Case Law Details
Brief of the Case
Bombay High Court held In the case of Nirmal Bang Securities Pvt. Ltd. vs. ACIT that section 10(33) provides that any income by way of (i) dividends referred to in section 115-O; or (ii) income received in respect of the units from the Unit Trust of India established under the Unit Trust of India Act, 1963; or (iii) income received in respect of units of a mutual fund specified under section 10(23D), shall be exempt from tax. The proviso to section 10(33) stipulates that this clause shall not apply to any income arising from transfer of units of the Unit Trust of India or of a mutual fund, as the case may be. From these provision, it is clear in the facts of the present case that the proviso to section 10(33) could never apply to the dividend income earned by the Petitioner. In the facts of the present case, dividend received by the Petitioner does not arise from the transfer of units of the mutual fund but arises by virtue of the fact that those units were held by the Petitioner. We are therefore view that the Assessing Officer could have no reason to believe that the dividend income earned by the Petitioner from the mutual funds had escaped assessment. As stipulated in section 10(33), the said income was exempt and therefore could not have been brought to tax. Thus the impugned notice is also without jurisdiction as the Assessing Officer could have had no reason to believe that income chargeable to tax had escaped assessment.
Facts of the Case
In respect of A. Y. 2000-2001, the Petitioner filed a return of income on 27th November, 2000 by which it returned a total income of Rs.6,70,66,640/-.The said return was accompanied by a copy of the Petitioner’s audited accounts for the year ending 31st March, 2000.In the return, the Petitioner has stated by way of a note that it had earned dividend income of Rs.3,38,45,293/- which was fully exempt from tax under section 10(33) of the Act. Similarly, in the profit and loss account, the Petitioner had disclosed in Schedule ‘M’ that it had earned dividend income of Rs.3,38,45,293/-.
Thereafter, notices were issued under section 143(2) of the Act dated 27th August, 2002 and 12th November, 2002 whereby certain queries were raised by the Assessing Officer. In reply to the aforesaid notices, the Petitioner addressed a letter dated 22nd November, 2002 wherein details with reference to secured loans, IPO, share application money, dividend received, inventory etc. were forwarded. After the queries raised by Revenue were answered by the Petitioner, Revenue passed an assessment order under section 143(3) of the Act dated 31st March, 2003 by which the total income of the Petitioner was assessed at Rs.6,81,54,960/-.In determining the above income, Respondent No.1 noted that the Petitioner had borrowed money to invest in mutual funds and earned dividend there from. He took the view that interest on the said borrowings computed at Rs.3.49 lakhs had to be disallowed under section 14A. However, he specifically noted that the Petitioner had earned dividend income of Rs.3,38,45,293/- which was exempt from tax.
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