Sandvik Asia Ltd., Pune V. Jt. CIT SR-5, Pune, Pune

ITA 579/PUN/2000

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3244 (ITAT-PUNE)
• Duration Of Justice: 10 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1995-1996
• Appeal Filed On: 10-05-2000
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Assessee Lawyers: J D MISTRY
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 579/PN/2000: A.Y. 1995-96 I.T.A. NO. 142/PN/2004: A.Y. 1996-97 SANDVIK ASIA LTD., MUMBAI PUNE ROAD, DAPODI PUNE-411 012 PAN AACCS 6638 K APPELLANT VS. 1. JT. CIT SR-5, PUNE 2. DY. CIT CIR. 8, PUNE RESPONDENT APPELLANT BY : SHRI J.D. MISTRY RESPONDENT BY: SHRI HARESHWAR SHARMA ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THESE APPEALS PERTAIN TO SAME ASSESSEE SO BEIN G DISPOSED OFF BY COMMON ORDER. I.T.A. NO. 579/PN/2000 FOR A.Y. 1995-96 THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT-I PUNE DATED 15-3-2000 PASSED U/S 263 OF THE ACT FOR A.Y. 1995-96 ON THE FOLLOWING GROUNDS. 1. THE CIT ERRED IN PASSING THE IMPUGNED ORDER U/S 263 OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE. 2. THE CIT FAILED TO APPRECIATE THAT THE IMPUGNED ORDER WAS NOT IN ACCORDANCE WITH/IN CONTRAVENTION OF THE PROVISIONS OF SEC. 263 AND HENCE WAS BEYOND JURISDICTION AND/OR WAS OTHERWISE BAD IN LAW. 3. THE CIT FAILED TO APPRECIATE THAT INCOME BY WAY OF DIVIDENDS FROM MASTER SHARES OF RS. 13,55,400/- WERE ENTITLED TO FULL DEDUCTION U/S 80-M OF THE ACT . ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 2 4. THE CIT ERRED IN HOLDING THAT DEDUCTION U/S 80M OF THE ACT WAS ALLOWABLE ONLY IN RESPECT OF 40% OF DIVIDEND FROM MASTER SHARES. 5. THE CIT ERRED IN PARTLY WITHDRAWING THE DEDUCTION I) THE SPECIFIC TERMS OF THE MUTUAL FUND (SUBSIDIARY) UNIT SCHEME 1986 AND/OR II) THE RELEVANT PROVISIONS OF THE UNIT TRUST OF INDIA ACT 1963 DEDUCTION U/S 80M OF THE ACT WAS ALLOWABLE IN RESPECT OF THE ENTIRE DIVIDEND ON MASTER SHARES. 2. THE CIT ISSUED A NOTICE U/S 263 FOR A.Y. 1995-96 ON THE GROUND THAT THE ASSESSMENT ORDER DATED 26-2-1998 WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AS 100% DIVIDEND RECEIVED FROM MASTER SHARES OF UTI OF RS. 13,55,400/- WAS ALLOWED AS A DEDUCTION INSTEAD OF R ESTRICTING THE SAME TO 40%. HENCE, THE EXCESS DEDUCTION OF RS. 8,13,240/- WAS REQUIRED TO BE WITHDRAWN. IN FACT, THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, RECE IVED DIVIDEND ON MASTER SHARES OF UTI AT RS. 13,55,400/- . THE ASSESSEE CLAIMED DEDUCTION U/S 80M ON THIS DIVIDEND AT 100%. AFTER REJECTING THE CONTENTION RAISED ON BEH ALF OF THE ASSESSEE, THE CIT HELD THAT THE ORDER PASSED BY THE A.O FOR A.Y. 1995-96 WAS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE AS THE ASSESSEE WAS ENTITLED TO DEDUCTION O NLY AT 40% AS AGAINST 100% ALLOWED BY THE A.O IN THE ORIGINAL ASSESSMENT. THE STAND OF THE ASSESSEE WAS THAT THE MASTER SHARES OF UTI RANK WITH SHARES OF ANY OTHER COMPAN Y AND NOT AS INCOME FROM UNITS OF UTI. ACCORDING TO THE ASSE SSEE THE ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 3 COMPANY HELD THE UNITS OF UTI. DIVIDEND RECEIVED FR OM UNITS OF US 64 WAS RESTRICTED TO 40% WHEREAS 100% DEDUCTI ON WAS CLAIMED FOR THE DIVIDENDS FROM HDFC LTD.. AND MASTE R SHARES OF UTI. IN THIS CONNECTION, THE ASSESSEE REFERRED TO THE PROVISIONS OF UNIT TRUST OF INDIA ACT 1963 WHEREIN IT WAS STATED THAT UNDER THE SAID ACT, SECTION 32(3)(B) ST ATES THAT UTI SHALL BE DEEMED TO BE A COMPANY. SIMILAR PROVISION S ARE ALSO INCLUDED IN THE INCOME-TAX ACT 1961. IT WAS CONTEN DED THAT MASTER SHARES WERE ISSUED NOT UNDER THE NORMAL SCHE ME OF UTI BUT IN PURSUANCE OF THE AMENDMENT TO THE UTI AC T, WHEREIN THE UTI WAS PERMITTED TO ISSUE DIFFERENT SC HEMES. IT WAS STATED THAT THE MUTUAL FUND (SUBSIDIARY) UNIT S CHEME 1986 OF UTI WAS NOTIFIED ON 9-10-1986 UNDER WHICH D IFFERENT UNITS WERE OFFERED FOR SUBSCRIPTIONS UNDER THE DIFF ERENT ISSUE DOCUMENTS. IT WAS ALSO STATED THAT THIS MUTUAL FUN D WAS TO BE THE SUBSIDIARY OF UTI. THE OBJECTIVES OF THE INVES TMENTS FROM THE TRUST WERE ALSO STATED AND IT WAS URGED THAT TH E MASTER SHARES WERE ISSUED IN TERMS OF THE MUTUAL FUND (SUB SIDIARY) SCHEME. THE CERTIFICATE MENTIONED THAT THE PERSONS NAMED IN THE CERTIFICATE WERE THE REGISTERED HOLDERS OF WITH IN MENTIONED MASTER SHARES OF RS. 10/- EACH BEARING THE DISTINCT IVE NUMBERS SPECIFIED SUBJECT TO THE PROVISIONS OF THE MUTUAL FUND (SUBSIDIARY) UNIT SCHEME OF 1986. HENCE IT WA S URGED THAT THE DIVIDEND RECEIVED FROM UTI OF MASTER SHARE S SHOULD ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 4 BE CONSIDERED AS DIVIDEND FROM OTHER COMPANIES AND SHOULD BE ENTITLED TO 100% DEDUCTION FOR THE PURPOSES OF S ECTION 80M AND NOT 40%. IN THIS BACKGROUND THE ORDER OF THE C IT IS OPPOSED. ON THE OTHER HAND, LD. DR SUBMITTED THE O RDER OF CIT UNDER PROVISIONS OF 263 IS JUSTIFIED IN ITS FAC TS AND CIRCUMSTANCES LD.DR RAISED DETAILED CONCLUSION ON B EHALF OF REVENUE TO SUPPORT THE ORDER OF CIT. 3. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD, WE FIND THAT THE PROVISIONS OF MUTUAL FUND (SUBSIDIARY) UNIT SCHEME 1986 FORMULATED UNDER SECT ION 21 OF THE UNIT TRUST OF INDIA ACT 1963 APPROVED BY THE BO ARD OF TRUSTEES OF THE UNIT TRUST OF INDIA AT THE BOARD ME ETING HELD ON JUNE 4, 1986 READ AS UNDER: MUTUAL FUND (SUBSIDIARY) UNIT SCHEME 1986 IN EXERCISE OF THE POWERS CONFERRED BY SECTION 21 O F THE UNIT TRUST OF INDIA ACT, 1963 (52 OF 1963) THE BOAR D OF THE UNIT TRUST OF INDIA HEREBY MAKES THE FOLLOWING UNIT SCHEME.. THE ABOVE MAKES IT CLEAR THAT THIS IS NOTHING BUT A DIFFERENT SCHEME OF ISSUING UNITS OF UTI. IN THIS BACKGROUND, THE PROVISIONS OF SECTION 80-M OF THE INCOME-TAX ACT, 1961 WAS ANALYZED. THE PROVISO TO SECTION 80M READS AS FOLLOWS: [PROVIDED THAT WHERE ANY DOMESTIC COMPANY RECEIVES ANY INCOME BY WAY OF DIVIDENDS FROM THE UNITS OF THE UN IT TRUST OF INDIA ESTABLISHED UNDER THE UNIT TRUST OF INDIA ACT 1963 (52 OF 1963), SUCH DOMESTIC COMPANY SHALL, SUBJECT TO THE AFORESAID PROVISIONS, BE ELIGIBLE FO R DEDUCTION TO THE EXTENT OF ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 5 (A) FOUR-FIFTH OF SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1994 (B) TWO-FIFTH OF SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1995 AND NO DEDUCTION SHALL BE ALLOWED ON SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1996 AND ANY SUBSEQUENT PREVIOUS YEAR.] 4. THE DISTRIBUTION OF UNITS OF UTI IS AT PAR WITH THE DIVIDENDS. THE PROVISO TO SECTION 80-M REFERS TO T HE INCOME BY WAY OF DIVIDEND FROM UTI AND DOES NOT MAKE A DISTIN CTION BETWEEN VARIOUS SCHEMES. THE SCHEME IS NOT STANDIN G AT ITS OWN PURPOSE BUT IT IS THE NORMAL PROCEDURAL ASPECT. BASICALLY IT IS UNDER THE UMBRELLA OF UTI. SO IT COMES UNDER THE PROVISION, ACCORDING TO WHICH WHERE ANY DOMESTIC CO MPANY RECEIVES ANY INCOME BY WAY OF DIVIDENDS FROM THE UN ITS OF THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE UNIT TRUS T OF INDIA ACT, 1963 (52 OF 1963), SUCH DOMESTIC COMPANY SHALL , SUBJECT TO THE AFORESAID PROVISIONS, BE ELIGIBLE FOR DEDUCT ION TO THE EXTENT OF (A) FOUR-FIFTH OF SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1994; (B) TWO FIFTH OF SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON THE 1 ST DAY OF APRIL 1995, AND NO DEDUCTION SHALL BE ALLO WED ON SUCH INCOME IN RESPECT OF THE PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL 1996 AND ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 6 ANY SUBSEQUENT PREVIOUS YEAR. UNDER CIRCUMSTANCES C IT WAS JUSTIFIED IN INVOKING PROVISION OF SECTION 263 AND REACHED TO JUDICIOUS FINDING WHICH NEED NO INTERFERENCE FROM O UR SIDE. ACCORDINGLY, THE ORDER OF THE CIT IS UPHELD ON POIN T OF VALIDITY AS WELL AS ON MERIT. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 142/PN/2004 FOR A.Y. 1996-97 5. THE ISSUES RAISED IN THIS APPEAL ARE AS UNDER. 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) [CIT (A)} ERRED IN LAW AND ON FACTS, IN UPHOLDING THE VIEW OF THE LEARNED DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 8, PUNE (DCIT) THAT UNITS AND MASTER SHARES ISSUED BY UNIT TRUST OF INDIA (UTI) ARE EQUIVALENT AND THEREBY, IN DISALLOWING THE DEDUCTION OF RS.10,74,600 UNDER SECTION 80M OF THE INCOME-TAX ACT, 1961 (THE ACT) TO SANDVIK ASIA LIMITED (THE APPELLANT) IN RESPECT OF DIVIDEND RECEIVED ON MASTER SHARES OF UNIT TRUST OF INDIA (UTI). THE CIT(A) OUGHT TO HAVE HELD THAT DIVIDEND RECEIVE D BY THE APPELLANT FROM UTI ON MASTER SHARES IS ELIGIBLE FOR FULL DEDUCTION FOR THE PURPOSE OF SECT ION 80 M OF THE ACT. THE DCIT MAY, THEREFORE, BE DIRECTED TO ALLOW THE DEDUCTION OF RS.10,74,600 UNDER SECTION 80M OF THE ACT. 2. THE APPELLANT PRAYS THAT THE DCIT BE DIRECTED TO GRANT ALL SUCH RELIEFS ARISING FROM THE ABOVE GROUN D AS ALSO RELIEFS CONSEQUENTIAL THERETO. 6. REVENUE AUTHORITIES HELD THAT MASTER SHARE WAS O NE OF THE UNIT SCHEMES OF UTI AND THEREFORE THE DIVIDEND RECEIVED ON MASTERS SHARES COULD NOT BE HELD AS DIFFERENT FROM THE DIVIDEND RECEIVED FROM OTHER UNIT SCHEMES OF UTI. ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 7 ACCORDINGLY, IT WAS HELD THAT DIVIDEND RECEIVED FRO M THE UNITS OF MASTERS SHARES WERE NOT ENTITLED FOR DEDUCTION U /S 80M OF THE I.T. ACT. IN THE LIGHT OF OUR LEGAL DISCUSSIO N ON ISSUE IN PARA 4 OF THIS ORDER, GIVEN IN PROCEEDING U/S 263 IN A.Y. 1995-96, WE ARE NOT INCLINED TO INTEREFERE IN THE FINDING OF THE CIT(A) THAT DIVIDEND RECEIVED FROM MASTER SHARES WE RE NOT ENTITLED FOR DEDUCTION U/S. 80M OF THE I.T. ACT. ACCORDINGLY DISALLOWANCE OF DEDUCTION U/S. 80M TO ASSESSEE IN RESPECT OF DIVIDEND RECEIVED ON MASTER SHARES OF UTI TRUST OF INDIA WAS JUSTIFIED, WE UPHELD THE SAME. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE,DATED THE 4 TH NOVEMBER 2010 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- I PUNE (4) CIT(A)-III PUNE (5) CIT-IV PUNE (5) THE D.R. A' BENCH, PUNE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE ITA NO. 579/PN/2000 AND ITA NO. 142/PN/2004 SANDVIK ASIA LTD. A.Y. 1995-96 & 1996-97 , 8