Case Law Details
Manmohan Textiles Limited Vs National Faceless Appeal Centre (ITAT Mumbai)
Provisions of Section 10(34) of the Act which stood amended by the Finance Act, 2020 and is applicable from A.Y.2021-22 onwards. For the sake of convenience, the amended provisions of Section 10(34) of the Act are reproduced hereunder:-
“[(34) any income by way of dividends referred to in section 115-O:
[Provided that nothing in this clause shall apply to any income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA:]
[Provided further that nothing contained in this clause shall apply to any income by way of dividend received on or after the 1st day of April, 2020 other than the dividend on which tax under section 115-O and section 115BBDA, wherever applicable, has been paid]”
From the perusal of the aforesaid provisions, we find that the second proviso is incorporated only from 01/04/2021 i.e. commencing from A.Y.2021-22 onwards which categorically states that dividends received on or after 01/04/2020 alone would be subjected to tax. In the instant case, admittedly dividend has been received by the assessee during the F.Y.2019-20 relevant to A.Y.2020-21. Hence, there is no case for taxing the said dividend income during the year under consideration. Accordingly, we direct the ld. AO to treat the dividend income as exempt u/s.10(34) of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No.1884/Mum/2022 for A.Y.2020-21 arises out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal No.NFAC/2019-20/10054672 dated 13/06/2022 (ld. CIT(A) in short) against the rectification order passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 10/01/2022 by the ld. ADIT, CPC, Bangalore (hereinafter referred to as ld. AO).
2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in treating the dividend income as ‘not exempt’ u/s.10(34) of the Act for the year under consideration. The interconnected issue involved therein is whether the ld. CIT(A) was justified in not allowing the loss claimed by the assessee in the year under consideration.
3. We have heard rival submissions and perused the materials available on record. We find that assessee company electronically filed its return of income for the A.Y.2020-21 on 19/12/2020 admitting loss to be carried forward at Rs.1,40,712/-. The return of income was processed u/s.143(1) of the Act on 12/10/2021 determining the total income of the assessee at Rs.1,05,850/-. The assessee company claimed income from dividend of Rs.2,46,559/- as exempt u/s.10(34) of the Act in the return of income. But while processing the return u/s.143(1) of the Act by the CPC, the dividend income was treated as taxable thereby converting the loss into income of Rs.1,05,850/-. Aggrieved with the said intimation, the assessee filed a rectification application u/s.154 of the Act. However, the CPC upheld its earlier action and dismissed the rectification application. Aggrieved by that the assessee filed an appeal before the ld. CIT(A). The CIT(A) upheld the action of the ld. CPC in treating the dividend income of Rs.2,46,559/- as taxable for the year under consideration. The ld. CIT(A) also observed that dividend income is not an exempt income and the same has become taxable and accordingly, the action of the CPC in taxing the same is in order.
4. We have gone through the provisions of Section 10(34) of the Act which stood amended by the Finance Act, 2020 and is applicable from A.Y.2021-22 onwards. For the sake of convenience, the amended provisions of Section 10(34) of the Act are reproduced hereunder:-
“[(34) any income by way of dividends referred to in section 115-O:
[Provided that nothing in this clause shall apply to any income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA:]
[Provided further that nothing contained in this clause shall apply to any income by way of dividend received on or after the 1st day of April, 2020 other than the dividend on which tax under section 115-O and section 115BBDA, wherever applicable, has been paid]”
5. From the perusal of the aforesaid provisions, we find that the second proviso is incorporated only from 01/04/2021 i.e. commencing from A.Y.2021-22 onwards which categorically states that dividends received on or after 01/04/2020 alone would be subjected to tax. In the instant case, admittedly dividend has been received by the assessee during the F.Y.2019-20 relevant to A.Y.2020-21. Hence, there is no case for taxing the said dividend income during the year under consideration. Accordingly, we direct the ld. AO to treat the dividend income as exempt u/s.10(34) of the Act.
6. In view of the aforesaid decision, the assessee’s claim of loss of Rs.1,40,712/- for the year would be eligible to carry forward to subsequent years. Accordingly, the grounds raised by the assessee are allowed.
7. In the result, appeal of the assessee is allowed.
Order pronounced in open Court on 06/09/2022
