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Judgment
This Petition is directed against the notice dated 27th December, 2006 issued under Section 148 of the Income Tax Act, 1961 (the Act), seeking to reopen the assessment for Assessment Year 2003-04.
The Petitioner filed its return of income, declaring the total income of Rs. 34.75 lakhs. In its return of income, the Petitioner had disclosed the dividend received of Rs. 1.21 Crores and claimed deduction of the same under Section 80M of the Act. This claim for deduction satisfied the condition therein that it shall not be more than the amount of dividend distributed by the Petitioner to its share holders before the due date of filing of return of income for the Assessment Year 2003-04 i.e. 31st October, 2003. In this case, the Petitioner had on 6th October, 2003 declared dividend of Rs. 1.22 Crores. Thus the Assessing Officer accepted the claim for deduction under Section 80M of the Act in his order dated 27th March, 2006 passed under Section 143(3) of the Act in the regular assessment proceeding.
On 27th December, 2006, the Assessing Officer issued the impugned notice seeking to reopen the assessment for Assessment Year 2003-04. The reasons recorded in support of the impugned notice as furnished to the Petitioner is as under:
"1 In this case return of income was filed on 03.11.2003 declaring income of Rs. 3575830/-. Assessment was made vide order u/s. 143(3) dt. 27.03.2006 and total income was assessed at Rs. 7360529/-.
The assessee company was allowed deduction of Rs. 12195220 u/s. 80M. Assessee had received dividend of Rs. 12195220 during the previous year relevant to A.Y. 2003-04. The assessee company had declared and paid Rs. 12237750 as dividend after 1.4.2003. Dividend tax thereon @ 12.50% amounting to Rs. 1567962 was paid on 11.10.2003. Such dividend which was distributed on or after 1.4.2003 and whereon dividend tax has been paid under sub sec. (1) of Sec. 115O, then by virtue of sub sec. (5) of sec. 115O, the company could not claim deduction u/s. 80M in respect of dividend so distributed. As deduction u/s. 80M has wrongly been allowed it has resulted in underassessment of income of Rs. 12195220.
Thus it is seen that income chargeable to tax has been under assessed and also that excessive relief has been given for which provisions of explanation 2(c)(i) & (iii) of sec. 147 are applicable. In view of the above facts, I have reason to believe that income chargeable to tax has escaped assessment. The limitation for approval and issue of notice expires on 31.3.2008."
The Petitioner by letter dated 15th January, 2007 objected to the reasons recorded in support of the impugned notice. The Petitioner pointed that deduction under Section 80M of the Act was correctly taken in accordance with law for Assessment Year 2003-04. It was pointed out that Section 115O of the Act came into force w.e.f. 1st April, 2003 and therefore was applicable only on and from Assessment Year 2004-05. By an order dated 29th January, 2007, the Assessing Officer rejected the Petitioner''s objection that in view of Section 115O(5) of the Act, the Petitioner has forfeited its claim for deduction under Section 80M of the Act.
Mr. Jasani, learned Counsel appearing for the Petitioner states that the issue raised in the present Petition is no longer res integra in view of the decisions of this Court in M/s. Godrej Agrovet Ltd., v/s. Deputy Commissioner of Income Tax and another 323 ITR 98 and in Income Appeal No. 1209 of 2012 (Commissioner of Income Tax v/s. M/s. Bharat Bijlee Ltd.,) rendered on 5th November, 2014. It is submitted that in M/s. Godrej Agrovet Ltd. (supra) on identical grounds a notice for reopening of assessment was set aside.
Mr. Pinto, learned Counsel appearing for the Revenue submits that in view of Section 115O(5) of the Act would disentitle the Petitioner from claiming benefit of Section 80M of the Act. This on the ground that subsection 5 of Section 115O of the Act clearly prohibits deduction being claimed under any other provisions of the Act in respect of amount which has been charged to tax thereunder. Moreover, it is submitted that subsection 5 of Section 115O of the Act is year neutral.
It would be useful to reproduce Sections 80M and 115O of the Act as in force at the relevant time:
"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 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."
(2) Where any deduction in respect of the amount of dividend distributed by the domestic company, has been allowed under subsection
(1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.
Explanation:-For the purposes of this section, the expression "due date" means the date for furnishing the return of income under subsection (1) of section 139.
115O(1):-Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income tax (hereafter referred to as tax on distributed profits) at the rate of fifteen per cent.
[(1A) The amount referred to in subsection (1) shall be reduced by (i) the amount of dividend, if any, received by the domestic company:
(a) such dividend is received from its subsidiary
(b) the subsidiary has paid the tax which is payable under this section on such dividend;
(c) ........
Provided that the same amount of dividend shall not be taken into account for reduction more than once; (ii) the amount of dividend, if any, paid to any person for, or on behalf of the New Pension System Trust referred to in clause (44) of Section 10.
(2) to (4) ..... ..... .....
(5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the amount which has been charged to tax under subsection (1) or the tax thereon.
It is very pertinent to note that during the subject Assessment Year 2003-04, Section 115O of the Act was not in the Act. It only came into force from the Assessment Year 2004-05.
It is not disputed before us that the decision of this Court in M/s. Godrej Agrovet (supra) would conclude the issue in favour of the Petitioner. In M/s. Godrej Agrovet (supra) also the assessment was being sought to be reopened for Assessment Year 2003-04 as in this case on similar grounds. This Court in Godrej Agrovet (supra) inter alia held that under Section 147 of the Act, the Assessing Officer has a power to reopen the assessment by issuing a notice for the same provided that he has reason to believe that income escaped assessment. The reopening of an assessment cannot be on a mere change of opinion. The Court further held that the basis of reopening of the assessment was the payment of dividend under Section 115O of the Act. The Court held that Section 80M of the Act as it stood during the Assessment Year 2003-04 allowed an assessee to claim deduction under Section 80M of the Act so long as the amount of dividend received is less then the amount of dividend distributed before the due date of filing the return of income. The Court held that the Assessing Officer seeking to deny the benefit of tax under Section 80M of the Act on account of Section 115O of the Act, has proceeded on an extraneous ground. The Court record that Section 115O of the Act could not have been invoked to disallow the deduction available under Section 80M of the Act in the Assessment Year 2003-04.
Section 80M of the Act allows the assessee to claim deduction of the dividend received, subject to the deduction being less then the amount of dividend distributed by the assessee. This distribution of dividend by assessee has to be on or before the due date of filing a return of income. In this case, the date of filing of return was 31st October, 2003 and the Petitioner had distributed the dividend on 6th October, 2003. Therefore, all conditions necessary for claiming deduction on the dividend received under Section 80M of the Act including the monetary cap of being less than the dividend distributed was satisfied. Thus, Assessing Officer could not have had any reason to believe that income chargeable to tax has escaped the assessment for Assessment Year 2003-04. It was not open to the Assessing Officer to invoke provisions of Section 115O of the Act which were not in the Act for the Assessment Year 2003-04 to deny the benefit of deduction under Section 80M of the Act.
The only distinction sought to be made by the Revenue is that Section 115O of the Act is year neutral. Therefore, it is submitted that the deduction under Section 80M of the Act will not be available even it is for an earlier Assessment Year as it does not refer to any particular assessment year. This submission over looks the fact that Section 115O(5) of the Act only prohibits an assessee from availing of deduction in respect of an amount which has been charged to tax under subsection (1) of the Section 115O of the Act. What has been charged to tax under Section 115O(1) of the Act is the dividend distributed by the Petitioner amongst its share holders. The deduction being claimed by the Petitioner under Section 80M of the Act is not on the amounts which have been distributed as dividend by the Petitioner to its share holders and on which the tax is paid under Section 115O of the Act. The deduction under Section 80M of the Act claimed is on the dividend received by the Petitioner as a share holder. Therefore, Section 115O(5) of the Act will have no application to the present facts.
In view of the above, we set aside the impugned notice dated 27th December, 2006 issued under Section 148 of the Act.
Accordingly, Rule made absolute in the above terms. No order as to costs.