ORBITECH LTD ( FORMERLY CITICORP OVERSEAS SOFTWARE LTD), MUMBAI V. DCIT 8(2), MUMBAI

ITA 4331/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1633 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 17-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R DAS
• Assessee Lawyers: A V SONDE
• Keywords: Reassessment proceedings
• Section: 143(3)

Judgement Text

ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH, MUMBAI BEFORE SHRI D.K. AGRAWAL (JUDICIAL MEMBER), AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO. 4331/MUM/2009 ASSESSMENT YEAR 2003-04 DATE OF HEARING 26.5.2010 ORBITECH LIMITED ......APPELLANT (FORMERLY CITICROP OVERSEAS SOFTWARD LTD.) C/O K.K. LALKAKA & CO. 507 CHURCHGATE CHAMBERS, 5, NEW MARINE LINES MUMBAI 400 020 PAN AAACC5736G VS. DY. COMMISSIONER OF INCOME TAX 8(2) .. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 APPELLANT BY : SHRI A.V. SONDE RESPONDENT BY : SHRI K.R. DAS O R D E R PER PRAMOD KUMAR: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE LD. CIT(A)S ORDER DATED 27 TH MAY 2009, IN THE MATTER OF ASSESSMENT U/S 143(3) O F THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR ASSESSMENT YEAR 2003-04. ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 2 OF 8 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS:-D 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASS ESSING OFFICER BY WRONGLY HOLDING THAT THE APPELLANT IS NOT ENTITL ED TO DEDUCTION U/S 80M OF RS.27,61,19,991/- FROM ITS TOTAL INCOME. 2. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE REASS ESSMENT PROCEEDINGS ARE BAD IN LAW, ILLEGAL, IN EXCESS AND/ OR IN WANT OF JURISDICTION AND / OR OTHERWISE VOID. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS NOWHERE IN HIS ASSESSMENT ORDER INVOKED THE PROVISIONS OF SECTION 115O(5) BUT HAS MERELY HELD T HAT DOUBLE EXEMPTION HAS BEEN CLAIMED BY THE ASSESSEE IN RESPE CT OF THE SAME INCOME WHICH FINDING IS NOT BORNE OUT FROM PRO PER APPRECIATION OF THE FACTS OF THE APPELLANTS CASE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) H AS FAILED TO APPLY HIS MIND TO THE SUBJECT MATTER OF APPEAL AND MECHANICALLY RELIED ON THE ORDER OF HIS PREDECESSOR IN CASE OF C ASTLE INVESTMENT INDUSTRIES P. LTD. VIDE ORDER NO.CIT(A)VIII/IT-296/ 2005-06 DATED 10.1.2006. IN ANY EVENT THE RESTRICTIVE PROVISIONS OF SECTION 115O(5) ARE NOT APPLICABLE AT ALL IN THE APPELLANT S CASE. 3. THE ASSESSEE HAS NOT PRESSED THE GRIEVANCES AGAINST REOPENING. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.59,62,59,111/- UNDER SE CTION 80M IN RESPECT OF DIVIDENDS PAID TO CITICORP TECHNOLOGY HOLDING INC., U.S.A. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE ALSO RECEIVED DIVIDEND OF ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 3 OF 8 RS.101,50,41,120. THE DIVIDEND PAYOUT TO CITICORP T ECHNOLOGY HOLDINGS INC. U.S.A., CONSISTED OF TWO DISTINCT SEGMENTS FIRST RS.32,01,39,120 PAID ON 17 TH SEPTEMBER 2002 IN RESPECT OF FINANCIAL YEAR 2001-02 SECOND OF RS.27,61,19,991 PAID ON 7 TH OCTOBER 2003, FOR THE ASSESSMENT YEAR 2002-03. AS REGARDS THE AMOUNT OF RS.32,01,39,120, THE ASSES SING OFFICER NOTED THAT THE TDS ON THE SAID PAYMENT WAS DULY DEDUCTED AND I T WAS ALSO TAXABLE IN THE HANDS OF THE RECIPIENT. THE ASSESSING OFFICER A CCEPTED THE CLAIM OF DEDUCTION U/S 80M IN RESPECT OF THIS AMOUNT. HOWEVE R, THE ASSESSING OFFICER NOTED THAT SO FAR AS THE AMOUNT OF RS.27,61,19,991/ - IS CONCERNED, THE ASSESSEE HAS PAID DIVIDEND DISTRIBUTION TAX U/S 115 O IN RESPECT OF THE SAME AND IT WAS TAX EXEMPT IN THE HANDS OF THE SHAREHOLD ER. THE ASSESSING OFFICER WAS OF THE VIEW THAT DEDUCTION U/S 80M IS AVAILABLE WHEN ASSESSEE RECEIVES A TAXABLE DIVIDEND AND DECLARES DIVIDEND OUT OF THE S AID RECEIPT WHICH IS ALSO TAXABLE IN THE HANDS OF THE SHAREHOLDERS. THE ASSES SING OFFICER NOTED THAT SO FAR AS THE PAYMENT OF ABOVE DIVIDEND OF RS.27,61,19 ,991 IS CONCERNED, SINCE THE SAME WAS EXEMPT IN THE HANDS OF RECIPIENT AND T HE COMPANY HAS SIMPLY PAID DIVIDEND DISTRIBUTION TAX U/S 115 O, DEDUCTI ON U/S 80M CANNOT BE ALLOWED IN RESPECT OF THE SAME. HE FURTHER OBSERVED THAT IF EXEMPTION (SIC DEDUCTION) U/S 80M ON PAYMENT OF RS.27,61,19,991/- IS ALLOWED, IT WILL AMOUNT TO DOUBLE DEDUCTION WHICH IS NEITHER THE INTENTION OF LAW NOR THERE IS ANY PROVISION IN THE LAW. WITH THESE OBSERVATIONS, DEDUCTION U/S 80M TO THE EXTENT OF RS.27,61,19,991 WAS DISALLOWED. AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN SECOND APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 4 OF 8 5. THE ISSUE IN APPEAL IS NO LONGER RES INTEGRA. HON BLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS SAUMYA FINANCE & LEASI NG CO. P. LTD. (ITA NO.56 OF 2005; JUDGMENT DATED 23 RD JANUARY 2008) HAS, INTER-ALIA, OBSERVED AS FOLLOWS:- 4. TO APPRECIATE THE CONTENTION RAISED BY THE REVE NUE, IT IS NECESSARY TO REPRODUCE (80M AS THEN EXISTING) WHI CH WAS AS UNDER:- 80M DEDUCTION IN RESPECT OF CERTAIN INTER-CORPOR ATE DIVIDENDS. (1) WHERE THE GROSS TOTAL INCOME OF A DOMESTIC COMPANY, IN ANY PREVIOUS YEAR, INCLUDES ANY INCOME BY WAY OF DIVIDENDS FROM ANOTHER DOMESTIC COMPANY, THERE S HALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION BE ALLOWED, IN COMPUTING THE TOTAL INCOME O F SUCH DOMESTIC COMPANY, A DEDUCTION OF AN INCOME BY WAY O F DIVIDENDS FROM ANOTHER DOMESTIC COMPANY AS DOES NOT EXCEED THE 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 B EEN ALLOWED UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, NO SUCH AMOUNT IN ANY OTHER PREVIOUS YEAR. EXPLANATION FO R THE PURPOSES OF THIS SECTION, THE EXPRESSION DUE DATE MEANS THE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139. 5. ON THE BARE READING OF THE SECTION IT IS CLEAR T HAT THE DEDUCTION AS PERMITTED IS OF AN AMOUNT EQUAL TO SO MUCH OF THE AMOUNT OF INCOME BY WAY OF DIVIDEND DECLARED BY THE COMPANY AS DOES NOT EXCEED THE AMOUNT OF DIVIDEND DISTRIBUTED BY THE ASSESSEE COMPANY ON OR BEFORE THE DUE DATE. 6. IT IS CLEARLY SEEN THAT THE SECTION DOES NOT PRO VIDE FOR THE NATURE OF THE DIVIDEND DISTRIBUTED BY THE ASSESSEE COMPANY. IT ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 5 OF 8 DOES NOT STATE THAT THE NATURE OF THE DIVIDEND DIST RIBUTED MUST BE FOR THE FINANCIAL YEAR UNDER ASSESSMENT. ACCEPTING THE ARGUMENT OF THE REVENUE WILL AMOUNT TO LAYING DOWN AN ADDITI ONAL RESTRICTION TO THE EFFECT THAT THE DIVIDEND DISTRIB UTED BY THE ASSESSEE COMPANY MUST BE FOR THE FINANCIAL YEAR UND ER ASSESSMENT. LAYING DOWN SUCH RESTRICTING QUALIFICAT ION, IN OUR VIEW, WILL AMOUNT TO DOING VIOLENCE TO THE PLAIN AN D CLEAR MEANING OF THE WORDS AS CONTAINED IN SECTION 80M. 7. COUNSEL APPEARING FOR THE REVENUE SOUGHT TO ARGU E THAT WHERE THE LITERAL MEANING OF THE WORDS CONTAINED IN ANY PROVISION OF LAW, WOULD LEAD TO AN ABSURD RESULT I. E., A RESULT NOT INTENDED TO BE SUB-SERVED, BY THE OBJECT OF THE LEG ISLATION AND IF ANOTHER CONSTRUCTION IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION, THEN THAT CONSTRUCTION, THEN THAT CON STRUCTION SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCT ION. ACCORDING TO COUNSEL FOR REVENUE, IF A LITERAL CONSTRUCTION IS G IVEN TO SECTION 80M, THEN IT WOULD LEAD TO AN ABSURD RESULT, SINCE THE AMOUNT OF DEDUCTION EARNED IN THE SUBSEQUENT YEAR WILL BE PER MITTED IN RESPECT OF THE INCOME OF THE PREVIOUS YEAR. HE PLAC ED STRONG RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE C ASE OF VARGHESE V. ITO, (1981), REPORTED IN 131 ITR 597. I N THAT CASE, THE APEX COURT WHILE CONSIDERING THE INTERPRETATION TO BE GIVEN TO SECTION 16(3) OF THE INCOME TAX ACT, OBSERVED AS UN DER:- IF THE PURPOSE OF A PARTICULAR PROVISION IS EASILY DISCERNIBLE FROM THE WHOLE SCHEME OF THE ACT, WHICH IN THIS CASE IS TO COUNTERACT THE EFFECT OF THE TRA NSFER OF ASSETS SO FAR AS COMPUTATION OF INCOME OF THE ASSESSEE IS CONCERNED, THE BEARING THAT PURPOSE IN MIND, WE SHOULD FIND OUT THE INTENTION FROM THE LANGUAGE USED BY THE LEGISLATURE AND IF STRICT LITE RAL CONSTRUCTION LEADS TO AN ABSURD RESULT, I.E., A RES ULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION FOUND IN THE MANNER INDICATED BEFORE, THEN IF ANOTHER CONSTRUCTION IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION, THEN THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITERAL CONSTRUCTION. ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 6 OF 8 8. IN OUR VIEW, THIS IS NOT A CASE WHERE A LITERAL CONSTRUCTION TO BE GIVEN TO SECTION 80M WOULD LEAD TO AN ABSURD RESULT. THE INTENTION OF LEGISLATURE WHILE ENACTING SECTION 80M WAS CLEARLY TO ENSURE THAT THE DIVIDEND INCOME RECEIVED BY THE ASS ESSEE COMPANY SHOULD BE PERMITTED AS A DEDUCTION ONLY IF IT IS RE- DISTRIBUTED AS DIVIDEND INCOME TO ITS SHAREHOLDERS. THE SECTION PROVIDED THAT THE SAID DISTRIBUTION TO BE MADE BEFO RE THE DUE DATE OF THE FILING OF THE RETURNS. THIS HAS BEEN DO NE BY THE PRESENT RESPONDENT AND ALL THE REQUIREMENTS OF SECTION 80M ARE CLEARLY MET BY THEM. 6. THERE ARE SEVERAL DECISIONS OF CO-ORDINATE BENCHES WHICH COVER THE ISSUE IN FAVOUR OF THE ASSESSEE. HOWEVER, NOW THAT WE HAVE BENEFIT OF GUIDANCE BY HONBLE JURISDICTIONAL HIGH COURT, WE N EED NOT REFER TO THESE PRECEDENTS. RESPECTFULLY FOLLOWING THE ESTEEMED VIE WS OF HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALL OWANCE OF DEDUCTION U/S 80M. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MAY 2010. SD/XX SD/XX (D.K. AGRAWAL) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 31 ST DAY OF MAY, 2010. ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 7 OF 8 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, C BENCH, ITAT, MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ITA NO. 4431/MUM/2009 ASSESSMENT YEAR : 2003-04 PAGE 8 OF 8 DATE INITIAL 1. DRAFT DICTATED ON 28.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 31.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 31.5.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER