Commissioner Of Income Tax,Chennai v. M/S.titan Industries Ltd

CORAM:THE HON'BLE DR. JUSTICE VINEET KOTHARIandTHE HON'BLE DR. JUSTICE ANITA SUMANTH T.C.(A).No.1102 of 2009 Commissioner of Income Tax,Chennai. .. Appellant/Respondent Vs M/s.Titan Industries Ltd., No.3, SIPCOT Industrial Complex,Hosur – 635 126 .. Respondent/Appellant Prayer : Tax Case (Appeal) is filed under Section 260A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal, Madras 'D' Bench, dated 03.04.2009 passed inITA No.1102/Mds/2008 for the Assessment year 2003-04 filedagainst the revision order dated 28.03.2008 me in C.NO.218((58to 60) CIT-1/263/2007-08 on the file of the Commissioner ofIncome Tax, Chennai I, for the Assessment Year 2003-04. For Appellant : Mr.M.Swaminathan Sr.Standing Counsel For Respondent : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan JUDGMENT (Judgment of the Court was delivered by DR.ANITA SUMANTH, J.) The Revenue has preferred this appeal challenging an orderpassed by the Income Tax Appellate Tribunal in ITANo.1102/Mds/2008 dated 03.04.2009 in respect of Assessment year2003-04. 2. The assessee/respondent is a company and was in receiptof inter-corporate dividend of a sum of Rs.9.03 crores duringthe financial year relevant to assessment year 2003-04. https://hcservices.ecourts.gov.in/hcservices/ Deduction under Section 80M of Income Tax Act (in short 'theAct') was claimed. The claim was accepted by the AssessingOfficer while framing an order of assessment dated 24.03.2006 interms of section 143(3) of the Act. 3. The Commissioner ofIncome Tax, however, in exercise of powers under section 263 ofthe Act, revised the assessment restricting the claim undersection 80M of the Act to an amount of Rs.7.9 crores beingdividend declared by the assessee in the financial yearrelevant to assessment year 2003-04. According to theCommissioner, the amount of deduction claimed could not haveexceeded the amount of dividend declared by the assessee on orbefore the due date for filing of return in the light of sub-Section 2 of Section 80M. He thus directed the Assessing Officerto restrict the claim of deduction under Section 80M to a sum ofRs.789.86 lakhs only. 4. As against the same, an appeal was filed before theIncome Tax Appellate Tribunal. The Tribunal concluded that therewas no condition imposed by law to support the stand of the CITand accepted the stand of the assessee. 5. We have heard Mr.M.Swaminathan, learned Senior StandingCounsel appearing for the Revenue and Mr.R.Vijayaraghavan,learned counsel appearing for the assessee. 6. The provisions of section 80M provide for a deduction inrespect of any income by way of dividends received from adomestic company and read thus: ‘80M.Deduction in respect of certain inter- corporate dividends.—(1) Where the gross total incomeof a domestic company, in any previous year, includesany income by way of dividends from another domesticcompany, there shall, in accordance with and subjectto the provisions of this section, be allowed, incomputing the total income of such domestic company, adeduction of an amount equal to so much of the amountof income by way of dividends from another domesticcompany as does not exceed the amount of dividenddistributed by the first-mentioned domestic company onor before the due date. (2) Where any deduction, in respect of the amountof dividend distributed by the domestic company, hasbeen allowed under sub-section (1) in any previousyear, no deduction shall be allowed in respect of suchamount in any other previous year. Explanation.—For the purposes of this section, theexpression "due date" means the date for furnishing the return of income under sub-section (1) of section139.’. (2) Where any deduction, in respect of the amountof dividend distributed by the domestic company, hasbeen allowed under sub-section (1) in any previousyear, no deduction shall be allowed in respect of suchamount in any other previous year. Explanation.—For the purposes of this section, theexpression "due date" means the date for furnishing the return of income under sub-section (1) of section139.’. 7. The provisions of Section 80M provide for a deduction inrespect of the income received by way of dividend by a domesticcompany and contains two limbs: the dividend received must be ofa quantum equal to the dividend distributed by the recipientcompany and the distribution of the dividend itself should beprior to the due date of filing of the return of income. 8. In the present case, the appellant has declared dividendof a sum of Rs.15.20 Crores for the periods 31.03.2002 and31.03.2003. The distribution of such dividend has taken placeonly in the course of financial year 2003-04, prior to the duedate for filing of return in respect of Assessment Year 2003 –2004. This is an admitted position. The case of the Revenue isthat the benefit of the dividend declared in respect ofAssessment Year 2002-2003 cannot be taken by the Assesseeparticularly seeing as the provisions of Section 80M werethemselves introduced only with effect from 01.04.2003. 9. We, however, find no fetter set out in the provision inthis regard. Though the declaration of dividend by theappellant had been occasioned in the financial years 2001-02 aswell as 2002-03, there is no dispute on the position that thedividend had in fact, been paid out by the assessee only duringthe relevant financial year and that too prior to the due datefor filing the return. Accepting the submission of the Revenue,would, in our view tantamount to inserting a new condition inthe statutory provision which is impermissible in law. We arethus in agreement with the Tribunal in their conclusion that theassessee is entitled to the deduction sought. 10. We draw support in this regard from the decisions of theDivision Bench of the Delhi High Court in the case ofCommissioner of Income Tax V. Delhi Tourism & TransportationDevelopment Corporation Ltd. ((2013) 357 ITR 95 (Delhi) and theBombay High Court in the case of Commissioner of Income Tax V.Saumya Finance and Leasing Co. P. Ltd. ((2008) 300 ITR 422(Bombay), which have taken views similar to the one expressedby us above. 11. The substantial questions of law admitted for resolutionare as follows: 1. Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that forthe purpose of Section M, “dividend distributed”would include dividends declared in the earlier yearbut paid out in the current year?the case, the Tribunal was right in holding that forthe purpose of Section M, “dividend distributed”would include dividends declared in the earlier yearbut paid out in the current year? 2. Whether on the facts and circumstances of the case, the Tribunal was right in holding thatdividend declared for a period when Section 80M wasnot in force but paid out after the section has comeinto effect, could be treated as part of thedividend distributed in the current year for thepurpose of calculation of deduction under Section80M?' 12. In the light of the discussion as above, bothsubstantial questions of law are answered in favour of theassessee and against the Revenue. 13. The Tax Case (Appeal) is dismissed. No costs. Sd/- Assistant Registrar(CS)//True Copy// Sub Assistant Registrar slTo1. The Registrar, Income Tax Appellate Tribunal,Madurai (D) Bench.2. The Commissioner of Income Tax,Chennai I. +1 cc to M/s.M.Swaminathan, Advocate Sr.No.81021+1 cc to M/s.Subbaraya Aiyar Padmanabhan, Advocate Sr.No.81238 T.C.(A).No.1102 of 2009RSI(CO)CSL/12.12.2018 https://hcservices.ecourts.gov.in/hcservices/