The Dy. CIT, Circle-3(3), Ahmedabad V. Uri Holdings Pvt. Ltd., Ahmedabad

ITA 6566/MUM/2007

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80551 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-11-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 29-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KUNJAN MYSOREWALA COM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER ITA NO . 6566 / M /20 07 A. Y. 200 3 - 0 4 DY.CIT, CIRCLE - 3(3), MUMBAI. VS M/S. URI HOLDINGS PVT. LTD. NIRMA HOU SE, ASHRAM ROAD, AHMEDABAD. PAN: AAACU 1649J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI NIMESH YADAV , SR. D.R. , ASSESSEE(S) BY : SHRI KUNJAN MYSOREWALA, COMPANY SECRETARY . / DATE OF HEARING : 1 1 / 11 /201 4 / DATE OF PRONOUNCEMENT: 28 / 1 1 /201 4 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE REVENUE EMANATING FROM THE ORDER OF T HE L EARNED CIT (A ) - II , AHMEDABAD , DAT ED 2 1 / 0 8/20 0 7 FOR A.Y. 200 3 - 0 4 AND THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.55 LACS U/S. 80M ESPECI ALLY CONSIDERING THE SPECIFIC PROVISIONS OF SUB - SECTION 5 OF 115 - O OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPLYING THE RATIO OF JUDGMENT IN ITAT, MUMBAI BENCH REPORTED I N 294 ITR (AT) 1 IN THE CASE OF LEBEN LABORATORIES LTD. VS. DCIT, WHERE IT WAS HELD THAT IF SPECIFIC ALLOWANCE HAS BEEN MADE BY THE LEGISLATURE EVEN ELSEWHERE IN THE ACT, THEN SUCH DISALLOWANCE HAS TO BE MADE DESPITE THERE BEING NO PROVISIONS OF DISALLOWAN CE IN THE MAIN SECTION . ITA NO. 6566 / M/2007 DCIT, CIRCLE 3(3), MUMBAI VS. M/S. URI HOLDINGS PVT. LTD. FOR A.Y. 200 3 - 0 4 - 2 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 08 .03.20 06 WERE THAT THE ASSESSEE COMPANY DECLARED AN INCOME OF RS.16,91,340/ - WHICH CONSISTED DIVIDEND INCOME. THE ASSESSEE HAD CLAIMED A DEDUCTION U/S.80M OF IT ACT OF RS.55 LACS. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS RECEIVED RS.73,28,025/ - AS DIVIDEND FROM TWO COMPANIES, NAMELY, NIRMA LTD., DIVIDEND OF RS.70,02,275/ - AND FROM TAMIL NADU PETRO CHEMICALS DIVIDEND OF RS.3,25,750/ - . IT WAS INFORMED THAT THE ASSESSEE HAD DISTRIBUTED RS.55 LAC TO ITS SHAREHOLDERS; THEREFORE, ENTITLED FOR THE CLAIM OF DEDUCTION U/S.80M OF IT ACT. HOWEVER, THE AO HAS NOTED THAT THE SHAREHOLDERS WERE FAMILY MEMBERS OF SHRI KARSANBHAI K. PATEL, CMD OF NIRMA LTD. 2.1 THE NEXT OBSERVATION OF THE AO WAS THAT THE NIRMA LTD . HAD DISTRIBUTED THE INCOME ON 13.09.2002. THEREAFTER THE ASSESSEE HAS DISTRIBUTED DIVIDEND OF RS.55 LAC TO ITS 5 SHAREHOLDERS ON 23.09.2003. THE ASSESSEE HAD PAID DIVIDEND TAX ON DISTRIBUTIO N OF PROFIT AS PRESCRIBED U/S.115 - O. THE AO S OBJECTION WAS THAT THE DIVIDEND INCOME WAS RECEIVED IN SUBMISSION OF F.Y. 2002 - 03, WHEREAS, THE DIVIDEND WAS DISTRIBUTED IN F.Y.2003 - 04 . ACCORDING TO AO, THE DEDUCTION U/S.80M WAS AVAILABLE BY THE LEGISLATURE I N ONE YEAR, I.E., UPTO F.Y. 2002 - 03. THERE WAS AN EXEMPTION AVAILABLE U/S.10(33)/10(34) DURING THE YEAR UNDER CONSIDERATION. AFTER DETAILED DISCUSSION, THE AO HAS HELD THAT AS PER SECTION 115 - O(5) NO DEDUCTION IS TO BE ALLOWED EITHER TO THE COMPANY OR THE SHAREHOLDERS IN RESPECT OF AMOUNT WHICH HAS BEEN DISTRIBUTED AS DIVIDEND TAX. AGAINST THE DISALLOWANCE ASSESSEE WENT IN APPEAL. 3. LEARNED CIT(A) HAS HELD AS UNDER: ITA NO. 6566 / M/2007 DCIT, CIRCLE 3(3), MUMBAI VS. M/S. URI HOLDINGS PVT. LTD. FOR A.Y. 200 3 - 0 4 - 3 3.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE A ABOVE SUBMISSION. I NOTICE THAT THE APPELLANT HAS RECEIVED DIVIDEND WHICH IS DECLARED BY NIRMA LIMITED AND TAMILNADU PETROCHEMICALS LTD. DURING THE F.Y. 2002 - 03. FROM SUCH INCOME, TAX HAS BEEN DEDUCTED AND SUCH INCOME IS INCLUDED IN THE TOTAL INCOME FOR THE YEAR. AS THE ASSESSEE CO MPANY HAS DECLARED DIVIDEND TO ITS SHAREHOLDERS FROM ITS TOTAL INCOME FOR THE YEAR WHICH INCLUDES SUCH DIVIDEND INCOME, IT IS ENTITLED TO DEDUCTION U/S. 80M OF IT ACT AS SUCH THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS SUGGESTED BY THE AO. ON T HE CONTRARY IT CAN BE SAID THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 80M AND ALSO SECTION 115 - O OF IT ACT. THE DEDUCTION U/S.80M OF IT ACT IS WITH REFERENCE TO THE INCOME RECEIVED WHICH IS INCLUDED IN ITS TOTAL INCOME AND PAYMENT OF TAX WITH REFERENCE TO THE DIVIDEND DECLARED BY THE ASSESSEE FROM ITS TOTAL INCOME. BOTH THE EVENTS ARE DIFFERENT EVENT. THE AO HAS WRONGLY INTERLINKED THESE TWO EVENTS AND TRIED TO ALLEGE THAT THE APPELLANT HAS CLAIMED DOUBLE DEDUCTIONS AND AVOIDED PAYMENT OF TAX. WHAT IS CLAIMED BY THE APPELLANT IS AS PER THE PROVISIONS OF SECTION 80M OF THE ACT. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S.80M AS CLAIMED BY THE APPELLANT. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED. 4. HAVING HEARD THE SUBMI SSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT NOW THIS ISSUE STOOD COVERED AS FAR AS THE ITAT AHMEDABAD BENCHES ARE CONCERNED BECAUSE RESPECTED CO - ORDINATE B BENCH IN THE CASE OF DCIT VS. BANIHAL HOLDING S PVT . LTD. IN ITA NO. 7155/AHD/20 07 IN A.Y. 2003 - 04 VIDE AN ORDER DATED 30 TH OCTOBER, 2009 HAS FINALLY HELD AS UNDER: 10. THE PROVISIONS OF SECTION 115O(5) CANNOT BE MADE APPLICABLE THIS YEAR BECAUSE ASSESSEE WAS REQUIRED TO PAY TAX AS PER SECTION 115O(1) IN RESPECT OF DIVIDEND DECLARED, DISTRIBUTED OR PAID ON OR AFTER FIRST DAY OF APRIL 2003. SINCE, IN THE PRESENT CASE DIVIDEND WAS DECLARED IN THE FINANCIAL YEAR 2002 - 2003, ASSESSEE COULD NOT BE CHARGED UNDER SECTION 115(O)(1) AND CONSEQUENTLY PROVISION OF SUB SECTION 5 CANNOT BE INVOKED DEBARRING THE ASSESSEE FROM CLAIMING DEDUCTION UNDER SECTION 80M. 11. IN THE PRESENT CASE, THERE IS NO CASE OF ANY DOUBLE DEDUCTION OR EXEMPTION , IF WE, VIEW CLAIM U/S 80M INDEPENDENT OF SECTION 115O WAS NOT APPLICABLE IN THE FINANCIAL YEAR 2002 - 2003. INC OME OF THE ASSESSEE WAS EXEMPT UNDER SECTION 10(33) IN FIRST YEAR 2002 - 2003 IN RESPECT OF THE DIVIDEND RECEIVED BY IT FROM M/S. NIRMA INDUSTRIES LIMITED AND M/S. TAMILNADU PETRO CHEMICALS LIMITED. IT WAS ALSO ENTITLED TO DEDUCTION UNDER SECTION 80M IN RESP ECT OF DIVIDEND DECLARED BY IT DURING THE FINANCIAL YEAR 2002 - 2003 AND PAID BY IT TO THE SHARE HOLDERS BEFORE DUE DATE. ENTIRE ARRANGEMENT IS ACCORDING TO LAW AND NO FALLACY AS SUCH HAS BEEN POINTED OUT BY LEARNED ASSESSING OFFICER. FURTHER IT IS INCORRECT TO SAY THAT NO TAX HAS ITA NO. 6566 / M/2007 DCIT, CIRCLE 3(3), MUMBAI VS. M/S. URI HOLDINGS PVT. LTD. FOR A.Y. 200 3 - 0 4 - 4 BEEN PAID BY THE ASSESSEE. THE AUDITED ACCOUNTS SHOWED THAT IT HAS PAID TAX ON THE DIVIDEND AT RS.7,17,500/ - AS PER PROFIT AND LOSS ACCOUNT PLACED ON PAGE 5 OF THE ASSESSEE'S PAPER BOOK. ACCORDINGLY, WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW THEN WHAT LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS TAKEN. 4.1 HOWEVER, WE HAVE NOTED THAT FACTS OF THE ABOVE CITED CASE IS IDENTICAL WITH THE FACTS OF THIS APPEAL BECAUSE THE CITED CASE IS ALSO FROM THE SAME GROUP OF COMPANIES. A S PER PARAGRAPH 3 OF THE CITED DECISION, RELEVANT FACTS WERE AS UNDER: 3. THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDED DIVIDEND INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES EARNED ON SHARES OF NI R MA INDUSTRIES LIMITED AND TAMILNADU PETRO CHEMI CALS LTD. AGGREGATING TO RS. 73,30,838 / - . THIS COMPRISED OF DIVIDEND INCOME RECEIVED FROM NIRMA LIMITED AT RS. 70,02,275 / - AND OF RS.3,28,563 / - RECEIVED FROM TAMILNADU PETRO CHEMICALS LIMITED. THE ASSESSEE IS SHAREHOLDERS IN THESE TWO COMPANIES. THE ASSE SSEE COMPANY ALSO DISTRIBUTED RS.56,00,000 / - TO ITS SHAREHOLDERS VIZ. SHRI KARSANBHAI K. PATEL (38,36,000 / - ), SMT. SHANTABEN K. PATEL (14,21,000 / - ) SHRI RAKESH K. PATEL (RS.1,68,000 / - ) AND SHRI HIREN K. PATEL (RS.1,68,000 / - ). ALL THESE SHAREHOLDERS ARE FAM ILY MEMBERS OF SHRI. KARSANBHAI K. PATEL, CMD OF NIRMA INDUSTRIES LIMITED. M/S. NIRMA INDUSTRIES LIMITED PAID DIVIDEND OF RS.70,02,275 / - TO THE ASSESSEE C OMPANY ON 13 - 09 - 2002 WHICH WAS DECLARED BY THAT COMPANY ON 09 - 09 - 200 2. THE ASSESSING OFFICER MENTIONE D THAT TDS WAS DEDUCTED BY NIRMA LIMIT ED ON THIS PAYMENT AS ON 16 - 09 - 2002. THE ASSESSEE COMPANY DECLA RED DIVIDEND OF RS. 56,00,000 / - ON 22 - 09 - 2003 AND DIVIDEND TAX ON DISTRIBUTED PROFITS UNDER SECTION 115O, IN CORPORATION TAX FORM, WAS PAID BY THE ASSES SEE ON 16 - 10 - 2003. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS ON ONE HAND RECEIVED DIVIDEND IN THE MONTH OF SEPTEMBER FALLING IN FINAL YEAR 2002 - 2003 WHEREAS IT IS PAID DIVIDEND TO ITS SHARE HOLDERS IN SEPTEMBER 2003 FALLING IN THE FINANCIAL YEAR 20 03 - 2004. BOTH THE COMPANIES ARE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, BUT THE TWO EVENTS VIZ. RECEIPT OF DIVIDEND BY THE ASSESSEE COMPANY AND DISTRIBUTION OF DIVIDED, IT HAS BEEN DIVIDED IN 2 FINANCIAL YEARS. ACCORDING TO THE ASSESSING OFFICER SECTION 115O(5) BARS THE CLAIM OF DEDUCTION UNDER SECTION 80M ONCE ASSESSEE HAS DECLARED DIVIDEND AND PAID TO SHARE HOLDERS. BY VIRTUE OF SUB SECTION 5 OF SECTION 115O DEDUCTION UNDER SECTION 80M WOULD NOT BE ALLOWED. THE ASSESSEE HAS INDULGED IN SUCH A PLAN IN W HICH MAIN FAMILY MEMBERS WHO ARE SHAREHOLDERS IN THE ASSESSEE COMPANY, GET DIVIDEND INCOME WITHOUT BEING TAXED. THUS, THE TAX IS NOT PAID EITHER BY NIRMA INDUSTRIES LIMITED OR BY THE ASSESSEE COMPANY OR BY THE SHAREHOLDERS OF THE ASSESSEE COMPANY. THE I NTERPRETATION OF SECTION 118M AND 115O DONE BY THE ASSESSEE IS ABSURD AND THEREFORE CANNOT BE FOLLOWED. HE ACCORDINGLY, DISALLOWED DEDUCTION UNDER SECTION 80M INVOKING PROVISIONS OF SECTION 115O(5). ITA NO. 6566 / M/2007 DCIT, CIRCLE 3(3), MUMBAI VS. M/S. URI HOLDINGS PVT. LTD. FOR A.Y. 200 3 - 0 4 - 5 4.2 IN VIEW OF THE ABOVE SITUATION WHEN THE FACTS AS WE LL AS THE LEGAL ISSUE AS RAISED BY THE REVENUE IN THIS APPEAL ARE IDENTICAL WITH THE ABOVE CITED DECISION, THEREFORE, WE HEREBY HOLD THAT THE MATTER IS COVERED BY THE SAID DECISION OF THE TRIBUNAL; HENCE, THE GROUND RAISED BY THE REVENUE IS HEREBY DISMISSE D. 4.3 IN THE RESULT, REVENUE S APPEAL IS DISMISSED. SD/ - SD/ - ( ANIL CHATURVEDI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28 / 1 1 / 20 1 4 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD