KAMAL IMRAN PANJU, MUMBAI V. ASST CIT 12(1), MUMBAI

CO 212/MUM/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 7382 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: HI TESH GAJARIA
• Keywords: Capital asset; Cost of acquisition; Competent authority; Capital receipt
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7620/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) ADDL. CIT 12(1), ROOM NO.117, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400 020 / VS. KAMAL IMRAN PANJU JN MARSHAL & CO., APEEJAY CHAMBERS, 5 WALLACE ROAD, FORT, MUMBAI ./ ./PAN/GIR NO. AACPP 1468 M ( /APPELLANT ) : ( !' / RESPONDENT ) !' ./ C.O. NO. 212/MUM/2012 (ARISING OUT OF ITA NO. 7620/MUM/2011) ( / ASSESSMENT YEAR: 2008-09) KAMAL IMRAN PANJU JN MARSHAL & CO., APEEJAY CHAMBERS, 5 WALLACE ROAD, FORT, MUMBAI / VS. ADDL. CIT 12(1), ROOM NO.117, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400 020 ./ ./PAN/GIR NO. AACPP 1468 M ( !'/ CROSS OBJECTOR ) : ( !' / RESPONDENT ) # $ % / REVENUE BY : SHRI SURINDER JIT SINGH &'()* $ % / ASSESSEE BY : SHRI HITESH GAJARIA + &#, $ *- / DATE OF HEARING : 30.12.2013 ./0 $ *- / DATE OF PRONOUNCEMENT : 31.12.2013 2 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) 1 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE AND A CROSS OBJECT ION (CO) BY THE ASSESSEE, IMPUGNING THE ORDER BY THE COMMISSIONER OF INCOME T AX (APPEALS)-23, MUMBAI (CIT(A) FOR SHORT) DATED 03.08.2011, PARTLY ALLOW ING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2008-09 VIDE ORDER DATED 30. 12.2010. 2. THE ONLY ISSUE ARISING IN THE REVENUES APPEAL I S THE MAINTAINABILITY IN LAW OF THE DELETION OF THE INCOME IN THE SUM OF RS.16,74,85,50 0/- ASSESSED BY THE ASSESSING OFFICER (A.O.) AS DIVIDEND INCOME U/S.2(22)(D) OF THE ACT. THE ASSESSEES CO RAISES AN ALTERNATE CONTENTION, CLAIMING THAT EVEN IF THE SAME IS HELD AS DIVIDEND INCOME, I.E., AS AGAINST THE CAPITAL GAINS ARISING ON THE TRANSFER OF SHARES, TH E SAME WOULD BE EXEMPT U/S.10(34) R.W.S. 115-O OF THE ACT. 2.1 THE REVENUES CASE IS THAT THE TRANSFER OF SHAR ES BY THE ASSESSEE IN THE INSTANT CASE IS NOT BY WAY OF BUY-BACK OF ITS SHARES BY THE ISSU ING COMPANY, I.E., WHOSE SHARES STANDS TRANSFERRED, INASMUCH AS THE SAME DOES NOT REPRESEN T A BUY-BACK OF SHARES IN TERMS OF SECTION 77A OF THE COMPANIES ACT, 1956 (COMPANIES ACT HEREINAFTER). TO QUALIFY AS SUCH, THE OFFER OF BUY-BACK MUST BE ON A PROPORTION ATE BASIS TO ALL THE SHARE-HOLDERS, WHICH WAS NOT SO IN THE INSTANT CASE. 2.2 THE ASSESSEES CASE, ON THE OTHER HAND, IS THAT THE SAID REDUCTION OF CAPITAL WAS PURSUANT TO A SCHEME U/SS.391 TO 394 OF THE COMPANI ES ACT, SINCE APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT, SO THAT IT IS ONLY BY WA Y OF REDUCTION OF CAPITAL U/SS.100 TO 102 OF THE SAID ACT. SECTIONS 391 TO 395 AND SECTION 10 2 OF THE COMPANIES ACT OPERATE IN A FIELD DIFFERENT FROM SECTION 77A THEREOF, WHICH HAS BEEN HELD BY THE HONBLE COURTS AS ONLY AN ENABLING PROVISION, SO THAT A COMPANY COULD EVEN PRIOR TO ITS ENACTMENT (I.E., BY COMPANIES AMENDMENT ACT, 1999 W.E.F 31.10.1998), RE DUCE ITS CAPITAL BY ACQUIRING ITS SHARES. TOWARD THIS, RELIANCE IS PLACED ON THE DECI SION IN THE CASE OF SEBI VS. STERLITE 3 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) INDUSTRIES (INDIA) LTD . (2003) 53 CLA 41 (BOM) BY THE JURISDICTIONAL HIGH COURT. FURTHER, THE TRANSACTION IS COVERED BY SECTION 46A OF THE AC T, WHICH DRAWS NO DISTINCTION QUA THE ROUTE ADOPTED BY THE COMPANY FOR THE PURCHASE OF IT S SHARES. IN ANY CASE OF THE MATTER, AS AFORE-STATED, EVEN ASSUMING THE TRANSACTION TO RESU LT IN DIVIDEND INCOME IN THE HANDS OF THE ASSESSEE, THE SAME BEING NOT A DIVIDEND U/S. 2( 22)(E) OF THE ACT., BUT ONLY U/S.2(22)(D), WOULD STAND TO BE EXEMPT U/S.10(34) R .W.S. 115-O OF THE ACT. THIS IN FACT IS THE BASIS OF THE ASSESSEES CO. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD AS WELL AS PERUSED THE CASE LAW CITED. 3.1 IT WOULD BE RELEVANT TO BRIEFLY STATE THE COURS E OF THE HEARING OF THE INSTANT APPEAL. WHEN THE APPEAL WAS ORIGINALLY HEARD, I.E., ON 05.0 9.2013, THE LD. DR HAD SOUGHT TIME ON THE GROUND THE REVENUE INTENDED TO WITHDRAW ITS APP EAL. AN ALLOWANCE OF ITS APPEAL MAY, IN VIEW OF THE ASSESSEES CO, BE PREJUDICIAL TO THE INTEREST OF THE REVENUE INASMUCH AS THE DIVIDEND INCOME, AS ASSESSED, IS LIABLE TO EXEM PT FROM TAX. HOWEVER, AS THE REVENUE HAD EARLIER ALSO SOUGHT ADJOURNMENT ON THAT BASIS, THE BENCH WAS DISINCLINED TO GRANT TIME, THE MATTER WAS PROCEEDED WITH. IT WAS ALSO MA DE CLEAR THAT THE BENCH CANNOT PREDICATE ITS DECISION, WHICH SHALL THOUGH ON MERIT S. THE APPEAL WAS HEARD AND THE DECISION RESERVED. IT WAS, HOWEVER, MADE CLEAR BY T HE LD. AR THAT HIS C.O. MAY NOT BE DECIDED IN CASE THE REVENUES APPEAL IS DISMISSED, MAKING AN ENDORSEMENT TO THAT EFFECT ON THE C.O. ITSELF. AS, HOWEVER, ON GOING THROUGH THE RECORD, AND THE D ECISIONS RELIED UPON BY THE REVENUE, ITS APPEAL WAS FOUND TO BE MERITORIOUS, SO THAT ACCEPTING IT MAY PROVE PREJUDICIAL TO IT IN VIEW OF THE ASSESSEES CO, RAI SING AN ALTERNATE CLAIM, IT WAS CONSIDERED PROPER TO ALLOW A FURTHER OPPORTUNITY TO IT TO STAT E ANYTHING IT MAY WISH TO IN THE MATTER INASMUCH AS AN APPELLANT CANNOT NORMALLY BE PUT IN A POSITION WORSE THAN HE IS IN PRIOR TO FILING THE APPEAL. THE MATTER WAS, ACCORDINGLY, POS TED AGAIN, WHEREAT THE LD. DR AGAIN SOUGHT TIME FOR WITHDRAWING THE APPEAL. THE LD. AR WOULD STATE THAT HE HAD NO OBJECTION PER SE THERETO THOUGH THE MATTER IN VIEW OF THE DELAY INV OLVED OUGHT TO BE PUT TO A 4 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) CLOSURE. A FINAL OPPORTUNITY WAS ACCORDINGLY ALLOWE D TO THE LD. DR, AND THE MATTER ADJOURNED TO A CONVENIENT DATE. NO WITHDRAWAL PETIT ION, HOWEVER, WAS FILED; THE REVENUE AGAIN SEEKING TIME IN VIEW OF NON AVAILABILITY OF C OMPETENT AUTHORITY, I.E., COMMISSIONER OF INCOME TAX-12 MUMBAI (CIT FOR SHORT), BEING ON LEAVE ON ACCOUNT OF SICKNESS. IT WAS FURTHER EXPLAINED BY THE LD. DR THAT THE MATTER STANDS REFERRED TO THE CHIEF CIT-7 MUMBAI, WHO STANDS TRANSFERRED BY CBDT, WITH NO ONE TRANSFERRED IN HIS STEAD. FURTHER, HE ARGUED, THAT IN THE EVENT OF WITHDRAWAL OF ITS A PPEAL, THE ASSESSEES CO SHALL NOT SURVIVE. THE LD. AR, ON THE OTHER HAND, WOULD ONCE AGAIN PRESS FOR THE CLOSURE OF THE MATTER; REITERATING HIS STAND THAT THE ASSESSEE SHA LL NOT PRESS ITS CO (OR THE GROUND RAISED THEREBY) IF THE REVENUES APPEAL WERE TO BE DISMISS ED. THE HEARING WAS CLOSED AT THIS STAGE. 3.2 THOUGH WE WOULD NORMALLY BE INCLINED TO GRANT A DJOURNMENT AS THE COMPETENT AUTHORITY IS STATED TO BE SICK, WE CANNOT BUT KEEP IN MIND THAT THE MATTER WAS POSTED ONLY BY WAY OF ABUNDANT CAUTION, TO ALLOW THE REVENUE AN OPPORTUNITY TO STATE OR RELY UPON WHATEVER IT MAY WISH TO IN PURSUANCE OF ITS APPEAL AND, FURTHER, THAT THE MATTER HAS BEEN POSTPONED FOR TOO LONG. THE MATTER, AS WE UNDERSTAN D, HAS BEEN DELAYED DUE TO REFERENCE BY THE COMPETENT AUTHORITY TO THE CHIEF CIT, EVEN A S WE FIND NO BASIS FOR THE SAID REFERENCE. AS SUCH, THERE BEING NO PERSON IN CHARGE OF THE OFFICE OF THE CHIEF CIT IS OF NO CONSEQUENCE. THE REVENUE SHOULD HAVE ACTED RESPONSI BLY, FIRSTLY, WHILE DECIDING ON FILING THE APPEAL AND, SUBSEQUENTLY, ON THE ASSESSE E PREFERRING A CO, WHICH ASPECT IN FACT COULD HAVE EVEN OTHERWISE BEEN ADVANCED AND SET UP BY HIM IN THE HEARING OF THE APPEAL ITSELF, I.E., INDEPENDENT OF HIS CO. TRUE, A CO IS FOR ALL INTENTS AND PURPOSE AN APPEAL. IT CANNOT, HOWEVER, BE CONDITIONAL, I.E., SUBJECT TO A PARTICULAR RESULT IN THE MAIN APPEAL. A RESPONDENT CAN EVEN OTHERWISE SUPPORT THE ORDER APP EALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM, SO THAT THE ASSESSEE NEED NOT HAVE NECESSARILY PREFERRED A CO, AND ITS ALTERNATE CLAIM, WHERE RAISED IN HEARING THE MA IN APPEAL, WOULD HAVE TO BE ADDRESSED. THE WITHDRAWAL OF THE APPEAL COULD ONLY BE WITH THE LEAVE OF THE COURT, WHOSE DECISION CANNOT BE TAKEN ONE-SIDED, AND HAS TO BE AFTER HEAR ING BOTH THE SIDES. AS SUCH, NOTHING 5 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) MUCH TURNS ON THE ARGUMENTS ADVANCED WITH REFERENCE TO THE SURVIVAL OR OTHERWISE OF THE ASSESSEES CO. I.E., INDEPENDENT OF THE MAIN APPEAL . THE QUESTION EVEN OTHERWISE IS ACADEMIC IN THE PRESENT CASE INASMUCH AS THERE HAS BEEN IN FACT NO WITHDRAWAL OF APPEAL, FOR WHICH EXTENDED TIME STANDS ALLOWED BY THE TRIBU NAL. ACCORDINGLY, THE ADJOURNMENT APPLICATION DATED 30.12.2013 IS REJECTED, AND WE PR OCEED TO DECIDE THE REVENUES APPEAL AND THE ASSESSEES CO ON MERITS, I.E., AS PER LAW; THE FACTS BEING UNDISPUTED. 3.3 IN OUR VIEW, THE MATTER IS REQUIRED TO BE CONSI DERED NOT FROM THE STAND-POINT OF WHETHER THE PURCHASE OF THE ASSESSEES SHARES BY TH E ISSUING COMPANY FALLS TO BE CONSIDERED AS A BUY-BACK U/S.77A OF THE COMPANIES A CT OR NOT, BUT WHETHER THE TRANSACTION IS IN SUBSTANCE A REDUCTION OF CAPITAL BY THE COMPA NY FOLLOWING THE SCHEME OF ARRANGEMENT PROVIDING AN EXIT OPTION TO THE MINORIT Y SHAREHOLDERS (I.E., THE MARSHALL GROUP, CONSISTING PRINCIPALLY THE ASSESSEE AND HER HUSBAND HOLDING 19.60% OF THE SHAREHOLDING, BESIDES THE RESIDUARY SHAREHOLDERS, A T 3.14%), CONSIDERED WITH REFERENCE TO THE RELEVANT PROVISIONS OF THE ACT. THERE IS NO DIS PUTE QUA THE SAME BEING A REDUCTION OF CAPITAL BY THE ISSUING-TRANSFEREE COMPANY UNDER THE RELEVANT PROVISIONS OF THE GOVERNING STATUTE, I.E., THE COMPANIES ACT. 3.4 SECTION 2(22)(D) OF THE ACT READS AS UNDER: DEFINITIONS 2 . IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRE S, (22) 'DIVIDEND' INCLUDES (A) . (B) . (C) . (D) ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COM PANY ON THE REDUCTION OF ITS CAPITAL, TO THE EXTENT TO WHICH THE COMPANY POSSESS ES ACCUMULATED PROFITS WHICH AROSE AFTER THE END OF THE PREVIOUS YEAR ENDI NG NEXT BEFORE THE 1ST DAY OF APRIL, 1933, WHETHER SUCH ACCUMULATED PROFIT S HAVE BEEN CAPITALISED OR NOT; WE HAVE CAREFULLY GONE THROUGH EACH OF THE DECISION S RELIED UPON BY THE REVENUE PER GROUND NO. 4 OF ITS GROUNDS OF APPEAL, VIZ. CIT VS. G. NARASIMHAN [1999] 236 ITR 6 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) 327 (SC); CIT VS. URMILA RAMESH [1998] 230 ITR 422 (SC); AND KARTIKEYA V. SARABHAI VS. CIT [1997] 228 ITR 163 (SC). THE ISSUE UNDER REFERENCE STANDS AMPLY CLARIFIED BY THE APEX COURT IN THE CASE OF G. NARASIMHAN (SUPRA), RENDERED AFTER CONSIDERING ITS EARLIER TW O DECISIONS, I.E., IN THE CASE OF URMILA RAMESH AND KARTIKEYA V. SARABHAI (SUPRA); THE LATTER RENDERED FOLLOWING THE DECISION IN THE CASE OF ANARKALI SARABHAI VS. CIT [1997] 224 ITR 422 (SC). IT CLARIFIED THAT THE DECISION IN THE CAS E OF KARTIKEYA V. SARABHAI (SUPRA) DID NOT CONSIDER THE PROVISION OF SECTION 2(22)(D) OF T HE ACT. VIDE THE SAID SECTION, ANY DISTRIBUTION BY A COMPANY TO ITS SHAREHOLDERS ON A REDUCTION OF CAPITAL, TO THE EXTENT IT POSSESS ACCUMULATED PROFITS, WHETHER CAPITALIZED OR NOT, SHALL FOR THE PURPOSES OF THE ACT BE CONSIDERED AS DIVIDEND INCOME. ACCORDINGLY, IT W AS HELD THAT THE DISTRIBUTION MADE BY THE COMPANY ON THE REDUCTION OF ITS SHARE CAPITAL, WHICH CORRELATED WITH THE COMPANYS ACCUMULATED PROFIT, WHETHER CAPITALIZED OR NOT, IS TO BE CONSIDERED AS DIVIDEND IN THE HANDS OF THE ASSESSEE-RECIPIENT, AND THE INCOME LIA BLE TO BE TAXED ACCORDINGLY. IT IS ONLY IN CASE OF DISTRIBUTION IN EXCESS OF SUCH ACCUMULAT ED PROFITS THAT THE QUESTION OF THE CAPITAL RECEIPT IN THE HANDS OF THE SHAREHOLDER WOU LD ARISE. 3.5 CLEARLY, THEREFORE, IN THE PRESENT CASE, THE RE CEIPT OF RS.1674.85 LACS, TO THE EXTENT IT IS ATTRIBUTABLE TO THE ACCUMULATED PROFITS OF TH E COMPANY, WOULD BE DIVIDEND U/S.2(22)(D) R.W.S. 2(24)(II) OF THE ACT. THE ASSES SEE DECLARING THE ENTIRE SUM, INCLUDING THAT ATTRIBUTABLE TO ACCUMULATED PROFITS (WHICH AGA IN STANDS DEFINED PER EXPLANATION 2 TO SECTION 2(22)), AS TOWARDS TRANSFER CONSIDERATION O F THE SHARES ON THE REDUCTION OF CAPITAL, LIABLE TO CAPITAL GAINS, IS THUS NOT CORRECT IN THE EYES OF LAW. ONLY THE SUM RECEIVED OVER AND ABOVE THAT REFERABLE TO THE ACCUMULATED PROFITS WOULD BEAR THE CHARACTER OF A CAPITAL RECEIPT AND, THUS, BEING IN RESPECT OF A TRANSFER O F A CAPITAL ASSET, LIABLE TO TAX U/S.45(1) OF THE ACT. THE REVENUES CASE IS UNEXCEPTIONAL. THE LD. CIT(A) HAS FAILED TO CONSIDER THE CLEAR PRO VISION OF LAW QUA REDUCTION OF CAPITAL, I.E., SEC. 2(22)(D), AS WELL AS THE RELEVA NT DECISION BY THE APEX COURT SETTLING THE MATTER. THE BUY-BACK OF SHARES , AS INDEED THE REDUCTION OF CAPITAL , BY A COMPANY COULD ONLY BE IN TERMS OF THE RELEVANT PROVISIONS OF THE COMPANIES ACT. SECTION 46A, IT MAY BE 7 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) NOTED, WAS INTRODUCED ON THE STATUTE-BOOK (BY FINAN CE ACT, 1999 W.E.F. 01/4/2000) AS A CONSEQUENTIAL AMENDMENT TO THE COMPANIES ACT, ALLOW ING A COMPANY TO PURCHASE ITS OWN SHARES (OR OTHER SPECIFIED SECURITIES) SUBJECT TO C ERTAIN CONDITIONS (VIDE S.77A). TO CLARIFY THE LEGAL POSITION QUA SUCH BUY BACK OF SHARES U/S. 77A OF THE COMPANIES ACT, S. 46A WAS INSERTED TO PROVIDE THAT ANY CONSIDERATION RECEIVED BY A SHAREHOLDER (OR HOLDER OF OTHER SPECIFIED SECURITY) ON THE PURCHASE OF ITS SHARES ( OR THE SPECIFIED SECURITIES) BY THE ISSUING COMPANY, SHALL, TO THE EXTENT IT IS IN EXCESS OF TH E ITS COST OF ACQUISITION, AND SUBJECT TO S. 48, BE DEEMED AS CAPITAL GAINS IN THE YEAR OF SUCH PURCHASE. SEC. 2(22) WAS SIMULTANEOUSLY AMENDED (VIDE CLAUSE (IV) THERETO) T O EXCLUDE ANY PART OF SUCH CONSIDERATION FOR BEING CONSIDERED AS DIVIDEND U/S. 2(22) OF THE ACT. THERE IS ACCORDINGLY NO CONFLICT BETWEEN THE DIFFERENT PROVISIONS, AND S . 46A IS ONLY TOWARD PURCHASE OF ITS SHARES, ETC. BY A COMPANY BY WAY OF BUY-BACK U/S.77 A, AND NOT BY WAY OF REDUCTION OF CAPITAL THROUGH THE PROCEDURE SPECIFIED IN ITS RESP ECT UNDER THE COMPANIES ACT. IN FACT, IT IS NOT EVEN THE ASSESSEES CASE THAT IT IS A CASE OF B UY-BACK OF SHARES U/S. 77A OF THE COMPANIES ACT, SO THAT THE PROVISION OF S. 46A, CON SIDERED BY THE LD.CIT(A) AS VALIDLY INVOKED BY THE ASSESSEE, HAS NO APPLICATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. IN VIEW OF THE FOREGOING, THE IMPUGNED RECEIPT I S LIABLE TO BE CONSIDERED AS DIVIDEND U/S.2(22)(D) OF THE ACT TO THE EXTENT AND AS ATTRIBUTABLE OF THE ACCUMULATED PROFITS OF THE COMPANY. WE DECIDE ACCORDINGLY, AND THE REVENUE SUCCEEDS IN PART. 5. COMING TO THE ASSESSEES CO, CLAIMING THAT THE D IVIDEND INCOME U/S. 2(22)(D) IS EXEMPT U/S. 10(34) OF THE ACT, SO THAT NO TAX LIABI LITY IN ITS CASE WOULD ARISE IN ANY VIEW OF THE MATTER. SECTION 10(34) OF THE ACT READS AS UNDER: INCOMES NOT INCLUDED IN TOTAL INCOME. 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR O F ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED (1) .. (2) .. (34) ANY INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTION 115-O; 8 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) SECTION 10(34) OF THE ACT, THUS, EXEMPTS INCOME BY WAY OF DIVIDENDS REFERRED TO IN U/S.115-O FROM TAX. SECTION 115-O OF THE ACT FALLS UNDER CHAPTER XII-D OF THE ACT, TITLED SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES. THE HEADING OF THE SECTION ITSELF READS AS: TAX ON DIS TRIBUTED PROFITS OF THE DOMESTIC COMPANIES. THE TERM DOMESTIC COMPANY IS DEFINED UNDER SECTION 2(22A) OF THE ACT, AND THAT THE ISSUING COMPANY IN THE INSTANT CASE IS A DOMESTIC COMPANY IS NOT IN DISPUTE. EVEN OTHERWISE, IT FLOWS FROM THE ASSESSEES ARGUME NT ITSELF INASMUCH AS THE DIVIDEND WOULD NOT BE EXEMPT U/S. 10(34) UNLESS IT IS A DIVI DEND REFERRED TO IN SECTION 115-O, I.E., DISTRIBUTED BY A DOMESTIC COMPANY. THE READING OF T HE SECTION WOULD BEAR OUT THAT THE SAME IS ONLY APPLICABLE TO SUMS DECLARED, DISTRIBUT ED OR PAID BY A QUALIFYING (DOMESTIC) COMPANY BY WAY OF DIVIDEND, WHETHER INTERIM OR OTHE RWISE. THE WORD DIVIDENDS FOR THE PURPOSES OF CHAPTER XII-D HAS BEEN DEFINED PER EXPLANATION THERETO TO MEAN THE SAME AS GIVEN VIDE CLAUSES (A) TO (D) OF SUB-SECTION (22) O F SECTION 2 OF THE ACT. THE AMOUNT UNDER REFERENCE HAS BEEN CONFIRMED BY US AS FALLING U/S. 2(22)(D) TO THE EXTENT OF THE TRANSFEREE- COMPANYS ACCUMULATED PROFITS AND, AS SUCH, AS DIVI DEND WITHIN THE CONTEMPLATION OF SECTION 115-O. THE SAME IS, THEREFORE, DIVIDEND REF ERRED TO IN SECTION 115-O AND, ACCORDINGLY, COVERED BY THE PROVISION OF SECTION 10 (34) OF THE ACT. THE ASSESSEES CLAIM PER ITS CO, TO THE EXTENT THE RECEIPT OF RS.1674.86 LACS IS A DIVIDEND U/S. 2(22)(D), IS, THUS, VALID IN LAW. THE SAME IS LIABLE TO ADDITIONAL INCO ME-TAX U/S. 115-O IN THE HANDS OF THE COMPANY PAYING THE SAME (DIVIDEND), AND WHICH THOUG H FOLLOWS DIRECTLY FROM WHAT HAS BEEN HELD BY US, IS ANOTHER MATTER, WITH WHICH WE A RE NOT DIRECTLY CONCERNED WITH IN THE PRESENT CASE. THE ASSESSEE THUS ALSO SUCCEEDS IN PA RT. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, BOTH THE REVENUES APPEAL AND THE ASSESSEES CO ARE PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER , 2013 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + , MUMBAI; 2& DATED : 31.12.2013 9 ITA NO. 7620/M/11 & CO NO. 212/M/12 KAMAL IMRAN PANJU (A.Y. 2008-09) #.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. + 3* ( ) / THE CIT(A) 4. + 3* / CIT - CONCERNED 5. 6#78 !*&9' , - 9'0 , + , / DR, ITAT, MUMBAI 6. 8:( ;, / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + , / ITAT, MUMBAI