Commissioner of Income Tax vs English Indian Clays Ltd.

C.N. Ramachandran Nair, J.—Of the two questions raised in the appeal, one pertains to disallowance of dividend paid to other shareholder companies and the other pertains to assessee''s claim for higher rate of depreciation on certain items. Dividend was admittedly not paid before the due date for filing returns as required u/s 80M. However, the first appellate authority and the Tribunal allowed the claim on the ground that the Annual General Body meeting was held and dividend was declared before the due date for filing returns. The Tribunal gave a further finding that assesses credited the accounts of the shareholder companies with dividend amount before filing returns. Senior standing Counsel appearing for the appellant relied on the decision in Delhi Tourism and T.D.C. Ltd. Vs. Commissioner of I.T.-II, and contended that a mere resolution declaring dividend is not sufficient to allow the claim. Even though declaration of dividend is not sufficient for entitling deduction, the finding of the Tribunal is that shareholder companies'' accounts have been credited with the dividend amount before the due date for filing returns and in fact dividend cheques have been released immediately after filing of the returns. However, on going through the Tribunal''s order we do not think Tribunal has verified the records before entering these facts. In any case, since Tribunal has not referred to the dates on which credit entries were made in the accounts of the shareholder companies and the dates on which cheques were released to them, we feel, verification is required with regard to facts found by the Tribunal in favour of the respondent. The assessee''s claim for higher rate of depreciation stands remanded to the Assessing Officer for reconsideration based on the certificate produced before the first appellate authority. It is not known whether revised orders are issued pursuant to remand. In any case, since Tribunal has not given the dates on which the assessee has credited the dividend amount and the dates of release of payment to the shareholder companies, we remand this issue also to the Assessing Officer for factual verification. However, we make it clear that if the accounts of the shareholder companies have been credited with dividend amount before the due date for filing returns and if shortly after filing of the returns dividend is paid to the shareholder companies, then the Assessing Officer will allow the claim. On the other hand, if credits have not been given before the due date for filing returns or if payments are not released shortly after filing returns, then the Assessing Officer will disallow the claim.

Appeal is disposed of by modifying the order of the Tribunal to the above extent.