Ve-par Pvt. Ltd., Ahmedabad V. The ACIT., Circle-8, Ahmedabad

ITA 937/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9223 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 29-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA SENIOR
• Assessee Lawyers: MEHUL K PATEL
• Section: 80HHC

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.937/AHD/2004 (ASSESSMENT YEAR: 2000-01) VE-PAR PRIVATE LIMITED, KAIVANNA, 9 TH FLOOR, PANCHVATI, ELLIS-BRIDGE, AHMEDABAD V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-8, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY :- SHRI MEHUL K PATEL, ADVOCATE RESPONDENT BY:- SHRI P M SHUKLA, SENIOR DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A) DATED 26- 02-2004. 2 GROUND NO.1 RELATES TO THE ADDITION MADE BY THE AO AMOUNTING TO RS.1,36,583/- ON ACCOUNT OF DIVIDEND I NCOME FROM EGG TRADING LIMITED. THE BRIEF FACTS OF THE CASE AR E THAT THE AO NOTED THAT THE ASSESSEE HAS SHOWN 7,840 POUNDS ON T HE BASIS OF INTIMATION RECEIVED FROM EGG TRADING LIMITED, AS DI VIDEND INCOME. THE AO NOTED THAT THE DIVIDEND PERTAINED TO AY 2000-01 AND THE ASSESSEE HAS RECEIVED THE DIVIDEND OF 9800 POUNDS BEFORE THE DATE OF FILING OF RETURN. SINCE THE ASSESSEE WA S FOLLOWING MERCANTILE SYSTEM, THIS ENTIRE DIVIDEND SHOULD BE T AXED IN THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE HAS AC COUNTED FOR ONLY FOR 7840 POUNDS, HE BROUGHT TO TAX REMAINING 1 960 POUNDS 2 CONVERTED INTO RS.1,36,583/- ON THE BASIS OF EXCHAN GE RATE PREVAILING AS ON 31-03-2000. THE ASSESSEE WENT IN A PPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE A O BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF AO AS WELL AS THE SUBMISSION AS ADVANCED BY THE COUNSEL OF THE APPELL ANT. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDE RING THE FACT THAT THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING, THE ACTION OF AO IN BRINGING THE ENTIRE DIVIDEND OF 9800 POUND S TO TAX INSTEAD OF 7840 POUNDS AS SHOWN BY THE APPELLANT IS QUITE JUST IFIED, BECAUSE AS PER THE MERCANTILE SYSTEM OF ACCOUNTING SUCH DIVIDE ND INCOME IS TO BE ACCOUNTED FOR ON ACCRUED BASIS. THEREFORE, I FIND N O JUSTIFICATION IN THE CONTENTION OF THE APPELLANT THAT THE DIVIDEND HAS T O BE ACCOUNTED FOR IN THE BOOKS OF THE APPELLANT ON ACTUAL RECEIPT BASIS. I, THEREFORE, HOLD THAT THE ADDITION MADE BY THE AO AMOUNTING TO RS.1, 36,583/-, BEING THE DIFFERENCE BETWEEN THE AMOUNT SHOWN BY THE APPE LLANT AND ACTUAL DIVIDEND DUE TO THE APPELLANT DURING THE YEAR UNDER CONSIDERATION IS QUITE IN ORDER AND NO INTERFERENCE IN THE ACTION OF THE AO REQUIRES TO BE MADE. 3 BEFORE US THE LEARNED AR VEHEMENTLY CONTENDED TH AT THE DIVIDEND WARRANT DATED 10-08-2000 WAS RECEIVED BY THE ASSESSEE SUBSEQUENTLY AND WAS CREDITED INTO ICICI B ANK ON 22- 08-2000 AND THE PROCEEDS WERE REALIZED ON 07-09-200 0. THE ASSESSEE SUBMITTED THE RETURN ON 30-11-2000. REFERR ING TO THE PROVISIONS OF SECTION 8 IT WAS CONTENDED THAT THE D IVIDEND INCOME IS CONSIDERED AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR WHEN IT IS DECLARED DISTRIBUTED OR PA ID BY THE COMPANY. SINCE THE DIVIDEND RELATES TO THE FINANCIA L YEAR ENDING ON 31-03-2000 AND THE DIVIDEND IS DECLARED O NLY WHEN THE BALANCE-SHEET AND PROFIT & LOSS ACCOUNT ARE APPROVE D IN THE BOARD MEETING / GENERAL BODY MEETING, IT CANNOT BE SAID THAT THE DIVIDEND WERE DECLARED PRIOR TO 31-03-2000. ON THIS BASIS IT WAS CONTENDED THAT BOTH THE AUTHORITIES BELOW HAD COMMI TTED AN ERROR 3 IN MAKING THE ADDITION OF RS.1,36,583/-. THE LEARN ED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AO. 4 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO G ONE THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW. SECTION 8 O F THE ACT DEALS WITH INCLUSION OF DIVIDEND INCOME. THIS SECTION STI PULATES AS UNDER:- 8 [FOR THE PURPOSES OF INCLUSION IN THE TOTAL INCO ME OF AN ASSESSEE, - (A) ANY DIVIDEND] DECLARED BY A COMPANY OR DISTRIBUTED OR PAID BY IT WITHIN THE MEANING OF SUB-CLAUSE (A) OR SUB- CLAUSE (B) OR SUB-CLAUSE (C) OR SUB-CLAUSE (D) OR S UB- CLAUSE (E) OF CLAUSE (22) OF SECTION 2 SHALL BE DEE MED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH IT IS S O DECLARED, DISTRIBUTED OR PAID, AS THE CASE MAY BE; (B) ANY INTERIM DIVIDEND SHALL BE DEEMED TO BE THE INCO ME OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DIVID END IS UNCONDITIONALLY MADE AVAILABLE BY THE COMPANY TO THE MEMBER WHO IS ENTITLED TO IT.] IN VIEW OF SECTION 8(A) ANY DIVIDEND DECLARED BY A COMPANY OR DISTRIBUTED OR PAID BY IT SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH IT IS SO DECLARED, DISTRIBUT ED OR PAID, AS THE CASE MAY BE. THE DIVIDEND ARE TO BE DEEMED TO B E DECLARED ONLY WHEN IT IS APPROVED BY THE SHAREHOLDERS IN THE GENERAL BODY MEETING. THERE IS NO DISPUTE THAT THE ACCOUNTING YE AR ENDS ON 31 ST MARCH, 2000. THE DIVIDEND CANNOT BE DECLARED PRIOR TO THE CLOSE OF THE ACCOUNTING YEAR. THE ASSESSEE HAS RECE IVED THE DIVIDEND WARRANT DATED 10-08-2000 AND DEPOSITED IN BANK ACCOUNT ON 22-08-2000. THERE IS NO EVIDENCE ON RECO RD WITH THE AO WHICH MAY PROVE THAT THE DIVIDEND WERE DECLARED PRIOR TO 31- 4 03-2000 SO THAT IT CAN BE ASSESSED DURING AY 2000-0 1. APPARENT IS REAL. ONUS IS ON THE PARTY WHO ALLEGES THAT APPA RENT IS NOT REAL. WE ACCORDINGLY DELETE THE ADDITION OF RS.1,36,583/- . 5 THE SECOND GROUND RELATES TO DEDUCTION U/S 80HHC IN RESPECT OF DIVIDEND INCOME. AFTER HEARING THE RIVAL SUBMISSIONS, WE NOTED THAT THE DIVIDEND INCOME HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS INCOME CANNO T BE REGARDED TO HAVE BEEN DERIVED FROM THE EXPORT BUSIN ESS. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE AO. THUS , THIS GROUND STANDS DISMISSED. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28-08-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 28-08-2009 COPY OF THE ORDER FORWARDED TO : 1. VE-PAR PRIVATE LIMITED, KAIVANNA, 9 TH FLOOR, PANCHVATI, ELLIS-BRIDGE, AHMEDABAD 2. THE ACIT, CIRCLE-8, AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XIV, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE 5 BY ORDER DY.R/AR, ITAT, AHMEDABAD