DCIT, CHENNAI v. M/s Aban Offshore Ltd., CHENNAI

ITA 1301/CHNY/2008 | 2004-2005
Pronouncement Date: 20-07-2010 | Result: Allowed

Appeal Details

RSA Number 130121714 RSA 2008
Assessee PAN AAACA3012H
Bench Chennai
Appeal Number ITA 1301/CHNY/2008
Duration Of Justice 2 year(s) 1 month(s) 7 day(s)
Appellant DCIT, CHENNAI
Respondent M/s Aban Offshore Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 20-07-2010
Date Of Final Hearing 20-07-2010
Next Hearing Date 20-07-2010
Assessment Year 2004-2005
Appeal Filed On 13-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A BEFORE SHRI PRADEEP PARIKH VICE-PRESIDENT AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.1301/MDS/2008 ASSESSMENT YEAR: 2004-05 THE DY. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-I(1) CHENNAI-34. VS. M/S. ABAN OFFSHORE LTD. 113/96 PANTHEON ROAD EGMORE CHENNAI-600 008. PAN AAACA 3012 H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI D. ANAND O R D E R PER PRADEEP PARIKH V.P. THE DEPARTMENT IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE LD. CIT (A) DATED 15.2.2008 FOR ASSES SMENT YEAR 2004-05. FIRST GROUND IN THE APPEAL IS AGAINST ALLOWING DEPRECIATION ON WINDMILLS. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF OFFSHORE OIL WELL DRILLING. IT RETURNED A TOTAL INC OME OF ` 57 06 07 829/- FOR THE YEAR UNDER CONSIDERATION. TH E ASSESSING OFFICER DISALLOWED DEPRECIATION ON WINDMI LLS BY FOLLOWING HIS ORDER IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04. THE ASSESSING OFFICER HELD THAT THE C LAIM OF DEPRECIATION AT THE RATE OF 80% AS CLAIMED BY THE A SSESSEE ON THE COST OF ADDITION TO WINDMILLS WERE NOT THE W INDMILLS ACQUIRED DURING THE RELEVANT PREVIOUS YEAR AND HENC E DEPRECIATION IS TO BE DISALLOWED. IN ALTERNATE ALSO THE ASSESSING OFFICER INVOKED EXPLANATION 3 TO SEC.43 A ND HELD THAT THE COST NEEDS TO BE TAKEN AS NIL. THE CIT (A ) ALLOWED 2 ITA 1301/08 THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEAR 2003-0 4. FOLLOWING THIS ORDER FOR THE PRESENT YEAR ALSO THE CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE. 3. THIS ISSUE HAD COME UP BEFORE THE TRIBUNAL IN TH E ASSESSEES CASE FOR ASSESSMENT YEAR 2003-04 IN I.T.A.NO.1964/MDS/2006 DATED 26.3.2008. THE TRIBUNA L UPHELD THE CLAIM OF THE ASSESSEE ON BOTH THE COUNTS . IN DOING SO RELIANCE WAS PLACED ON THE JUDGMENT OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ANN AMALAI FINANCE LTD. IN 275 ITR 451. THUS RESPECTFULLY FOL LOWING THE EARLIER ORDER OF THE TRIBUNAL THE FIRST ISSUE IS D ECIDED AGAINST THE REVENUE. 