Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: form 3cd :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: VAT RATES :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: list of goods taxed at 4% :: TDS :: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: empanelment :: ACCOUNTING STANDARDS
 
 
From the Courts »
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a

COMMISSIONER OF INCOME TAX DELHI -IV Vs. DELHI TOURISM & TRANSPORTATION DEVELOPMENT CORPORT
July, 20th 2013
$~8.
*       IN THE HIGH COURT OF DELHI AT NEW DELHI


+       INCOME TAX APPEAL NO. 92/2013


                                          Date of decision: 16th July, 2013


        COMMISSIONER OF INCOME TAX DELHI -IV
                                                             ..... Appellant
                             Through Mr. Sanjeev Sabharwal, Sr.
                             Standing Counsel.

                             versus

        DELHI TOURISM & TRANSPORTATION DEVELOPMENT
        CORPORTATION LTD
                                         ..... Respondent
                             Through Ms. Prem Lata Bansal, Sr. Advocate
                             with Mr. Ruchir Bhatia, Advocate.

        CORAM:
        HON'BLE MR. JUSTICE SANJIV KHANNA
        HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL):

        Having heard learned counsel for the parties, the following

substantial question of law is framed:

                         "Whether the Income Tax Appellate
                  Tribunal was right in holding that assessee is
                  entitled to deduction under Section 80M of the
                  Income Tax Act, 1961?"

2.      We have heard learned counsel for the parties on the aforesaid

question and proceed to dictate our judgment.

ITA No. 92/2013                                                 Page 1 of 10
3.      Respondent is a domestic company wholly owned by the

Government of NCT of Delhi and the Assessment Year involved is

1993-94.          The assessee had disclosed income of Rs.14,26,29,843/-

during the assessment year in question. Deduction under Section 80M

of the Income Tax Act, 1961 (Act, for short) was claimed on the

ground that the assessee had received dividend of Rs.50,00,000/- in

this year from Unit Trust of India (UTI).         The Assessing Officer

disallowed the claim for deduction under Section 80M observing that

the respondent-assessee had not produced evidence in support of

payment of dividend within the specified time and as per the audit

statement the respondent had proposed dividend of Rs.36,83,000/- and

the dividend had not been paid. There is no further discussion in the

order of the Assessing Officer.




4.      Commissioner of Income Tax (Appeals) [CIT (Appeals), for

short] affirmed the said view observing that the dividend distribution

related to earlier years, i.e., Financial Years 1990-91 and 1991-92 and

as such deduction under Section 80M of the Act was not permissible.

He also recorded that the dividend of Rs.48,72,518/- was paid to the

shareholders of the company by four cheques dated 31st March, 1993,

which were encashed on 21st April, 1993. We record here that the CIT

(Appeals) has not indicated or mentioned why the dividend distributed

related to Financial Years 1990-91 and 1991-92. He has not elaborated

ITA No. 92/2013                                               Page 2 of 10
upon the said statement. As noticed above, the order of the Assessing

Officer also does not elaborate and deal with the said aspect.

5.      The Income Tax Appellate Tribunal has recorded some factual

details.     It has recorded that the respondent-assessee had declared

dividend of Rs.48,72,518/- relating to Financial Years 1990-91 and

1991-92 but the dividends were paid on 21st April, 1993 by cheques

dated 31st March, 1993. CIT (Appeals) had held that benefit of Section

80M would be only relatable to dividends paid and distributed and

were relatable to the Assessment Year 1993-94 or Financial Year

1992-93.

6.      In other words, the contention of the Revenue is that each

assessment year is a self contained and as dividend of Rs.48,72,518/-

related to Financial Years 1990-91 and 1991-92, deduction under

Section 80M cannot be allowed on the basis of dividend income of

Rs.50,00,000/- received in the Financial Year 1992-93.               This is

because the dividend distributed was for Financial Years 1990-91 and

1991-92 and deduction under Section 80M was claimed for the year

ending 31st March, 1993.

7.      Ex facie, there appeared to be some merit in the contention

raised by the appellant-Revenue but on deeper scrutiny, we do not find

that ground or justification is made out to interfere with the order of the

tribunal. Section 80M as it existed and applicable to the Assessment

ITA No. 92/2013                                                  Page 3 of 10
Year 1993-94 was as under:

                  "80M. Deduction in respect of certain
                  intercorporate dividends.--(1) Where the gross
                  total income of a domestic company, in any
                  previous year, includes any income by way of
                  dividends from another domestic company, there
                  shall, in accordance with and subject to the
                  provisions of this section, be allowed, in
                  computing the total income of such domestic
                  company, a deduction of an amount equal to,--

                        (i) in the case of a scheduled bank or a
                  public financial institution, or a State financial
                  corporation or a State industrial investment
                  corporation or a company registered under
                  section 25 of the Companies Act, 1956 (1 of
                  1956), sixty per cent. of the income by way of
                  dividends from another domestic company;

                         (ii) in the case of any other domestic
                  company, so much of the amount of income by
                  way of dividends from another domestic
                  company as does not exceed the amount of
                  dividend distributed by the first-mentioned
                  domestic company on or before the due date:
                  Provided that where any domestic company
                  receives any income by way of dividend from the
                  units of the Unit 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 for deduction to
                  the extent of--

                        (a) four-fifth of such income in respect of
                  the previous year relevant to the assessment year
                  commencing on the 1st day of April, 1994 ;

                        (b) two-fifth of such income in respect of
                  the previous year relevant to the assessment year
                  commencing on the 1st day of April, 1995,
                  and no deduction shall be allowed on such
                  income in respect of the previous year relevant to

ITA No. 92/2013                                                   Page 4 of 10
                  the assessment year commencing on the 1st day
                  of April, 1996, and any subsequent previous
                  year.

                  (2) Where any deduction, in respect of the
                  amount of dividend distributed by the domestic
                  company, has been allowed under clause (ii) of
                  sub-section (1) in any previous year, no
                  deduction shall be allowed in respect of such
                  amount in any other previous year.

                  (3) Where the dividend distributed is in respect
                  of any period comprised in the previous year
                  ending on the 31st day of March, l99O, no
                  deduction shall be allowed in respect of such
                  dividend.

                  Explanation.--For the purposes of this section,
                  the expressions--

                         (i) "scheduled bank" means the State Bank
                  of India constituted under the State Bank of India
                  Act, 1955 (23 of 1955), a subsidiary bank as
                  defined in the State Bank of India (Subsidiary
                  Banks) Act, 1959 (38 of 1959), a corresponding
                  new bank constituted under section 3 of the
                  Banking Companies (Acquisition and Transfer of
                  Undertakings) Act, 1970 (5 of 1970), or under
                  section 3 of the Banking Companies (Acquisition
                  and Transfer of Undertakings) Act, 1980 (40 of
                  1980), or any other bank included in the Second
                  Schedule to the Reserve Bank of India Act, 1934
                  (2 of 1934), and which is a domestic company;

                       (ii) "public financial institution" shall have
                  the meaning assigned to it in section 4A of the
                  Companies Act, 1956 (1 of 1956);

                        (iii) "State financial corporation" and
                  "State industrial investment corporation" shall
                  have the same meanings as in section 43B;

                        (iv) "due date" means the date for

ITA No. 92/2013                                                    Page 5 of 10
                  furnishing the return of income under sub-section
                  (1) of section 139."


8.      Section 80M(1) for the purpose of interpretation can be

segregated into two parts or postulates two requirements. The first

requirement is that gross income of a domestic company in the

previous year should include income by way of dividend from another

domestic company. The said condition it is accepted is satisfied as the

respondent-assessee had received dividend of Rs.50,00,000/- from

another domestic company, i.e., UTI.          The second part of Section

80M(1) states that in the year in which the dividend was received, the

assessee company would be allowed a deduction of an amount equal to

and not exceeding the amount of dividend distributed on or before the

due date. Due date as per Explanation to Section 80M means the date

of filing of return of income under Section 139(1). If we go by the

order of the CIT (Appeals) and the tribunal, they have accepted the

plea of the respondent-assessee that the dividend was paid to the

shareholders of the assessee before due date vide cheques dated 31st

March, 1993, which were encahsed on 21st April, 1993.

9.      The requirement of the second part of Section 80M(1) is that the

company, which has received dividend from a domestic company

should have distributed dividend not exceeding the amount of dividend

received on or before the due date. The second part of Section 80M(1)

ITA No. 92/2013                                                  Page 6 of 10
does not stipulate that the dividend, which was distributed, must relate

to the year in question to which the return relates.          The only

requirement or condition is that the dividend should have been

distributed in the year in question or on or before the due date. The

due date has been specified to mean the date of furnishing of return

under Section 139(1) of the Act.




10.     The view we have taken is supported by sub-section (2) to

Section 80M. The said sub-section stipulates that where dividend was

distributed in a previous year, no deduction would be allowed in

respect of the said amount in any other year. In other words, the

deduction is to be allowed in the year when the dividend was

distributed and not in any other year. Sub-section (3) to Section 80M

states that no deduction would be allowed under the said Section where

dividend distributed was in respect of periods prior to 31st March,

1990. The said sub-section supports the contention of the respondent-

assessee that when dividend distributed relates to period prior to 31 st

March, 1990, deduction under Section 80M as applicable cannot be

allowed.

11.     The second part of Section 80(1) of the Act, does not

specifically postulate or prescribes the requirement that dividend

distributed must match or relate to the assessment year itself. There is

good reason, why the Legislature has not prescribed the said

ITA No. 92/2013                                              Page 7 of 10
condition/requirement. Dividends can be declared and are normally

declared after the end of the financial year and when financial results

are known. Payment of dividend in several cases may spill over and

distribution can and does take in the subsequent year.

12.     We are also inclined to accept the view of the respondent-

assessee for another important reason, even if we feel that the

contention of the Revenue is plausible. The reason is that Bombay

High Court in Commission of Income Tax versus Saumya Finance

and Leasing Co. P. Ltd, [2008] 300 ITR 422 (Bombay) has taken an

identical view and this judgment was noticed and followed by the

tribunal. Facts in the case of Saumya Finance and Leasing Co. P.

Ltd. (supra) are almost similar though not identical. In the said case,

the assessee company had received dividend in the Financial Year

1996-97 but had declared interim dividend for the Financial Year

1997-98. In the returns filed for the Financial Year 1996-97, deduction

under Section 80M was claimed on account of dividend earned and

received in the said previous year. Bombay High Court dismissing the

appeal of the Revenue, observed:-


                  "5. On the bare reading of the Section it is clear
                  that the deduction as permitted is of an amount
                  equal to so much of the amount of income by
                  way of dividend declared by the Company as
                  does not exceed the amount of dividend

ITA No. 92/2013                                                   Page 8 of 10
                  distributed by the assessee company on or before
                  the due date.

                  6. It is clearly seen that the section does not
                  provide for the nature of the dividend distributed
                  by the assessee company. It does not state that
                  the nature of the dividend distributed must be for
                  the financial year under assessment. Accepting
                  the argument of the revenue will amount to
                  laying down an additional restriction to the effect
                  that the dividend distributed by the Assessee
                  Company must be for the financial year under
                  assessment. Laying down such restricting
                  qualification, in our view, will amount to doing
                  violence to the plain and clear meaning of the
                  words as contained in Section 80M."

13.     The contention of the Revenue that the interpretation given by

the Bombay High Court would result in absurdity was rejected as the

intention of the legislature in enacting Section 80M was clear, i.e., to

ensure that the dividend income received by the assessee company

would be permitted as a deduction only if it was redistributed as

dividend to the shareholders.            The emphasis was on the word

"distribution" and not on the "period" to which the dividend paid

related. The possibility of misuse of the said provision appears to be

remote as normally dividends declared have to be paid within the

statutory time limit fixed under the Companies Act, 1956 and

violations invite punishment and penalty. This is a peculiar case of a

Government company wherein dividend for Financial Years 1990-91


ITA No. 92/2013                                                    Page 9 of 10
and 1991-92 got distributed on 23rd April, 1993, i.e. the date of

encashment of cheques dated 31st March, 1993. We have also noted

that the provision, Section 80M would become illusory, if we accept

the interpretation of the Revenue, as it would ignore the factum that

dividends are mostly declared after the end of the financial year, upon

approval of accounts and in many, if not in majority, distribution may

be after "due date" for filing of the return of income for the relevant

year. Thus, interpretation of the Revenue if accepted, would result in

denial of benefit under Section 80M in most cases. Legislature being

aware and conscious has deliberately not prescribed and stipulated

principle of matching i.e. dividend received and dividend distributed

must relate to the same assessment year.

14.     In view of the aforesaid position, we answer the question of law

in affirmative, i.e., in favour of the respondent-assessee and against the

Revenue. The appeal is dismissed. There is no order as to costs.



                                       SANJIV KHANNA, J.



                                       SANJEEV SACHDEVA, J.
JULY 16, 2013
VKR




ITA No. 92/2013                                               Page 10 of 10
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions