SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD, MUMBAI V. ITO 1(3)(2), MUMBAI

ITA 5000/MUM/2012

• Counselvise Citation: 500019914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-03-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: H N MOTIWALA
• Keywords: Reopening of assessment; Earning of tax free income; Difference of opinion; Change of opinion
• Section: 147; 11; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDI CIAL MEMBER . / ITA NO. 5000 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 3 04 ) SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. C/O H.N. MOTIWALLA & CO. 508, SHARDA CHAMBERS 33, NEW MARINE LINES MUMBAI 400 020 .. / APPELLANT V/S INCOME TAX OFFICRE WARD 1(3)(2), MUMBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AA ECS4770L / ASSESSEE BY : MR. H.N. MOTIWALA / REV ENUE BY : MR. ASHOK SURI / DATE OF HEARING 2 6 . 0 3 .201 4 / DATE OF ORDER 30.04.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE CHALLENGING THE IMPUGNED ORDER DATED 2 1 ST JUNE 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) I I , MUMBAI, FOR THE QUANTUM OF SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 2 ASSESSMENT PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMEN T YEAR 20 03 04 , ON THE FOLLOWING GROUNDS: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF REOPENING OF ASSESSMENT UNDER SECTION 147 PARTICULARLY WHEN THE ASSESSMENT UNDER SECTION 143(3) WAS CORRECTLY MADE DETERMINING THE BUSINESS LOSS OF ` 3,07,826 AFTER ALLOWING THE DEDUCTION OF ` 22,52,250 UNDER SECTION 80M AND LONG TERM CAPITAL GAIN OF ` 9,11,480 AND THUS REOPENING OF THE ASSESSMENT IS NOTHING BUT A CHANGE OF OPINION BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DISALLOWING THE CLAIM OF THE APPELLANT AMOUNTING TO ` 22,52,250 UNDER SECTION 80M IN RESPECT OF DIVIDEND RECEIVED ON 24 .9.2002, FROM ASIAN ELECTRONICS LTD. AMOUNTING TO ` 22,55,600 (GROSS) ON WHICH TAX WAS DEDUCTED AMOUNTING TO ` 2,36,838 WHICH WAS DISTRIBUTED BY THE APPELLANT ON 29.10.2003 I.E., BEFORE DUE DATE OF FILING RETURN OF INCOME. 2 . FACTS IN BRIEF : THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND SECURITIES AND INVESTMENTS IN MUTUAL FUNDS. FOR THE ASSESSMENT YEAR 2003 04, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 27 TH NOVEMBER 2003, DECLARING TOTAL INCOME OF ` 3,94,444, AFTER CLAIMING DEDUCTION OF ` 22,54,250 UNDER SECTION 80M. THEREAFTER, THE ASSESSMENT WAS FINALLY COMPLETED UNDER SECTION 143(3), WHEREIN, THE CLAIM OF DEDUCTION UNDER SECTION 80M, WAS ALLOWED AFTER DEDUCTING PROPORTIONATE EXPENDITURE OF ` 2,12,704. THE SAID A SSESSMENT ORDER ALSO STOOD CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) VIDE ORDER DATED 13 TH FEBRUARY 2006. THEREAFTER, THE SAID ASSESSMENT WAS RE OPENED UNDER SECTION 147 VIDE NOTICE DATED 29 TH FEBRUARY 2008, ISSUED UNDER SECTION 148, ON THE FOLLOWING REASONS : SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 3 IT IS SEEN 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 ` 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 U NDER SUB SECTION (1) OF THE SECTION 115 O OR TAX THEREON. AS THE DIVIDEND OF ` 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.T. ACT, 1961. 3 . THE ASSESSEE, AFTER COMPLETING THE FORMALITIES OF REQUIREMENT OF NOTICE UNDER SECTION 148, SOUGHT FOR REASONS FOR RE OPENING THE CASE. AFTER RECEIVING THE REASONS RECORDED , THE ASSESSEE RAISED DETAIL OBJECTIONS VIDE LETTER DATED 17 TH MARCH 2008. THE SUM AND SUBSTANCE OF THE SAID OBJECTION WAS THAT TH E ASSESSEE HAS CORRECTLY CLAIMED DEDUCTION UNDER SECTION 80M ON THE BASIS OF CBDT CIRCULAR NO.8 OF 2002 DATED 27 TH AUGUST 2002. BESIDES THIS, IT WAS SUBMITTED THAT DURING THE RELEVANT ASSESSMENT YEAR, THE DIVIDEND WAS TAXABLE IN THE HANDS OF THE ASSESSEE A ND THE ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION IN RESPECT OF THE DIVIDEND DISTRIBUTED BY IT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME AND ACCORDINGLY, DEDUCTION UNDER SECTION 80M WAS ALLOWABLE. THE ASSESSEE, FURTHER, IN RESPONSE TO THE SHO W CAUSE NOTICE, SUBMITTED THE DETAILS OF DIVIDEND PAID AND DIVIDEND RECEIVED ALONG WITH THE COPY OF SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 4 BANK STATEMENT EVIDENCING THE DISTRIBUTION OF DIVIDEND FOR WHICH DEDUCTION UNDER SECTION 80M WAS CLAIMED. THESE DETAILS WERE AS UNDER: WITH REFERENCE TO THE ABOVE, WE ARE SUBMITTING THE DETAILS OF DIVIDEND PAID AS FOLLOWS: NAME CHEQUE NO. NO. OF SHARES AMOUNT PAID ( ` ) USHA S. SHAH 591122 2250 102375 SURESH H. SHAH 591121 2250 102375 MAMTA SHAH 591123 2250 102375 SHRADHA S. SHAH 591124 2250 102375 PA HOR INVESTMENT & LEASING PVT. LTD. 591136 6750 307125 SURU INVESTMENT & LEASING PVT. LTD. 591140 6750 307125 DEEMITA INVESTMENT & LEASING PVT. LTD. 591137 6750 307125 SARDMA LEASING & INVESTMENTS PVT. LTD. 591136 6750 307125 TEJOMAY LEASING & INVESTMEN T PVT. LTD. 591138 6750 307125 MAXMINI LEASING & INVESTMENTS PVT. LTD. 591125 6750 307125 49500 2252250 THE DIVIDEND WAS DECLARED @ 45.50% ON FACE VALUE OF SHARES OF ` 100 EACH ON 29.10.2003. DETAILS OF DIVIDEND RECEIVED GROSS TDS NET FROM ASIAN ELECTRONICS LTD. 22,55,600 2,36,838 20,18,762 FROM NATIONAL CO OP BANK LTD. 150 NIL 150 TOTAL: 22,50,750 2,36,838 20,18,912 SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 5 COPY OF THE BANK STATEMENT EVIDENCING THE DISTRIBUTION OF DIVIDEND FOR WHICH DEDUCTION U/S 80M HAS BEEN CLAIMED COPY OF THE BANK STATEMENT OF BANK OF INDIA, PANCHPAKADI BRANCH, ATTACHED FOR DIVIDEND PAID AND RECEIPT. 4 . THE ASSESSING OFFICER DISPOSED OF THE ASSESSEES OBJECTION VIDE INTERIM ORDER DATED 2 ND DECEMBER 2008. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVE D DIVIDEND OF ` 22,55,600 FROM ASIAN ELECTRONICS LTD. ON 24 TH SEPTEMBER 2002 I.E., DURING THE RELEVANT ASSESSMENT YEAR 2003 04. HOWEVER, THE ASSESSEE HAD MADE THE PAYMENT OF DIVIDEND OF ` 22,50,000, ONLY ON 29 TH OCTOBER 2003 I.E., BEFORE THE DUE DATE OF FI LING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 04. THUS, THE DIVIDEND WAS NOT DECLARED OUT OF THE PROFITS OF THE ASSESSMENT YEAR 2002 03, WHICH HAS ENDED ON 31 ST MARCH 2003. THE DIVIDEND WHICH HAD BEEN DECLARED ON 29 TH OCTOBER 2003, IS A DIVIDEN D DECLARED DURING THE FINANCIAL YEAR 2003 04, WHICH FALLS IN THE ASSESSMENT YEAR 2004 05. THUS, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80M AND, THEREFORE, THE ASSESSMENT HAS RIGHTLY BEEN RE OPENED. ACCORDINGLY, IN THE ASSESSMENT ORDER DAT ED 19 TH DECEMBER 2008, ALSO HE DISALLOWED ` 22,55,750, ON ACCOUNT 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 WITHOU T BRINGING ANY NEW MATERIAL ON RECORD, THEREFORE, SUCH RE OPENING IS NOT VALID I N VIEW SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 6 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 OPENI NG OF THE CASE, HELD THAT THE RE OPENING PROCEEDINGS HAVE BEEN VALIDLY INITIATED AS THE ASSESSING OFFICER HAS DISPOSED OFF THE ASSESSEES OBJECTION ON MERITS AND FURTHER THERE WAS AN UNDER ASSESSMENT BY CLAIMING IMPERMISSIBLE DEDUCTION IN THIS YEAR. 6 . ON M ERITS, 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 DIVIDEND INCOME RECEIVED BY TH E ASSESSEE SHOULD BE PERMITTED AS A DEDUCTION ONLY IF IT HA S RE DISTRIBUTED THE DIVIDEND INCOME TO ITS SHAREHOLDERS. THE SAID DISTRIBUTION HAD TO BE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME OF THE RELEVANT ASSESSMENT YEAR, WHICH, IN THE P RESENT CASE, HAS BEEN DONE. THE REQUIREMENT FOR CLAIMING DEDUCTION UNDER SECTION 80M ARE AS UNDER: I ) THE DOMESTIC COMPANY SHOULD HAVE RECEIVED DIVIDEND INCOME FROM ANOTHER DOMESTIC COMPANY; II ) THE DIVIDEND SHOULD HAVE BEEN DISTRIBUTED BY SUCH DOMESTIC COMPAN Y ON OR BEFORE THE DUE DATE OF FILING RETURN OF INCOME AS SPECIFIED IN SECTION 139(1) OF THE I.T. ACT, 1961. III ) THE DEDUCTION U/S 80M SHALL BE ALLOWED TO THE EXTENT OF SUCH DISTRIBUTION OR DIVIDEND INCOME WHICHEVER IS LESS. REFERENCE WAS ALSO MADE TO THE C BDT CIRCULAR NO.7 OF 2003 DATED 5 TH NOVEMBER 2003, THE CONTENT OF WHICH HAS BEEN REPRODUCED IN PAGE 8 TO 10 OF THE APPELLATE ORDER. THUS, IT WAS SUBMITTED THAT THE ASSESSEE SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 7 WHO HAD RECEIVED THE DIVIDEND OF ` 22,55,600 ON 24 TH SEPTEMBER 2002, AND OUT OF THA T IT HAS DISTRIBUTED THE DIVIDEND TO ITS SHAREHOLDERS ON 29 TH OCTOBER 2003, WHICH IS BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 04. THE ASSESSEE COULD NOT DISTRIBUTE THE DIVIDEND BEFORE 31 ST MARCH 2003, AS, ON THAT D ATE, THERE WAS A LOSS AND, THEREFORE, THE DIRECTORS, IN THEIR REPORT, STATED THAT NO DIVIDEND CAN BE DISTRIBUTED AT THE YEAR END TO CONSERVE THE RESOURCES. AFTER CONSIDERING THE PROFITABILITY OF THE COMPANY, THE DIVIDEND WAS DISTRIBUTED AND THE SAME WAS CL AIMED AS DEDUCTION UNDER SECTION 80M, AS IT WAS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 04, WHICH WAS ON 31 ST OCTOBER 2003. 7 . THE LEARNED COMMISSIONER (APPEALS) HELD THAT THE DEDUCTION IN RESPECT OF CERTAIN IN TER CORPORATE DIVIDEND UNDER SECTION 80M, MAY HAVE BEEN CLAIMED IN THE ASSESSMENT YEAR 2003 04, WHEREIN THE PROVISIONS OF SECTION 115 O(5) WERE NOT APPLICABLE. THE DEDUCTION UNDER SECTION 80M WAS DISCONTINUED ONLY FROM THE ASSESSMENT YEAR 2004 05. ON THE O THER HAND, THERE WAS A SPECIFIC PROVISIONS OF SECTION 115 O(5) WHICH CATEGORICALLY PROVIDES THAT 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 UN DER SECTION 115 O (1). THUS, IN VIEW OF THE 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 C ASE, 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. SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 8 8 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T, 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 ` 22,55,600 FROM ASIAN ELECTRONICS LTD. FROM 24 TH SEPTEMBER 2002, WHICH WAS FALLING WITHIN THE RELEVANT ASSESSMENT YEAR 2003 04. TH E REAFTER, THE ASSESSEE HAS DISTRIBUTED THE DIVIDEND TO THE SHAREHOLDERS ON 29 TH OCTOBER 2003, WHICH WAS BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 04 I.E., BEFORE 31 ST OCTOBER 2003. SECTION 80M CLEARLY PROVIDES THAT IF THE DIVIDEND HAS BEEN DISTRIBUTED BY THE DOMESTIC COMPANY ON/OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME AS SPECIFIED IN SECTION 13 9(1), THE DEDUCTION SHALL BE ALLOWED TO THE EXTENT OF SUCH DISTRIBUTION OR DIVIDEND INCOME WHICHEVER IS LESS. THE LAW CLEARLY PROVIDES THAT THE ASSESSEE CAN DISTRIBUTE THE DIVIDEND ON/OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME WHICH HAS BEEN DONE. HE FURTHER RELIED UPON THE CBDT CIRCULAR NO.8 OF 2002 DATED 27 TH AUGUST 2002 AND ALSO 7 OF 2003 DATED 5 TH SEPTEMBER 2003. FURTHER, SECTION 80M HAS BEEN DELETED FROM THE STATUTE W.E.F. 2004 05, WHICH MEANS THAT THE SAID SECTION WOULD BE APPLICABLE FOR THE ASSESSMENT YEAR 2003 04. 9 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS) AND SUBMITTED THAT THE PROVISIONS OF SECTION 115 O HAVE BEEN SPE CIFICALLY BROUGHT ON STATUTE FROM THE ASSESSMENT YEAR 2003 04, WHICH PROVIDES THAT ANY DIVIDEND WHICH HAS BEEN SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 9 DISTRIBUTED AFTER 1 ST APRIL 2003, THE SAME SHALL BE CHARGED TO ADDITIONAL INCOME TAX AND IF SUCH TAX HAS NOT BEEN PAID, NO DEDUCTION SHALL BE PRO VIDED UNDER ANY PROVISIONS OF THE ACT. THUS, NOT ONLY THE RE OPENING IS VALID BUT ALSO ON MERITS THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS) IS LEGALLY CORRECT. 10 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUS ED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS RECEIVED DIVIDEND OF ` 22,55,600 FROM ASIAN ELECTRONICS LTD., ON 24 TH SEPTEMBER 2002, WHICH WAS IN THE FINANCIAL YEAR 2002 03, RELEVANT FOR THE ASSESSM ENT YEAR 2003 04. UPTO 31 ST MARCH 2003, THE ASSESSEE COULD NOT DISTRIBUTE THE DIVIDEND TO THE SHAREHOLDERS AS PER THE DECISION TAKEN BY THE DIRECTORS. THE DIVIDEND WAS DISTRIBUTED TO THE SHAREHOLDERS ONLY ON 29 TH OCTOBER 2003 , AS PER THE DETAILS MENTIONED ABOVE . THE ASSESSEES CONTENTION HAS BEEN THAT THE SAID DISTRIBUTION OF THE DIVIDEND HAS BEEN DONE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME WHICH WAS ON 31 ST OCTOBER 2003 AND, THEREFORE, DEDUCTION UNDER SECTION 80M SHOULD BE ALLOWED IN VIEW OF CLEAR CUT PROVISIONS OF SECTION 80M , WHEREAS THE REVENUES CASE IS THAT THE PROVISIONS OF SECTION 115 O, HAVE BEEN BROUGHT IN THE STATUTE W.E.F. 1 ST APRIL 2003 I.E., ASSESSMENT YEAR 2003 04, WHICH CLEARLY PROVIDES THAT THE DIVIDEND DISTRIBUTED WILL BE SUB JECT 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. 1 ST FEBRUARY 2004, READ AS UNDER: 80M. DEDU CTION 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 SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 10 DIVIDENDS FROM ANOTHER DOMESTIC COMPANY, THERE SHALL, IN ACCORDANCE WITH AND SUBJ ECT 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 ALLOWED UNDER SUB SECTION (1) IN ANY PREVIOUS YEAR, NO DEDU CTION SHALL BE ALLOWED IN RESPECT OF SUCH AMOUNT IN ANY OTHER PREVIOUS YEAR. EXPLANATION FOR THE PURPOSE OF THIS SECTION, THE EXPRESSION DUE DATE MEANS THE DATE FOR FURNISHING THE RETURN OF INCOME UNDER SUB SECTION (1) OF SECTION 139. THUS, SECTION 80M PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF A DOMESTIC COMPANY INCLUDES ANY INCOME BY WAY OF DIVIDENDS FROM A DOMESTIC COMPANY, THEN DEDUCTION OF AN AMOUNT EQUAL TO THE AMOUNT OF INCOME BY WAY OF DIVIDEND SHALL BE ALLOWED WHILE COMPUTING THE TOTAL IN COME OF SUCH DOMESTIC COMPANY IF IT DOES NOT EXCEED THE AMOUNT OF DIVIDEND DISTRIBUTED. THE OTHER CONDITION OF ALLOWING THE DEDUCTION UNDER SECTION 80M, IS THAT THE DIVIDEND SHOULD HAVE BEEN DISTRIBUTED ON / OR BEFORE THE DUE DATE OF FILING OF THE RETURN O F INCOME AS SPECIFIED IN SECTION 139(1). THUS, THE PROVISIONS OF SECTION 80M WAS CLEARLY APPLICABLE IN THE ASSESSMENT YEAR 2003 04, AS THE SAME HAS BEEN OMITTED W.E.F. THE ASSESSMENT YEAR 2004 05. THUS, ANY DOMESTIC COMPANY WHICH HAS RECEIVED THE DIVIDEND INCOME FROM ANOTHER DOMESTIC COMPANY AND HAS DISTRIBUTED SUCH DIVIDEND ON / OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME [AS SPECIFIED IN SECTION 139(1)], THEN DEDUCTION UNDER SECTION 80M HAS TO BE ALLOWED. IN THE PRESENT CASE, THERE IS NO DISP UTE THAT THE ASSESSEE HAS RECEIVED SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 11 DIVIDEND INCOME AND SUCH DIVIDEND HAS BEEN DISTRIBUTED BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. 12 . THE CONTROVERSY IN THE PRESENT CASE IS , WHETHER THE PROVISIONS OF SECTION 115 O, WHICH HAS BEEN BROUGHT IN THE STATUTE BY THE FINANCE ACT, 2003, W.E.F. 1 ST APRIL 2003, CAN BE SAID TO BE APPLICABLE IN THE PRESENT CASE IN AS MUCH A S TO DENY THE STATUTORY DEDUCTION UNDER SECTION 80M, WHICH WAS APPLICABLE IN THIS YEAR. SECTION 115 O, AS IT STOOD IN THE STATUTE W.E.F. 1 S T APRIL 2003, READ S AS UNDER: 1 [CHAPTER XII - D SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES. 115 - O. 2 [( 1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION O F THIS ACT AND SUBJECT TO THE PROVISIONS OF THIS SECTION, IN ADDITION TO THE INCOME - TAX CHARGEABLE IN RESPECT OF THE TOTAL INCOME OF A DOMESTIC COMPANY FOR ANY ASSESSMENT YEAR, ANY AMOUNT DECLARED, DISTRIBUTED OR PAID BY SUCH COMPANY BY WAY OF DIVIDENDS (W HETHER INTERIM OR OTHERWISE) ON 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 PRINCIP AL 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 ) PAYMEN T OF ANY DIVIDEND WHICHEVER IS EARLIEST. SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 12 (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 C LAIMED 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 SHAREHOLDER IN RESPECT OF THE AMOUNT WHICH HAS BEEN CHARGED TO TAX UNDER SUB SECTION (1) OR THE TAX THEREON. 13 . FROM THE EXPRESSION USED IN THE AFORE SAID SECTION, IT IS EVIDENT THAT FIRSTLY, SUB SECTION (1) STARTS WITH A NON OBSTANTE CLAUSE WHICH PROVIDES THAT IN ADDITION TO THE INCOME TAX CHARGEABLE IN RESPECT OF THE TOTAL INCOME OF A DOMESTIC COMPANY FOR ANY ASSESSMENT YEAR, ANY AMOUNT DECLARED, DISTRIBUTED OR PAID BY SUCH COMPANY BY WAY OF DIVIDEND ON/OR AFTER 1 ST APRIL 2003, WHETHER OUT OF CURRENT OR ACCUMULATED PROFIT , SHALL BE CHARGED TO ADDITIONAL INCOME TAX AT THE RATE SPECI FIED THEREIN. THUS, THE DIVIDEND DISTRIBUTED WAS SUBJECTED TO ADDITIONAL TAX; SECONDLY, EVEN THOUGH, NO INCOME TAX IS PAYABLE BY DOMESTIC COMPANY ON ITS TOTAL INCOME, THEN ALSO, THE TAX ON DISTRIBUTED PROFITS FOR THE DIVIDEND DECLARED OR DISTRIBUTED SHALL BE PAYABLE; THIRDLY, THE PRINCIPAL OFFICER IS LIABLE FOR PAYMENT OF TAX ON SUCH DISTRIBUTED DIVIDEND WITHIN 14 DAYS; FOURTHLY, THE TAX ON DISTRIBUTED PROFITS IS TO BE TREATED AS FINAL PAYMENT OF TAX IN RESPECT OF SUCH DECLARED / DISTRIBUTED DIVIDEND AND NO FURTHER CREDIT OF SUCH TAX PAID CAN BE CLAIMED; AND LASTLY, NO DEDUCTION UNDER ANY OTHER PROVISION OF THE ACT SHALL BE ALLOWED TO THE COMPANY OR A SHAREHOLDER IN RESPECT OF THE AMOUNT WHICH HAS BEEN SUBJECTED TO TAX ON THE DIVIDEND DECLARED OR DISTRIBUTED . THUS, SUB SECTION (5) ONLY RESTRICTS THE CLAIM OF DEDUCTION IN RESPECT OF THE AMOUNT PAID ON DIVIDEND DISTRIBUTED. 14 . THE PURPOSE OF SECTION 115 O WAS TO TAX THE DIVIDEND AT THE TIME OF DECLARATION / DISTRIBUTION AND, THEREFORE, SUCH DIVIDEND IS NOT TAX ED IN THE HANDS OF THE SHAREHOLDER. THIS IS CLEAR FROM THE PROVISIONS OF SECTION 10(33)((1) WHICH WAS APPLICABLE ON 1 ST APRIL 2003 AND LATER ON IN SECTION 10(34) W.E.F. 1 ST APRIL 2004. THIS SECTION EXEMPTS DIVIDEND WHICH HAS BEEN SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 13 REFERRED IN SECTION 115 O I.E ., IT IS TREATED AS EXEMPT IN THE HANDS OF THE RECIPIENTS. THE REVENUES CONTENTION THAT SUB SECTION (5) OF SECTION 115 O, BARS THE DEDUCTION UNDER ANY OTHER PROVISIONS OF THE ACT BY THIS OVERRIDING CLAUSE , IS NOT CORRECT. THE BAR WHICH HAS BEEN PROVIDED I N SUB SECTION (5) IS ONLY WITH RESPECT TO THE DEDUCTION OF THE AMOUNT OF TAX WHICH HAS BEEN CHARGED UNDER SUB SECTION (1) I.E., ADDITIONAL TAX ON THE AMOUNT OF DIVIDEND DECLARED AND DISTRIBUTED. THERE IS NO INHERENT CONTRADICTION IN THE DEDUCTION PROVIDED IN SECTION 80M 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 DISTRIBUTE D 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 T HE ASSESSEE HAS NOT BEEN CLAIMING ANY EXEMPTION ON DIVIDEND A S AN EXEMPT INCOME IN ITS HAND EITHER UNDER SECTION 10(33) OR 10(34). THE ASSESSEES 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 DED UCTION 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 HA VE BEEN INFRINGED. THE PURPOSE AND INTENT OF SECTION 1 15 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 SECTION OR ANY OTHER PROVISION. THUS, IN OUR OPINION, IN THE PRESENT C ASE, THE DEDUCTION ALLOWABLE UNDER SECTION 80M TO THE ASSESSEE IS NOT OVERRIDDEN BY SECTION 115 O AS HELD BY THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, THE CLAIM OF DEDUCTION UNDER SECTION 80M, IS CLEARLY ALLOWABLE AS ALL THE CONDITIONS MENTIONED THEREIN HAS BEEN FULLY COMPLIED WITH. SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 14 16 . NOW, COMING TO THE ISSUE WHETHER THE DIVIDEND HAS BEEN DISTRIBUTED FROM THE PROFITS OF ASSESSMENT YEAR 2003 04 OR NOT, FROM THE RECORDS, IT IS SEEN THAT THE ASSESSEE HAS DISTRIBUTED THE S AME QUANTUM OF AMOUNT OF DIVIDEND WHICH WAS RECEIVED IN SEPTEMBER 2002 TO ITS SHAREHOLDERS ON 29 TH OCTOBER 2003. THE ASSESSEE HAD THE TIME LIMIT FOR SUCH DISTRIBUTION UP TO THE DATE OF FILING OF THE RETURN OF INCOME. IN SUCH A SITUATION, THE PRESUMPTION CA N 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 TH E ASSESSING OFFICER. 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 THIS CONCLUSION OF THE ASSESSING OFFICER, ESPECIALLY WHEN IN THE ORIGINAL ROUND OF SCRUTINY PROCEEDINGS UNDER SECTION 143(3) , THE ASSESSEES CONTENTION HAS BEEN ACCEPTED. THUS, THE FINDINGS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) CANNOT BE AFFIRMED , SANS ANY CONTRARY MATERIAL ON RECORD. ACCORDINGLY, IN VIEW OF THE AFORESAID OBSERVATION, WE HOLD THAT THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80M, IS CLEARLY ALLOWABLE AS THE SAME IS WITHIN THE MANDATE OF SECTION 80M , AS ALL THE CONDITIONS MENTIONED THEREIN STANDS FULFILLED FOR WHICH THERE IS NO DISPUTE BY THE DEPARTMENT. WE HAVE ALREADY HELD THAT IN THIS CASE, PROVISIONS OF SECTION 115 O WILL NOT NEGATE THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80M IN THIS YEAR, AS THE PROVISIONS OF SECTION 115 0 IS FOR DIFFERENT PURP OSE ALTOGETHER. THUS, THE APPEAL PREFERRED BY THE ASSESSEE IS ALLOWED ON MERITS. 17 . THE LEGAL ISSUE RAISED ON ACCOUNT OF VALIDITY OF RE OPENING UNDER SECTION 147 ON THE GROUND OF CHANGE OF OPINION IS NOT BEING SEPARATELY SHAH INVESTMENTS FINANCIALS DEVELOPMENTS & CONSULTANTS LTD. 15 ADJUDICATED IN VIEW OF OUR AFORESA ID OBSERVATIONS. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 18 . 1 7 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED . 30 TH APRIL 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL 2014 SD / - . D. KARUNAK ARA RAO ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 30 TH APRIL 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHO WDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI