assessed income for the previous year relevant to the assessment year 2015-16. (3) That the respondent assessee craves leave to add to and / or amend, alter, modify or rescind the ground hereinabove before or at the time of hearing of the cross objection 4. We first take the Revenue’s appeal in ITA No. 207/KOL/2019. 5. At the outset, ld. Counsel for the assessee submitted that the issue raised by the Revenue in the instant appeal is squarely covered in favour of the assessee by plethora of judgments and the decision of this Tribunal including that of Birla Corporation Limited –vs. DCIT (2015) 55 taxmann.33 (Kol. Trib.); Century Inka Limited –vs.- DCIT (2015) 37 ITR 644 (ITAT, Kolkata; Apollo Tyres Limited –vs.- ACIT (2014) 45 taxmann.com 337. 6. The ld. D.R. failed to controvert the contention made by the ld. Counsel for the assessee. 7. We have heard the rival contentions and perused the relevant material placed before us. We notice that the assessee has claimed additional depreciation of Rs.3,79,10,416/- @ 10% of ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 4 the amount of depreciation on assets, which were put to use in the second half of the preceding financial year. In other words, the assessee purchased certain fixed assets during financial year 2013-14 in the second half and though entitled to 20% of additional depreciation for the whole year, only claimed 10% under section 32(1)(iia) and the remaining 10% was claimed in the subsequent financial year, i.e. financial year 2014-15 relevant to assessment year 2015-16. The ld. Assessing Officer disallowed the said claim. 8. We observe that the Hon’ble Supreme Court in the case of CIT –vs.- Bajaj Tempo Limited (1992) 196 ITR 188 (SC) has held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally and the sections pertaining to incentives, exemptions and deductions where the spirit is to promote exports, increase earnings in foreign convertible exchange, promote industrialization, infrastructure development etc. should be construed liberally and decided in favour of the assessee. Accordingly the provision of section 32(1)(iia) of the Act should be construed liberally. 9. Further we notice that this Tribunal in the cases of Birla Corporation Limited (supra), Century Enka Limited (supra) has taken a consistent view that if the assessee had not claimed the total amount of depreciation in the year of purchase of assets for the reason that it is held for less than six months, then the ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 5 assessee is entitled to claim the remaining amount of additional depreciation in the subsequent financial year. 10. We further notice that 3 rd proviso to section 36(1)(iia) has been inserted by the Finance Act, 2015, which clearly clarifies that the claim of balance amount of additional depreciation for assets, which were put to use for less than 180 days, which was restricted to 50%, would be allowed to be claimed in the immediately succeeding year. The same has been clarified in the Memorandum to the introduction of third proviso to section 32(1)(i) of the Finance Bill 2015. We are thus of the considered view that the ld. CIT(Appeals) has rightly allowed the said claim of assessee towards the balance amount of depreciation. Thus no interference is called for and the sole Ground raised by the Revenue is dismissed. 11. Ground No. 2 is general in nature, which does not call for recording of any finding. 12. In the result, the appeal of the Revenue is dismissed. 13. Now we take the Cross Objection bearing C.O. No. 1/KOL/2020 filed by the assessee. 14. At the outset, ld. Counsel for the assessee stated that he does not want to press Ground No.2, therefore, the same is dismissed as not pressed. ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 6 15. The only issue left for consideration is Ground No. 1. The ld. Counsel for the assessee contended that the rate of Dividend Distribution Tax (in short ‘DDT’) paid by the respondent-assessee on the dividend distributed /paid to Chloride Eastern Limited, a foreign company and tax resident of Singapore, ought to have been restricted to 10% as per provisions of Article 10(2) of the India-Singapore Tax Treaty instead of 16.995% at which the respondent-assessee had paid the DDT as per the provisions of section 115-O of the Income Tax Act, 1961 and thus the assessee is eligible for refund. 16. Before us, ld. Counsel for the assessee has filed a detailed written submission running into 24 pages in support of his contention that Treaty rate of 10% ought to have been applied for DDT on the dividend distributed/paid to Chloride Eastern Limited, a foreign company and tax resident of Singapore in place of the rate on dividend distribution under the provision of section 115-O of the Act. It is also submitted by the ld. Counsel for the assessee that though similar issue has been dealt by the Special Bench of this Tribunal Mumbai Bench in the case of DCIT –vs.- Total Oil India Private Limited in ITA No. 6997/MUM/2019 & Others dated 20 th April, 2023 and the issue has been decided by the Special Bench, ITAT, Mumbai against the assessee, however, the submission made before us nu the ld. Counsel for the assessee contends that the decision of Special Bench is not applicable on the assessee. ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 7 17. On the other hand, ld. D.R. stated that the judgment of the Special Bench, Mumbai in the case of Total Oil India Private Limited (supra) is squarely applicable on the assessee. 18. We have heard the rival contentions and perused the material placed before us. In the Cross Objection, the assessee has raised a ground that dividend distribution tax payable on the dividend distributed /paid to Chloride Eastern Limited, a foreign company and tax resident of Singapore, ought to have been charged only @ 10% being the tax rate as per provisions of Article 10(2) of the India-Singapore Tax Treaty instead of 16.995% of the DDT rate provided under section 115-O of the Act. We notice that the assessee has deposited the dividend distribution tax @ 16.995% only but at the later stage, the claim has been made for restricting DDT rate at 10% based on India-Singapore Tax Treaty and refund has been claimed. Though detailed submission has been filed by the assessee but prima facie indicates that the decision referred by ld. Counsel for the assessee in its favour, is not applicable on the facts before us and are thus distinguishable. We, however, would like to peruse the question for consideration before the Hon’ble Special Bench, ITAT, Mumbai of this Tribunal in the case of Total Oil India Private Limited (supra), which reads as under:- “Where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts additional income- tax (tax on distributed profits) referred to in ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 8 section 115-O of the Income Tax Act, 1961 (in short ‘the Act’), whether such additional income- tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act or the rate of tax applicable to the non-resident shareholder(s) with reference to such dividend income”. 19. Thereafter in the decision of the Special Bench, judicial jurisprudence has been dealt with and the conclusion of the decision reads as under:- “83. For the reasons given above, we hold that where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income Tax (Tax on Distributed Profits) referred to in Sec. 115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income. Nevertheless, we are conscious of the sovereign’s prerogative to extend the treaty protection to domestic companies paying dividend distribution tax through the mechanism of DTAAs. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. Thus, the question before the Special bench is answered, accordingly”. 20. After going through the decision of the Special Bench, we find that the issue raised by the assessee in its Cross Objection is ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 9 similar to the issue dealt with by the Special Bench, wherein the matter was related to dividend distribution tax rate applicable to the dividend distributed/paid to a foreign company located at France and whether the DDT was leviable at the prescribed rate between India and France and the Hon’ble Special Bench held that where dividend is declared or distributed by domestic company to a non-resident holder, such additional income tax payable under section 115-O of the Income Tax Act shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident holder as specified in the relevant DDT with reference to such dividend income. Accordingly, respectfully placing reliance on the said decision of Special Bench, ITAT in the case of Total Oil India Pvt. Limited (supra) and the same being squarely applicable against the assessee on the issue raised in Cross Objection, we are inclined to hold that the assessee is liable to pay dividend distribution tax @ 16.995% on the dividend distributed/paid to non-resident namely Chloride Eastern Limited, a foreign company and tax resident of Singapore. Thus Ground No. 1 of the Cross Objection filed by the assessee is dismissed. 21. Ground No. 3 is general in nature, which does not require for recording of any finding. 22. In the result, the Cross Objection filed by the assessee is dismissed. ITA No. 207/KOL/2019 Assessment Year: 2015-2016 & CO-01-KOL-2020 (in ITA 207/KOL/2019) Exide Industries Limited 10 23. To sum up, the appeal filed by the Revenue and the Cross Objection by the assessee both are dismissed. Order pronounced in the open Court on10 th August, 2023. Sd/- Sd/- (Sonjoy Sarma) (Manish Borad) Judicial Member Accountant Member Kolkata, the 10 th day of August, 2023 Copies to :(1) Assistant Commissioner of Income Tax, Circle-1(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (2) Exide Industries Limited, 59E, Exide House, Chowringhee Road, Kolkata-700020 (3) Commissioner of Income Tax (Appeals)-1, Kolkata; 4) Commissioner of Income Tax- ; (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.