4. THE SECOND GROUND IS AGAINST RESTRICTING THE DISALLOWANCE UNDER SEC.94 (7) TO ` 1 21 712/- AS AGAINST ` 19 36 923/- DETERMINED BY THE ASSESSING OFFICER. TH E DETAILS OF GAINS AND LOSSES RESULTING FROM THE TRANSFER OF INVESTMENTS IN MUTUAL FUNDS REVEALED A SHORT TERM CAPITAL LOSS OF ` 19 36 923/- WHICH WAS CLAIMED BY THE ASSESSEE AS DEDUCTION. THE ASSESSING OFFICER INVOKED THE PROVIS IONS OF SEC.94 (7) WHICH REQUIRES THE ASSESSEE TO IGNORE TH E SHORT TERM CAPITAL LOSS TO THE EXTENT OF EXEMPT DIVIDEND INCOME. THE ASSESSING OFFICER ANALYSED ALL THE TRANSACTIONS AND CAME TO THE CONCLUSION THAT THE ENTIRE LOSS WAS DISALLOW ABLE. THE EXPLANATION OF THE ASSESSEE WAS THAT THE SCHEME FRO M WHICH IT RECEIVED DIVIDENDS DID NOT HAVE ANYTHING BY WAY OF RECORD DATE AND HENCE SEC.94 (7) WAS NOT APPLICABLE. THE ASSESSING OFFICER REJECTED THE EXPLANATION AND DISALLOWED THE ENTIRE LOSS. 3 ITA 1301/08 5. BEFORE THE CIT (A) IT WAS CONTENDED BY THE ASSES SEE THAT IT HAD KEPT ITS SURPLUS FUNDS IN LIQUID ASSETS WHICH COULD BE REDEEMED BY 24-HOUR NOTICE AND THE INCOME WAS REGULARLY CREDITED TO ITS ACCOUNTS PERIODICALLY I.E . DAILY WEEKLY MONTHLY ETC. ACCORDING TO THE ASSESSEE SUC H SCHEMES OPERATED WITHOUT ANY RECORD DATE. IT WAS AL SO CONTENDED THAT WHERE THERE ARE MORE THAN ONE RECORD DATE IN A SCHEME IN WHICH WEEKLY DIVIDEND IS AUTOMATICAL LY CREDITED THE LAST RECORD DATE NEEDS TO BE CONSIDER ED AND NOT ANY OTHER DATE. HOWEVER IT WAS ADMITTED BY THE ASS ESSEE THAT SEC.94 (7) WOULD BE APPLICABLE IN RESPECT OF J .M. SHORT TERM FUND AND RELIANCE SHORT TERM FUND. ACCORDINGLY THE CIT (A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE OF LOSS ONLY TO THE EXTE NT OF ` 11 148/- IN THE CASE OF J.M. FUND AND ` 1 21 712/- IN CASE OF RELIANCE FUND. IN OTHER CASES THE DISALLOWANCE WAS DELETED. 6. THE LD. D.R. STRONGLY ASSAILED THE ORDER OF THE CIT (A) FOR ACCEPTING THE CONTENTION THAT THERE IS NO CONCE PT OF RECORD DATE AS THE SCHEME IS EXPLICIT ABOUT THE FRE QUENCY OF DIVIDEND PAYMENTS. THE ARGUMENT WAS THAT IRRESPECTI VE OF THE FACT WHETHER DIVIDEND IS WEEKLY MONTHLY OR YEA RLY THERE HAS TO BE A RECORD DATE ON WHICH DATE THE LIST OF P ERSONS ENTITLED TO DIVIDEND IS FROZEN. HE SUBMITTED AN ANA LYSIS ON THE BASIS OF THE TRANSACTIONS LISTED BY THE ASSESSI NG OFFICER IN THE ANNEXURE TO THE ASSESSMENT ORDER AND ON THE BAS IS OF THE INFORMATION ABOUT RECORD DATES FURNISHED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDING TO HIM EXCEPT FOR ITEM NOS. 5 16 25 AND 26 ALL OTHER IT EMS WERE PURCHASED AND SOLD WITHIN THE 3-MONTH PERIOD AND HE NCE SEC.94(7) WAS SQUARELY APPLICABLE. IN RESPECT OF IT EM NO.5 ACCORDING TO THE LD. D.R. LOSS ONLY TO THE EXTENT OF ` 4 ITA 1301/08 19 043/- WAS ALLOWABLE IN RESPECT OF ITEM NO.16 L OSS TO THE EXTENT OF ` 72 050/- WAS ALLOWABLE AND IN RESPECT OF ITEMS 25 AND 26 THE ENTIRE LOSS WAS ALLOWABLE. 7. THE CONTENTION OF THE LD. COUNSEL WAS THE SAME A S IT WAS BEFORE THE LOWER AUTHORITIES. HIS EMPHASIS WAS ON THE ARGUMENT THAT IN CASE OF WEEKLY DIVIDENDS THERE IS NO CONCEPT OF RECORD DATE AND HENCE THE DATE ON WHICH THE LAST DIVIDEND IS DECLARED IS TO BE TAKEN AS THE RECORD D ATE. THUS HE SUPPORTED THE ORDER OF THE CIT (A). 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D THE MATERIAL ON RECORD. SEC.94(7) TO PUT IT BRIEFLY M ANDATES THAT IF A PERSON IS EARNING EXEMPT DIVIDEND FROM SE CURITIES OR UNITS AND ALSO CLAIMS SHORT TERM LOSS ON SALE OF SU CH SHARES OR UNITS SUCH LOSS WILL BE IGNORED FOR THE PURPOSE OF COMPUTING INCOME CHARGEABLE TO TAX IF THE PURCHASE AND SALES ARE WITHIN THE SPECIFIED PERIODS. RECORD DATE IS THE RELEVANT DATE ON THE BASIS OF WHICH THE ABOVE MENTI ONED PERIOD HAS TO BE RECKONED. EXPLANATION TO SEC.94(7) DEFINES RECORD DATE TO MEAN SUCH DATE AS MAY BE FIXED BY A COMPANY FOR THE PURPOSE OF ENTITLEMENT TO RECEIVE D IVIDEND OR BY A MUTUAL FUND OR THE ADMINISTRATOR TO RECEIVE DIVIDEND BY THE HOLDER OF THE SECURITIES OR UNITS AS THE CAS E MAY BE. THUS IT IS CLEAR THAT THERE IS NO FLEXIBILITY AS R EGARDS FIXING THE RECORD DATE. THE COMPANY OR MUTUAL FUND WILL IN VARIABLY FIX A RECORD DATE IN ORDER TO DETERMINE THE PERSONS WHO ARE ENTITLED TO RECEIVE THE DIVIDEND. THEREFORE THE VI EW OF THE CIT (A) THAT THERE IS NO CONCEPT OF RECORD DATE HAS NO BASIS. IN FACT AS PER SEC.108(1A) OF THE COMPANIES ACT 1 956 EVERY INSTRUMENT OF TRANSFER OF LISTED SHARES HAS T O BE LODGED WITH THE COMPANY AT ANY TIME BEFORE THE DATE ON WHI CH THE 5 ITA 1301/08 REGISTER OF MEMBERS IS CLOSED OR WITHIN TWELVE MONT HS FROM THE DATE OF PRESENTATION. IT HAS BEEN OPINED BY THE DEPARTMENT OF COMPANY AFFAIRS THAT THE FIXATION OF RECORD DATE FOR THE PURPOSE OF AGM OR DECLARATION OF DIVID ENDS AMOUNTS TO CLOSURE OF THE REGISTER OF MEMBERS FOR T HE PURPOSE OF SEC.108 (1A). THIS ALSO SHOWS THAT RECOR D DATE HAS SANCTITY IN LAW AND CANNOT BE LEFT TO BE DETERM INED BY ANYONE ELSE BUT THE COMPANY OR THE MUTUAL FUND. IN THE PRESENT CASE OF COURSE THE LD. D.R. HAS ANALYSED THE TRANSACTIONS ON THE BASIS OF THE RECORD DATES GIVEN BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. D ESPITE THIS THE LD. COUNSEL HAS DISPUTED THE RECORD DATES TAKEN BY THE LD. D.R. THEREFORE IN THE INTEREST OF JUSTICE WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WIT H THE DIRECTION TO OBTAIN THE RECORD DATES WITH REGARD TO EACH TRANSACTION FROM THE CONCERNED MUTUAL FUND AND THEN DETERMINE WHETHER THE LOSS ON SUCH TRANSACTION IS A LLOWABLE OR NOT IN TERMS OF SEC.94(7). IF THE ASSESSEE OR TH E ASSESSING OFFICER IS NOT ABLE TO OBTAIN THE VARIOUS RECORD DA TES FROM THE MUTUAL FUND THEN THE RECORD DATES ALREADY AVAILABL E ON THE FILE OF THE ASSESSING OFFICER MAY BE TAKEN AS FINAL AND DETERMINE THE ALLOWABILITY OF LOSS IN ACCORDANCE WI TH LAW. 9. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 20.7.2010. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (PRADEEP PARIKH) VICE-PRESIDENT CHENNAI DATED THE 20 TH JULY 2010 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR