RADHA MADHAV INVETMENT LTD, MUMBAI v. DCIT CIR 3(3), MUMBAI

ITA 2309/MUM/2010 | 2003-2004
Pronouncement Date: 09-12-2011 | Result: Allowed

Appeal Details

RSA Number 230919914 RSA 2010
Assessee PAN AAACR4063M
Bench Mumbai
Appeal Number ITA 2309/MUM/2010
Duration Of Justice 1 year(s) 8 month(s) 16 day(s)
Appellant RADHA MADHAV INVETMENT LTD, MUMBAI
Respondent DCIT CIR 3(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-12-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 09-12-2011
Date Of Final Hearing 22-09-2011
Next Hearing Date 22-09-2011
Assessment Year 2003-2004
Appeal Filed On 23-03-2010
Judgment Text
1 RADHA MADHAV INVESTMENT LTD IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI D DD D BENCH BENCH BENCH BENCH MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R K PANDA R K PANDA R K PANDA R K PANDA AM & AM & AM & AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM ITA NO. ITA NO. ITA NO. ITA NO. 2309/MUM/2010 2309/MUM/2010 2309/MUM/2010 2309/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2003 2003 2003 2003- -- -04 0404 04) )) ) RADHA MADHAV INVESTMENT LTD 11A MITTAL CHAMBERS NARIMAN POINT - MUMBAI 21 VS THE DY COMMR OF INCOME TAX CIR 3(3) MUMBAI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AAACR4063M AAACR4063M AAACR4063M AAACR4063M ASSESSEE BY SH RAHUL HAKANI REVENUE BY DR B SENTHIL KUMAR DT.OF HEARING 1 ST DEC 2011 DT OF PRONOUNCEMENT 9 TH DEC 2011 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO JM JMJM JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 3.7.2009 OF THE CIT(A) FOR THE AY 2003-04. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LD. CIT (A) ERRED IN LAW AND FACTS IN UPHOLD ING RE-OPENING PROCEEDINGS U/S.148 WITHOUT ANY FRESH MATERIAL OR E VIDENCE WITH THE A.O. FOR RE-OPENING THE ASSESSMENT PROCEEDINGS AND WITHO UT FOLLOWING DUE PROCESS OF LAW PRESCRIBED BY APEX COURT IN THE CASE OF GRN DRIVESHAFTS CASE. 2. THE LD CIT (A) ERRED IN LAW AND FACTS IN UPHOLDI NG THE DISALLOWANCE OF ASSESSEES CLAIM U/S 80M OF THE ACT OF RS. 6 67 27 000/-. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG CONTRARY TO TH E FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW. 3. THE LD CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION U /S 80M OF THE ACT OF RS. 6 67 27 000/- TO THE EXTENT OF DIVIDEND DECLAR ED AND PAID BY THE ASSESSEE BEFORE THE STIPULATED DATE OUT OF DIVIDEND INCOME OF THE FINANCIAL YEAR 2002-03 AND ASSESSEE COMPLIED WITH ALL THE CON DITIONS TO BE ELIGIBLE FOR THE DEDUCTION. 4. THE LD. CIT (A) FAILED TO PROPERLY CONSTRUE THE PROVISIONS OF LAW AND WRONGLY DENIED THE DEDUCTION UNDER SECTION 80M EVEN WHEN THE SAID PROVISION WAS ON STATUTE BOOK TILL 31.03.04. 2 RADHA MADHAV INVESTMENT LTD . 3 GROUND NO.1 IS REGARDING REOPENING OF THE ASSESSM ENT. 3.1 THE ASSESSEE FILED ITS RETURN OF INCOME ON 21.1 1.2003 DECLARING A TOTAL INCOME OF RS. 2 61 33 870/- AFTER CLAIMING THE DEDU CTION U/S 80M OF RS.8 67 15 858/- . THE ASSESSING OFFICER PASSED ASS ESSMENT U/S 143(3) ON 30.11.2005 DETERMINING THE TOTAL INCOME AT RS.2 66 84 600/-. SUBSEQUENTLY NOTICE U/S 148 WAS ISSUED ON 26.3.2008 FOR REOPENIN G THE ASSESSMENT U/S 147 ON THE GROUND THAT NO DEDUCTION IS ALLOWABLE TO THE AS SESSEE U/S 80M IN VIEW OF THE PROVISIONS OF SEC. 115-O(5). THE ASSESSING OFFICER ACCORDINGLY PASSED THE REASSESSMENT ORDER U/S 143(3) R.W.S 147 ON 17.10.20 08 WHEREBY DEDUCTION ALLOWED U/S 80M WAS WITHDRAWN. 3.2 ON APPEAL THE CIT(A) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER IN DISALLOWANCE CLAIMED U/S 80M IN THE REASSESSMENT PR OCEEDINGS. 4 BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF GODREJ AGROVET LTD VS DCIT REPORTED IN 232 ITR 97(B OM) AND SUBMITTED THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA). 4.1 ON THE OTHER HAND THE LD DR HAS RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AFT ER PASSING THE ASSESSMENT ORDER U/S 143(3) THE ASSESSING OFFICER REOPENED TH E ASSESSMENT BY RECORDING THE REASONS AS UNDER: 3 RADHA MADHAV INVESTMENT LTD 2.1 AS PER SECTION (1) OF SECTION 1150 OF THE INCOM E TAX ACT 196] IN THE CASE OF A DOMESTIC COMPANY ANY AMOUNT DECLA RED DISTRIBUTED OR PAID BY SUCH COMPANY BY WAY OF DIVID END ON OR AFTER THE 01/04/2003 WHETHER OUT OF CURRENT OR ACCUMULAT ED PROFITS) AT THE RATE OF TWELVE AND HALF PERCENT. AS PER SUB SEC TION (5) OF SECTION 1150 NO DEDUCTION UNDER ANY OTHER PROVISIONS OF TH IS ACT SHALL BE ALLOWED TO THE COMPANY OR A SHAREHOLDER IN RESPECT OF THE AMOUNT WHICH HAS BEEN CHARGED TO TAX UNDER SUB SECTION (1) OR TAX THEREON. 2.2 RETURN FILED BY THE ASSESSEE FOR A. Y-2003-04 W AS ASSESSED U/S 143(3) ON 30/11/2005 DETERMINING TAXABLE INCOME AT RS. 2 66 84 600/-. IT IS SEEN FROM THE ASSESSMENT O RDER WHILE DETERMINING TAXABLE INCOME UNDER NORMAL PROVISIONS ASSESSEE WAS ALLOWED A DEDUCTION OF RS. 8 67 15 858/- U/S 80M FR OM THE INFORMATION AVAILABLE ON RECORDS. IT IS OBSERVED TH AT DEDUCTION CLAIMED U/S 80M INCLUDED DIVIDEND PROPOSED DURING T HE YEAR ON PREFERENCE SHARES (RS.1 21 27 000/-) AND ON EQUITY SHARES (RS. 5 46 00 000/-). TAX ON DISTRIBUTED PROFIT AMO UNTING TO RS. 85 49 405/- WAS PAID ON 02/07/2003 U/S 1150. SI NCE DIVIDEND AMOUNT OF RS. 6 67 2 7 000/- WAS SUBJECTED TO TAX U NDER SUB SECTION (1) OF SECTION 1150 NO DEDUCTION U/S 80M IS ALLOWA BLE IN VIEW OF SPECIFIC PROVISION CONTAINED IN SUB SECTION (5) OF SECTION 1150. 5.1 THUS IT IS CLEAR FROM THE REASONS RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSMENT WAS REOPENED ON THE BASIS THAT THE D ISTRIBUTION OF THE DIVIDEND BY THE ASSESSEE WAS SUBJECTED TO TAX UNDER SUB SECT ION (1) OF SECTION 115-0 AND THEREFORE IN VIEW OF THE ASSESSING OFFICER NO DED UCTION U/S 80M IS ALLOWABLE. IT IS TO BE NOTED THAT AN IDENTICAL ISSUE HAS BEEN CON SIDERED AND ADJUDICATED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ AGROVET LTD (SUPRA). THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT DUE DATE UNDER THE EXPLANATION IS THE DATE FOR THE FURNISHING OF THE R ETURN OF INCOME UNDER SUBSECTION (1) OF SECTION 139 IN PARA 9 AS UNDER: 9 SECTION 80M WAS PART OF THE INCOME-TAX ACT 1961 DURING THE COURSE OF THE ASSESSMENT YEAR 2003-04. SECTION 80M APPLIES WHERE THE GROSS TOTAL INCOME OF A DOMESTIC COMPANY INCLU DES ANY INCOME BY WAY OF DIVIDEND FROM ANOTHER DOMESTIC COMPANY D URING THE PREVIOUS YEAR. IN SUCH A CASE IN COMPUTING THE TO TAL INCOME OF THE DOMESTIC COMPANY WHICH IS IN RECEIPT OF DIVIDEND F ROM ANOTHER COMPANY A DEDUCTION IS ALLOWABLE OF AN AMOUNT EQU AL TO THE INCOME RECEIVED BY WAY OF DIVIDEND. HOWEVER SECTIO N 80M IMPOSED A CEILING ON THE EXTENT OF DEDUCTION THAT C AN BE CLAIMED BY 4 RADHA MADHAV INVESTMENT LTD STIPULATING THAT THIS SHOULD NOT EXCEED THE AMOUNT OF DIVIDEND DISTRIBUTED BY THE COMPANY ON OR BEFORE THE DUE DA TE. THE DUE DATE UNDER THE EXPLANATION IS THE DATE FOR THE FURN ISHING OF THE RETURN OF INCOME UNDER SUBSECTION (1) OF SECTION 13 9. 5.2 FURTHER THE HONBLE JURISDICTIONAL HIGH COURT HAS ADJUDICATED THE ISSUE IN PARAS 11 & 13 AS UNDER: 11 ON THESE FACTS AS THEY STAND IT IS IMPOSSIBLE TO CONTEND THAT THE ASSESSEE WAS NOT ENTITLED TO A DEDUCTION UNDER SECTION 80M. SIGNIFICANTLY THE VIEW OF THE ASSESSING OFFICER W AS CONSISTENT WITH THE DECISION OF THE TRIBUNAL IN THE CASE OF CASTLE INVESTMENT (SUPRA). THE JUDGMENT IN CASTLE INVESTMENT IN SO F AR AS IS MATERIAL HELD THAT SECTION 115-O(5) DOES NOT IN ANY WAY RES TRICT THE ALLOWABILITY OF THE CLAIM UNDER SECTION 80M. UNDER SECTION 80M WHAT IS CLAIMED AS A DEDUCTION IS THE DIVIDEND RECE IVED BY THE COMPANY. DIVIDENDS DECLARED DISTRIBUTED OR PAID A RE NOT CLAIMED AS A DEDUCTION UNDER SECTION 80M THOUGH THEY CONST ITUTE AN OUTFLOW OF FUNDS FROM THE COMPANY. SECTION 80M IMP OSES A MONETARY RESTRICTION ON THE AMOUNT THAT MAY BE CLA IMED BY WAY OF A DEDUCTION BY PROVIDING THAT THE AMOUNT OF CLAIM CANNOT EXCEED THE DIVIDEND DISTRIBUTED BY THE ASSESSEE BY THE DUE DATE. THOUGH THE JUDGMENT OF THE TRIBUNAL IN CASTLE INVESTMENT W AS DATED JULY 18 2007 (THE ORDER OF ASSESSMENT BEING DATED FEBRU ARY 28 2006) IT IS NECESSARY TO NOTE THAT THE DECISION FOLLOWED THE EARLIER DECISION OF THE TRIBUNAL DATED MAY 10 2002 IN THE CASE OF SILVASSA INDUSTRIES AND THE DECISION DATED OCTOBER 7 2004 IN KAIKOBAD BYRAMJEE (SUPRA). THE DECISION OF THE TRIBUNAL IN CASTLE INVESTMENT (SUPRA) WAS AFFIRMED BY A DIVISION BENCH OF THIS C OURT ON JULY 22 2008 IN I. T. A. 1557 OF 2007. 12 THE ASSESSING OFFICER IN HIS REASONS FOR REOPE NING THE ASSESSMENT ADVERTS TO THE CIRCUMSTANCE THAT THE AS SESSEE PAID DIVIDEND TAX AFTER APRIL 1 2003 UNDER SECTION 11 5-O. IT IS ON THIS BASIS THAT THE INFERENCE IS DRAWN THAT THE ASSESSE E HAS FORFEITED THE RIGHT TO CLAIM A DEDUCTION UNDER SECTION 80M. THE REASONS WHICH HAVE BEEN RECORDED BY THE ASSESSING OFFICER A RE EX FACIE EXTRANEOUS TO THE QUESTION AS TO WHETHER THE ASSESS EE WOULD BE ENTITLED TO A DEDUCTION UNDER SECTION 80M. SECTION 80M IT MAY BE NOTED FORMS A PART OF THE PROVISIONS OF CHAPTER VI -A OF THE INCOME- TAX ACT 1961. CHAPTER VI-A IS DISTRIBUTED IN SEVE RAL PARTS. PART A DEALS WITH THE GENERAL PROVISIONS AND CONSISTS OF S ECTIONS 80A AND 80B. PART B DEALS WITH DEDUCTIONS WITH RESPECT TO C ERTAIN PAYMENTS AND COMPRISES OF SECTIONS 80C TO 80GGC. PART C OF CHAPTER VI-A PROVIDES FOR DEDUCTIONS IN RESPECT OF CERTAIN INCO MES. SECTION 80M AS IT THEN STOOD DURING THE COURSE OF THE ASSESSME NT YEAR 2003-04 FORMED A PART OF PART C OF CHAPTER VI-A. UNDER SEC TION 80M THE DEDUCTION IS NOT IN RESPECT OF THE AMOUNT DECLARED OR DISTRIBUTED BY WAY OF DIVIDEND. THE DEDUCTION THAT WAS STIPULATED UNDER SECTION 80M WAS IN RESPECT OF DIVIDEND RECEIVED BY A DOMEST IC COMPANY FROM ANOTHER DOMESTIC COMPANY. THE EXTENT OF THE DE DUCTION WAS 5 RADHA MADHAV INVESTMENT LTD HOWEVER SUBJECT TO A MONETARY CEILING THE CEILING BEING THAT THE DEDUCTION SHOULD NOT EXCEED THE AMOUNT DISTRIBUTED BY WAY OF DIVIDEND ON OR BEFORE THE DUE DATE FOR THE FILING OF A RETURN. THE ASSESSING OFFICER BY ADVERTING TO THE PROVISIONS O F SECTION 115-O HAS PROCEEDED TO REOPEN THE ASSESSMENT ON A PLAINL Y EXTRANEOUS GROUND. 6 IN VIEW OF THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT (SUPRA) WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY THE REOPENING OF ASSESSME NT IS NOT SUSTAINABLE AND HENCE INVALID. AS THE REOPENING HAS BEEN HELD AS IN VALID THUS WE DO NOT PROPOSE TO GO INTO THE MERITS OF DISALLOWANCE. 7 IN THE RESULT APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THE 9 TH DAY OF DEC 2011. ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:9 TH DEC 2011 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI