HB Stock Holdings Ltd, V. DCIT Circle 12 (1),

ITA 5023/DEL/2007

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86723 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-12-2014
• Assessment Year: 1994-1995
• Appeal Filed On: 28-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: S K AGGARWAL
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, A.M. AND SHRI A.T. VARKEY , J.M. ITA NO. 5023 /DEL/20 07 ASSESSMENT YEAR : 1994 - 95 M/S HB STOCKHOLDINGS LTD. VS. THE DY.CIT, CIRCLE 12(1) NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT ) APPELLANT BY : - SHRI S K AGGARWAL, ADV. RESPONDENT BY : - MS. Y.KAKKAR, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) DT. 2 2.11.2007, PERTAINING TO THE AY 1994 - 95 WHEREIN PENALTY LEVIED U/S 271(1)(C ) OF THE ACT HAS BEEN CONFIRMED. 2. THE CASE HAS A CHEQUERED HISTORY. THE DATES AND EVENTS ARE AS FOLLOWS. SL.NO. DATE EVENT 1. 1985 THE ASSESSEE WAS INCORPORATED UNDER THE NAME OF HB PORTFOLIO LEASING LTD. ITS NAME WAS CHANGED TO HB STOCKHOLDINGS LTD. FROM 19.2.1997. 2. 1994 - 95 THE AY UNDER REFERENCE FOR WHICH THE PRE VIOUS YEAR WAS THE FINANCIAL YEAR 1993 - 94. THE ACCOUNTING YEAR OF THE APPELLANT OTHERWISE STARTS ON 1 ST JUNE OF THE YEAR AND ENDS ON 31 ST MAY OF THE NEXT YEAR. 3. 1.8.94 THE BOARD OF DIRECTORS OF THE APPELLANT IN THEIR MEETING APPROVED THE ACCOUNTS AND RECOMMENDED A DIVIDEND @ 28% ON THE EQUITY SHARE CAPITAL OF THE APPELLANT FOR THE YEAR ENDED ON 31 ST MAY, 1984 SUBJECT TO THE APPROVAL OF THE SHAREHOLDERS. IT WAS RESOLVED IN THE MEETING ON 2.11.1994 THAT FOR PAYMENT OF THE PROPOSED DIVIDEND APPROPRIATE S TEPS MAY BE TAKEN. 4. 21.11.94 PUNJAB NATIONAL BANK, PARLIAMENT STREET, NEW DELHI WAS REQUESTED TO OPEN A SEPARATE CURRENT ACCOUNT ITA NO.5023/DEL/2007 M/S HB STOCKHOLDINGS LTD., N.DELHI AY 1994 - 95 2 STYLED, HBPL - DIVIDEND ACCOUNT, 1994 FOR DISBURSEMENT OF THE DIVIDEND. 5. 30.11.94 THE 8 TH ANNUAL GENERAL MEETING OF THE SHARE HOLDERS OF THE ASSESSEE WAS HELD. THE DIRECTORS REPORT, ANNUAL ACCOUNTS FOR THE YEAR ENDED ON 31 ST MAY,1994, THE AUDITORS REPORT WERE APPROVED AND ADOPTED BY THE SHAREHOLDERS IN THAT MEETING. THE RECOMMENDATION OF T HE BOARD OF DIRECTORS FOR THE DIVIDEND @ 28% ON THE EQUITY SHARE CAPITAL OF THE ASSESSEE FOR THE YEAR ENDED ON 31 ST MAY, 1994 WAS ALSO APPROVED. A PRINTED COPY OF THE 8 TH ANNUAL REPORT, 1993 - 94 SENT TO EVERY SHAREHOLDER CONTAINED A NOTICE THAT THE 8 TH AN NUAL GENERAL MEETING OF THE ASSESSEE FOR VARIOUS PURPOSES, INCLUDING FOR THE DECLARATION OF DIVIDEND FOR THE YEAR 1993 - 94, HAD BEEN CONVENED ON 30 TH NOV. 1994. 6. 30.11.94 A SUM OF RS.60 LACS WAS TRANSFERRED BY THE ASSESSEE IN THE HBPL DIVIDEND ACCOUNT, 1 994 ACCOUNT NO.13314 WITH PUNJAB NATIONAL BANK, NEW DELHI FOR DISBURSEMENT OF THE DIVIDEND FOR THE YEAR 1994 TO THE VARIOUS SHARE HOLDERS OF THE ASSESSEE. THEREAFTER THE DIVIDEND WARRANTS WERE SENT TO THE SHARE HOLDERS AND WERE ENCASHED BY THEM. 7. 30.11 .94 THE DUE DATE FOR FILING OF RETURN OF INCOME FOR THE AY UNDER REFERENCE. THE ASSESSEE HAD DIVIDEND INCOME OF RS.57,44,216/ - IN THE AY UNDER REFERENCE. THE ASSESSEE HAD DECLARED DIVIDEND ON 30 TH NOV.1994 AND THUS INCURRED A LIABILITY FOR THE PAYMENT OF THE SAME. IT TRANSFERRED A SUM OF RS.60 LACS IN THE SEPARATE BANK ACCOUNT HBPL DIVIDEND ACCOUNT, 1994 FOR PAYMENT OF DIVIDEND ON 30 TH NOV.1994. THE ASSESSEE HAD THUS DISTRIBUTED DIVIDEND OF MORE THAN RS.57,44,216/ - ON 30 TH NOV.1994, THE DUE DATE FOR FILING THE RETURN OF INCOME FOR THE AY UNDER REFERENCE AND WAS ENTITLED TO A DEDUCTION OF THE SAME IN VIEW OF THE PROVISIONS OF S.80M OF THE ACT. THE ASSESSEE, THEREFORE, CLAIMED A DEDUCTION OF RS.57 ,44,216/ - U/S80M OF THE ACT IN THE RETURN OF INCOME FILED BY IT FOR THE AY UNDER REFERENCE ON 30.11.1994 DECLARING AN ASSESSABLE INCOME OF RS.1,22,42,530/ - . 8. 31.3.97 THE ASSESSMENT WAS MADE VIDE ASSESSMENT ORDER AT AN INCOME OF RS.2,03,74,699/ - . THE AO DID NOT ALLOW THE AFORESAID DEDUCTION U/S 80M OF THE ACT AS NO DIVIDEND WAS DISTRIBUTED ON OR BEFORE 30.11.94. 9. 22.12.97 THE CIT(A) - XVI, NEW DELHI, HELD, IN RESPECT OF THIS ISSUE, THAT THE ASSESSEE, DISTRIBUTED THE DIVIDEND ON 30 TH NOV.1994 AS IT HAD DECLARED THE DIVIDEND AND TRANSFERRED THE MONEY FOR THE SAME TO A SEPARATE ITA NO.5023/DEL/2007 M/S HB STOCKHOLDINGS LTD., N.DELHI AY 1994 - 95 3 BANK ACCOUNT ON 30 TH NOV.1994 RELYING UPON SEVERAL JUDGEMENTS AND THE CIRCULAR NO.572, DT. 3.8.90 ISSUED BY THE CBDT, NEW DELHI AND AS SUCH THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 80M OF THE ACT. 10. 26.5.06 THE TRIBUNAL DECIDED THE APPEAL FILED BY THE DEPARTMENT, ITA NO.1276/DEL/1998 AGAINST THE ASSESSEE FOLLOWING ITS CONSOLIDATED ORDER DT. 14.6.2004 IN ITA NOS. 3473/DEL/1998 FOR AY 1994 - 95 IN THE CASE OF M/S HB LEASING & FINA NCE CO.LTD., NEW DELHI, AND 2621/DEL2000 FOR AY 1996 - 97 IN THE CASE OF M/S RRB SECURITIES LTD., NEW DELHI, WHERE IT FOLLOWED ITS ORDER DT. 26 TH FEB.2004 IN ITA NO.573/DEL/2000 FOR AY 1997 - 98 IN THE MATTER OF M/S KAPCOMPANY GENERAL LTD., NEW DELHI. IT HEL D THAT THERE WAS NO DISTRIBUTION OF THE DIVIDEND ON OR BEFORE 30 TH NOV.1994 BY THE ASSESSEE. 11. 15.1.07 THE HON BLE DELHI HIGH COURT, DISMISSED THE APPEAL FILED BY THE ASSESSEE AGAINST THE AFORESAID ORDER OF THE HON BLE TRIBUNAL, IN ITA 1776 OF 2006. IT HELD THAT NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED FOLLOWING ITS EARLIER ORDERS. 12. 29.1.08 THE HON BLE SC VIDE CONSOLIDATED ORDER SET ASIDE THE AFORESAID ORDER OF THE HON BLE HIGH COURT AND REMITTED THE MATTER TO THE HON BLE HIGH COURT FOR PASSING A FRESH ORDER IN ACCORDANCE WITH LAW : CIVIL APPEAL NO.771 OF 2008. THE APPEAL OF THE ASSESSEE AGAINST THE JUDGEMENT OF HON BLE DELHI HIGH COURT IN THE CASE OF DELHI TOURISM AND TDC LTD. VS. CIT REPORTED IN 285 ITR 114, WAS ALSO DISPOSED OF BY THE SAID ORDE R SIMILARLY : CIVIL APPEAL NO.3894 OF 2006. 3. HENCE THE APPEAL IS BEFORE US. 4. WE HAVE HEARD SHRI SK AGARWAL, THE LD.COUNSEL FOR THE ASSESSEE AND MS.Y.KAKKAR, LD.SR.D.R. ON BEHALF OF THE REVENUE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF PAPERS ON RECORD, WE HOLD AS FOLLOWS. 6. IN THE QUANTUM PROCEEDINGS THE DELHI C BENCH OF THE TRIBUNAL IN ITA 3473/DEL/1998 IN THE CASE OF DCIT, SR - I, NEW DELHI VS. HP LEASING & FINANCE CO. LTD., NEW DELHI IN IT A NO.2621/DEL/2000 FOR THE AY 2006 - 07 IN THE CASE OF JCIT, SPECIAL RANGE 18 VS. RRB NEW DELHI VIDE ORDER DT. 14 TH JUNE, 2004 HAS CONSIDERED THE FOLLOWING QUESTION. ITA NO.5023/DEL/2007 M/S HB STOCKHOLDINGS LTD., N.DELHI AY 1994 - 95 4 THE SHORT QUESTION POSED BEFORE US, IS WHETHER THE WORD DISTRIBUTION USED IN S.80M MEANS ACTUAL LY DISTRIBUTION OF THE AMOUNT OF DIVIDEND AMONGST SHAREHOLDERS OR MERE APPORTIONMENT OF A PARTICULAR AMOUNT OF DIVIDEND FOR ITS DISTRIBUTION. 6.1. AT PARA 13 , IT IS HELD AS FOLLOWS. 13. WE HAVE ALSO EXAMINED THE PROVISIONS OF SECTION 205 - A OF T HE COMPANIES ACT AND OTHER RELEVANT JUDGEMENTS IN SUPPORT OF THE CONTENTION OF THE ASSESSEE THAT ONCE THE DIVIDEND IS DECLARED AND APPORTIONED, THE ASSESSEE LOST ITS RIGHT OVER IT AND IT BECOMES A DEBT AND THE SHARE HOLDERS CAN ENFORCE THE RECOVERY OF THE SAME. THIS PROPOSITION OF LAW IS NOT DISPUTED HERE. THE SOLE QUESTION BEFORE US IS TO SEE WHETHER THE ASSESSEE HAS DISTRIBUTED THE DIVIDEND PHYSICALLY OR CONSTRUCTIVELY. IF THE ASSESSEE HAS ISSUED DIVIDEND WARRANTS BEFORE THE DUE DATE ONE CAN UNDERSTAND THE DIVIDEND WARRANTS ARE PUT IN TO TRANSIT AND THE ASSESSEE HAS NO CONTROL OVER IT AND IT AMOUNTS TO A DISTRIBUTION OF DIVIDEND. BUT IN THE INSTANT CASE, EXCEPT DECLARATION AND APPORTIONMENT, NO EFFORT WAS MADE ON BEHALF OF THE ASSESSEE TO DISTRIBUTE TH E DIVIDEND AMONGST THE SHAREHOLDERS BEFORE THE DUE DATE. IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION TO HOLD THAT THE DIVIDENDS WERE NOT DISTRIBUTED AMONGST THE SHARE HOLDERS BEFORE THE DUE DATE WHICH IS CONDITION PRECEDENT FOR CLAIMING DEDUCTION U/S 80 - M OF THE ACT. THE CIT(A) DID NOT EXAMINE THIS ASPECT WHILE ALLOWING THE CLAIM TO THE ASSESSEE. WE THEREFORE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80 - M OF THE ACT. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF THE AO I S RESTORED. SIMILAR IS THE POSITION IN APPEAL NO.2621/DEL/2000 FOR AY 1996 - 97. FOLLOWING THE DECISION IN THE FORMER (I.E. IN APPEAL NO.3473/DEL/98 FOR AY 1994 - 95), WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE IT ON THIS ISSUE TO THE AO IN APPEAL N O.2621/DEL/2001 FOR AY 1996 - 97. 7. THE AO HAD LEVIED PENALTY ON THE ASSESSEE ON THOSE FACTS. THE LD.C O MMISSIONER ( APPEALS ) HAS CONFIRMED THE PENALTY. THE TRIBUNAL IN ITS ORDER IN ITA NO.4772/DEL/2005 H BENCH VIDE ORDER DT. 9 TH OCTOBER,2009 AT PARA 3 AND 4 HELD AS FOLLOWS. INSOFAR AS CLAIM OF DEDUCTION UNDER SECTION 80M OF THE ACT IS CONCERNED, THE TRIBUNAL HAS OPINED THAT IT WAS A DEBATABLE ISSUE. NO DOUBT, AS PER THE JUDGMENT OF THE SUPREME COURT IN PUNJAB DISTILLING INDUSTRIES LTD. (SUPRA), THE CL AIM COULD NOT BE MADE UNLESS THE AMOUNT ACTUALLY DISBURSED ON THE INTERPRETATION OF THE WORD 'DISTRIBUTION' GIVEN BY THE SUPREME COURT THEREIN, THE QUESTION IN THE PRESENT CASE WAS AS TO WHETHER THE CONDITIONS STIPULATED UNDER SECTION 80M OF THE ACT STOOD FULFILLED WHEN THE AMOUNT IN QUESTION, WHICH WAS TO BE DISTRIBUTED AS DIVIDEND, WAS KEPT ASIDE IN A SEPARATE BANK ITA NO.5023/DEL/2007 M/S HB STOCKHOLDINGS LTD., N.DELHI AY 1994 - 95 5 ACCOUNT. IN THE FACTS OF THIS CASE, WE ARE OF THE OPINION THAT THIS ISSUE IS DEBATABLE. WE SAY SO BECAUSE OF THE REASON THAT NOT ONLY IN THE Q UANTUM PROCEEDINGS CIT(APPEAL) HAD DELETED THE ADDITIONS, EVEN WHEN THE TRIBUNAL REVERSED THE ORDER OF CIT(APPEAL) AND THIS COURT ALSO DISMISSED THE APPEAL OF THE ASSESSEE, THE SUPREME COURT HAS REMITTED THE CASE BACK TO THIS COURT AND THE ISSUE STANDS ADMITTED. ONCE THE APPEAL, I.E. ITA NO.612/2004 PREFERRED BY THE ASSESSEE HAS BEEN ADMITTED THAT WOULD SHOW THAT SUBSTANTIAL QUESTION OF LAW ON THE INTERPRETATION IS INVOLVED. THE ISSUE IS THUS CLEARLY DEBATABLE. 8. THIS DECISION OF THE TRIBUNAL WAS CONFIRMED BY THE HON BLE HIGH CO URT IN ITA NO.1612/2012 DT. 28.2.2011 WHERE AT PARA 3 IT IS HELD AS FOLLOWS. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN REGARD TO THE ISSUE OF DISALLOWANCE OF CLAIM U/S 80M, IT IS NOTICED THAT THE DETAIL OF CLAIM OF 80M WAS FULLY DISCLOSED IN THE RETURN FILED. FURTHER, IT IS NOTICED THAT THE CLAIM OF 80M HAS BEEN DISALLOWED BY THE A.O. ON THE GROUND THAT THE DIVIDEND HAD NOT BEEN DISTRIBUTED TO THE SHAREHOLDERS. THE FACT THAT THE DIVIDEND OF RS.30 LACS HAS BEEN DEPOSITED SEPARATELY IN A SEPARATE DIVIDEND ACCOUNT IS NOT DISPUTED. IN THESE CIRCUMSTANCES, IT IS NOTICED THAT THE PENALTY HAS BEEN LEVIED ON THE DENIAL OF THE CLAIM OF DEDUCTION ON WHICH TWO VIEWS ARE POSSIBLE. ALL THE FACTS RELATING TO THE CLAIM OF 80M WERE AVAILABLE IN THE RETURN AND TH ERE IS NO CONCEALMENT OF THE FACTS LEADING TO THE CLAIM. IT IS ONLY IN THE INTERPRETATION OF TERM 'DISTRIBUTION' AS AVAILABLE IN THE PROVISIONS OF SECTION 80M THAT THE ADDITION HAS BEEN MADE AND THE CONSEQUENTIAL PENALTY LEVIED. WHEN THE FACTS ARE DISCLOSE D AND THE CLAIM IS DENIED ON ACCOUNT OF INTERPRETATION OF A STATUTE, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE CLAIM OF 80M ITSELF IS A DEBATABLE. ISSUE, WHICH IS EVIDENT FROM THE FACT THAT THE LD. CIT(A) HAD CONSIDERED THE CLAIM TO BE GENUINE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE PENALTY AS LEVIED BY THE A.O. AND AS CONFIRMED BY THE LD.CIT(A) IN REGARD TO THE CLAIM OF DEDUCTION U/S 80M IS DELETED. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF HON'BLE HIGH COURT .OF DELHI IN THE CASE OF INTERNATIONAL AUDIO VISUAL CO. REPORTED IN 288 ITR 570 AS ALSO THE DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF NATH BROTHERS & EXIM INTERNATIONAL LTD ., REPORTED IN 288 ITR 670 (DEL.). 9. THE LD.SR.D.R. VEHEMENTLY CONTENDED THAT THE TRIBUNAL IN THE QUANTUM PROCEEDINGS HAS STATED THAT THE ASSESSEE HAS NOT FURNISHED AN IOTA OF EVIDENCE, TO SUBSTANTIATE ITS CLAIM THAT THE DIVIDENDS ARE DISTRIBUTED. IN OUR VIEW THIS IS NOT THE ISSUE WHICH MATTERS IN THE PRESENT APPEAL. THE ITA NO.5023/DEL/2007 M/S HB STOCKHOLDINGS LTD., N.DELHI AY 1994 - 95 6 FACTS IN THE CASE OF M/S HP LEASING & FINANCE CO.LTD. AND THE FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL. THUS IN OUR VIEW THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDIC TIONAL HIGH COURT. HENCE RESPECTFULLY FOLLOWING THE JUDGEMENT OF HON BLE DELHI HIGH COURT IN ITA NO.1612/2010 FOR THE AY 1994 - 95 IN THE CASE OF CIT VS. HP LEASING & FINANCE CO.LTD., WE DELETE THE PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RE SULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY , 2015 . SD/ - SD/ - ( A.T. VARKEY ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 12 TH FEBRUAR Y , 2015 *MANGA COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR