Case Law Details
PCIT Vs SIL Investments Ltd. (Delhi High Court)
Delhi High Court held that disallowance under section 80M of the Income Tax Act to the extent of divided distributed to the shareholders unsustainable in law. Accordingly, disallowance rightly deleted by CIT(A).
Facts- The assessed income factored in included two disallowances: i) disallowance of deduction claimed by the respondent/assessee under Section 80IA/80IB, amounting to Rs. 4,32,65,725/- on the ground that profits of two (2) eligible units were not adjusted against unabsorbed losses of the other (3) eligible units and brought forward losses of earlier years; and ii) disallowance under section 80M amounting to Rs. 3,97,34,475/-. The said disallowance was ordered as dividend received by the respondent/assessee had not been distributed to its shareholders.
Conclusion- In sum, there is no requirement under section 80IA(5) of the Act to adjust profits derived from the eligible units against the losses that stand absorbed against profits of the ‘other’ non-eligible businesses or losses that have already been adjusted against the profits of the eligible businesses in the years before the previous year in relation the first assessment year in which the deduction was claimed. Therefore, in this case, the respondent/assessee was not required to set off losses of other units against its profitable units.
The CIT(A) has returned the finding of fact, which was sustained by the Tribunal, that the respondent/assessee had placed the relevant material before the AO which showed that dividend to the extent of Rs. 3,97,34,475/- had been distributed by it to its shareholders. This is a finding of fact that remains undisturbed and, therefore, in our view, the deletion of disallowance ordered by the CIT(A) and the Tribunal under Section 80M was correct.
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Author Bio
80M is certainly right. When it was introduced I remember our we invested cadhflow surplus is US64 where Dividend was assured everyyear. We planned that by interim Dividend this is distributed and a final before filing return. How can the company sleep on this subject.