ANIL R. CHHABRIA, MUMBAI V. DCIT 16(2), MUMBAI

ITA 8729/MUM/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7987 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: S C TIWARI; RUTUJA PAWAR
• Keywords: Earning of tax free income
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 8729 /MUM/20 1 1 ASSESSMENT YEAR: 2008 - 09 SHRI ANIL R. CHHABRIA, 105, MANI MAHAL, 13, MATHEW ROAD, MUMBAI - 400004 PAN: ACVPC3707 F VS. THE DY. COMMISSIONER OF INCOME TAX 16 (2) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.C. TIWARI & MS. RUTUJA PAWAR (AR) REVENUE BY : SHRI RAJESH KUMAR YADAV (DR) DATE OF HEARING: 25/10 /201 7 DATE OF PRONOUNCEMENT: 20 / 12 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 17/10/2011 PASSED BY THE CIT (A) - 27, MUMBAI, WHEREBY THE LD. CIT (A) HAS DISMISSED THE APPEAL FILED BY THE ASSES SEE AGAINST ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE TOTAL INCOME OF RS. 18,32,033/ - . THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT. SINCE T HE CASE WAS SELECTED FOR SCRUTINY, NOTICE U/S 143 (2) WAS ISSUED . I N RESPONSE THEREOF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FILED THE DETAILS. IT WAS SEEN THAT THE AS SESSEE HAD RECEIVED DIVIDEND INCOME OF RS. 20,11,843/ - 2 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 AND RS. 41,31,000/ - FROM FINOLEX CABLE LTD. RELATING TO EARLIER YEARS. THE SAID DIVIDEND INCOME WAS THE PART OF THE DIVIDEND INCOME OF RS. 84,77,024/ - SHOWN IN COMPUTATION OF INCOME UNDER THE HEAD INCO ME FROM OTHER SOURCES. THE ASSESSEE HAD CLAIMED THE ENTIRE DIVIDE ND INCOME OF RS. 84,77,024/ - AS EXEMPT U/S 10 (33) OF THE ACT. ACCORDINGLY, DURING THE COURSE OF ASSESSMENT, THE ASSESSEE WAS ASKED TO PROVIDE YEAR WISE DETAIL S IN RESPECT OF ABOVE DIVIDEND I NCOME RECEIVED FROM FINOLEX CABLE LTD. AND TO RECONCILE THE SAME WITH THE FIGURES SHOWN IN THE LETTER DATED 27/07/2007 ISSUED TO THE ASSESSEE BY FINOLEX CABLE LTD. T HE ASSESSEE WAS ALSO ASKED TO EXPLAIN AS TO WHY THE ENTIRE DIVIDEND R ECEIVED DURING THE YEA R HAS BEEN CLAIMED AS EXEMPT EVEN THOUGH PART OF THE DIVIDEND INCOME RELATES TO YEARS IN WHICH THE DIVIDEND INCOME WAS TAXABLE. IN RESPONSE THEREOF THE ASSESSEE CLAIMED THAT HIS RIGHT WAS CRYSTALLIZED ONLY AFTER THE JUDGMENT DELIVERED BY THE BOMBAY HIGH CO URT. IN VIEW OF THE FACT THAT THE DIVIDEND WAS RECEIVED AFTER IN 2003 WHERE AFTER THE DIVIDEND INCOME EXCLUDED FROM THE TOTAL INCOME UNDER SECTION 10(34) OF THE ACT. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE AO HELD THAT THE DEDUCTION OF RS . 11,28,690/ - CLAIMED AS EXEMPT U/S 10(3 4 ) IS NOT ALLOWED. ACCORDINGLY, HE ADDED THE DIVIDEND INCOME RECEIVED BY THE ASSESSEE FOR THE PERIOD PRIOR TO THE AMENDMENT AND INSERTION OF SECTION 10(34) OF THE ACT, TO THE INCOME OF THE ASSESSEE. THE ASSESSMENT OR DER WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE AND AFFIRMED THE ACTION OF THE AO . 4. THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE TWO ADDITIONS OF RS. 3 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 3,02,490/ - AND RS. 8,26,200/ - , MADE BY THE LEARNED ASSESSING OFFICER TO THE TAXABLE INCOME SHOWN BY THE APPELLA NT IN HIS RETURN OF INCOME. 2. THE LEARNED C.I.T. (A) ERRED IN NOT CORRECTLY INTERPRETING THE PROVISIONS OF SECTION 10 (34) OF THE INCOME TAX ACT, 1961 AND IN REJECTING THE CLAIM OF THE APPELLANT FOR EXEMPTION OF THE TOTAL AMOUNT OF DIVIDEND PAID TO HIM, BY THE COMPANY, DURING THE RELEVANT PREVIOUS YEAR. 3. THE LEARNED C.I.T. (A) FAILED TO APPRECIATE THAT THE FACT THAT THE ABOVE DIVIDEND RELATED TO THE EARLIER YEARS WAS NOT RELEVANT SINCE THE RIGHT TO RECEIVE THE ABOVE DIVIDEND OF EARLIER YEARS WAS CRYSTALISED ONLY AFTER AND BECAUSE OF THE JUDGEMENT OF THE BOMBAY HIGH COURT, DATED 10.07.2007. 4. THE LEARNED C.I.T. (A) FAILED TO APPRECIATE THAT UNDER SECTION 10(34) OF THE ACT ANY DIVIDEND REFERRED TO IN SECTION 115 - O SHALL NOT BE INCLUDED IN THE TOTAL INCOME O F THE ASSESSEE. 5. THE LEARNED C.I.T. (A) FAILED TO APPRECIATE THAT SINCE THE DIVIDEND WAS PAID BY THE COMPANY TO THE APPELLANT DURING THE RELEVANT PREVIOUS YEAR, IT BECAME DIVIDEND REFERRED TO IN SECTION 115 - O, AND HENCE EXEMPT UNDER SECTION 10(34) OF THE ACT. 6. THE LEARNED C.I.T. (A) FAILED TO APPRECIATE THAT SECTION 10(34) OF THE ACT DOES NOT MENTION ANY DIVIDEND ON WHICH THE COMPANY HAS PAID TAX UNDER SECTION 115 - O. 7. THE APPELLANT PRAYS THAT THE ORDER OF THE C.I.T. (A) BASED ON AN INCORRECT INTERPRETAT ION OF LAW MAY KINDLY BE REVERSED AND THE APPELLANT MAY KINDLY BE NOT BURDENED WITH ADDITIONAL TAX ON DIVIDENDS, RECEIVED BY HIM AFTER MANY YEARS CAUSING HIM A PECUNIARY LOSS. 8. YOUR APPELLANT CRAVES, LEAVE TO ADD, ALTER, AMEND, WITHDRAWAL ALL OR ANY AT THE GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE APPEAL MAY REQUIRE . 5 . THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APPEAL ON 01/02/2016 WHICH READS AS UNDER: - 4 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND IN LAW, LEA RNED CIT (APPEALS) HAS ERRED IN SUSTAINING THE ASSESSMENT OF THE SUM OF RS. 1,128,690/ - BEING THE DIVIDEND OF EARLIER YEARS BECAUSE THIS INCOME PERTAINS TO EARLIER YEARS AND IS CHARGEABLE TO TAX IN THE EARLIER ASSESSMENT YEARS AND NOT ASSESSMENT YEAR 2008 - 09. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND TAKEN IN THIS CASE MAY BE ALLOWED AS THE SAME IS ON THE LEGAL ISSUE AND CAN BE DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD WITHOUT ANY INQUIRY OR VERIFICATIO N . ON MERIT THE LD. COUNSEL REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND CONTENTED THAT THE OWNERSHIP OF THE SHARES WAS CRYSTALLIZED ONLY AFTER THE JUDG MENT OF THE BOMBAY HIGH COURT AND THUS THE APPELLANTS RIGHT TO RECEIVE DIVIDEND IN EA RLIER YEARS WAS ALSO CRYSTALLIZED ON BECOMING THE OWNER OF THE SHARE. SINCE , THE DIVIDEND INCOME RECEIVED BY THE APPELLANT WAS A CCRUED TO HIM IN A CURRENT YEAR, THE SAME IS EXEMPT TO TAX U/S 10 (34) OF THE ACT. IN THE LIGHT OF THE ADDITIONAL GROUND T HE L D. COUNSEL SUBMITTED THAT THE AMOUNT ADDED TO THE INCOME OF THE ASSESSEE BEING DIVIDEND OF THE EARLIER YEARS, CHARGEABLE TO THE TAX IN THE RESPECTIVE ASSESSMENT YEARS AND NOT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 7. ON THE OTHER HAND, THE LD. DEPARTME NTAL REPRESENTATIVE (DR) OPPOSED THE APPLICATION FOR ALLOWING ADDITIONAL GROUND OF APPEAL ON THE GROUND THAT THE GROUND TAKEN ARE NOT ENTIRELY ON LEGAL ISSUE . ON MERIT THE LD DR RELYING ON THE FINDINGS OF THE AUTHORITIES BELOW SUBMITTED THAT THERE IS NO ME RIT IN THE CONTENTION OF THE APPELLANT BECAUSE THE INCOME IN QUESTION PERTAINS TO THE PERIOD DURING WHICH THE SAID INCOME WAS TAXABLE. THEREFORE, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE AO. 5 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIAL ON RECORD. SO FAR AS THE ADDITIONAL GROUND IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE GROUND RAISED BY THE ASSESSEE IS LEGAL GROUND THE ASSESSEE IS ENTITLED TO RAISE THE SAME AT THIS STAGE. HENCE, WE ALLOW THE ADDIT IONAL GROUND RAISED BY THE ASSESSEE. 9 . THE ONLY ISSUE TO BE ADJUDICATED IN THIS CASE IS WHETHER THE DIVIDEND INCOME ACCRUED IN THE ASSESSMENT YEARS 1996 - 97 AND 2002 - 03, WHICH WAS TAXABLE DURING THE RELEVANT PERIOD, BECOMES NON TAXABLE ON RECEIVING THE SAME IN THE YEAR 2007 IN VIEW OF THE AMENDMENT VIDE WHICH DIVIDEND INCOME WAS MADE EXEMPT INCOME U/S 10(34) OF THE ACT, OR IN VIEW OF THE CONTENTION OF THE ASSESSEE THAT SINCE THE TAX PERTAIN TO THE ASSESSMENT YEAR 1996 - 97 AND 2002 - 03 , THE SAME CANNOT BE LEVIED IN THE CURRENT YEAR. IT IS APPARENT FROM THE RECORD THAT THE SHARES WERE ORIGINALLY OWNED BY THE APPELLANTS FATHER. ON THE DEATH OF APPELLANT S FATHER IN THE YEAR 1987, THE SHARES WERE TO BE TRANS FERRED TO THE LEGAL HEIRS INCLUDING THE ASSESSEE. WHEN THE SUCCESSION CERTIFICATE WAS FILED BEFORE THE COMPANY SOME DISPUTE AROSE AND THE MATTER WENT UP TO THE BOMBAY HIGH COURT. THE DISPUTE WAS ULTIMATELY SETTLED BY THE HONBLE HIGH COURT IN THE YEAR 2007. IN THE MEANWHILE BONUS SHARES WERE ALSO ISSUED. HOWEVER, DIVIDEND WAS NOT PAID TO THE ASSESSEE DUE TO THE PENDING LITIGATION. THE ASSESSEE RECEIVED THE DIVIDEND OF RS. 8 4,77,024/ - FOR THE ENTIRE PERIOD I.E., FROM THE YEAR 1987 TO 2007. AS PER THE AUTHORITIES BELOW, DIVIDEND PERTAINING TO THE ASSESSMENT YEAR 1996 - 97 AND 2002 - 03 WAS TAXABLE, THEREFORE THE ASSESSEE IS NOT ENTITLED TO CLAIM OF EXEMPTION U/S 10(34) OF THE DIVIDEND RECEIVED PERTAINING TO THE ASSESSMENT YEAR 1996 - 97 AND 2002 - 03. 10. THE CONTENTION OF THE LD. COUNSEL IS THAT SINCE THE ENTIRE A MOUNT OF DIVIDEND WAS RECEIVED IN THE YEAR 2007 AND SINCE THE SAID INCOME WAS NO LONGER TAXABLE IN THE YEAR 2007 IN VIEW OF THE AMENDMENT , THE AUTHORITIES BELOW HAVE WRONGLY DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD . COUNSEL FURTHER ARGUED IN THE LIGHT OF THE ADDITIONAL GROUND THAT IN ANY CASE THE TAX 6 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 ARISING OUT OF THE INCOME PERTAINING TO THE ASSESSMENT YEARS 1996 - 97 AND 2002 - 03 CANNOT BE REALIZED FROM THE IN COME OF THE CURRENT YEAR AND IF THE ENTIRE DIVIDEND IS TREATED AS THE INCOME OF THE ASSESSMENT YEAR UNDER CONSIDERATION, THEN IN THAT CASE THE AUTHORITIES BELOW ARE BOUND TO ALLOW THE CLAIM OF THE ASSESSEE U/S 10(34) OF THE ACT . 11. AS PER THE SETTLED PRINCIPLE OF LAW, THE INCOME TAX DUE FROM THE INCOME OF THE EARLIER YEARS CANNOT BE REALIZED FROM THE INCOME OF ANY SUBSEQUENT YEAR. IN THE PRESENT CASE , SINCE THE DISALLOWANCE IN QUESTION PERTAIN TO THE ASSESSMENT YEARS 1996 - 97 AND 2002 - 03, IT IS NOT PERMISSIBLE TO REALIZE THE SAME FROM THE INCOME PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. SO, THE LD. CIT(A) HAS WRONGLY AFFIRMED THE ACTION OF THE AO . WE, THEREFORE, FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL THAT IF THE ENTIRE INCOME IS TO BE TREATED AS THE INCOME PERTAINING TO THE ASSESSMENT YEAR 2007, THEN THE AO IS BOUND TO ALLOW THE CLAIM OF THE ASSESSEE U/S 10(34) OF THE ACT AND IF THE PART OF THE INCOME IS TREATED AS THE INCOME PERTAINING TO THE ASSESSMENT YEAR 1996 - 97 AND 2002 - 03, THEN THE TAX DUE IS REQUIRED TO BE REALIZED FROM THE INCOME OF THE ASSESSMENT YEARS 1996 - 97 AND 2002 - 0 3 AND NOT FROM THE INCOME OF THE ASSESSMENT YEAR UNDER CONSIDERATION. WE, THEREFORE, ALLOW THE APPEAL OF THE ASSESSEE AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR A SSESSMENT YEAR 2008 - 20 09 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH . DECEMBER , 2017 . SD/ - SD/ - ( G.S. PANNU ) ( RAM LAL NEGI ) AC COUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 20 / 1 2 / 2017 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 7 ITA NO. 8729/MUM/2011 ASSESSMENT YEAR: 2008 - 09 1. / THE APPELLANT 2. / THE RE SPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDE R, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI