TML Benefit Trust Vs Addl/Joint/Deputy/ACIT (NFAC) (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) considered two appeals involving the tax treatment of ₹86,40,00,000 dividend income received by TML Benefit Trust from Tech Mahindra Limited for Assessment Year 2018–19 and the legality of an adjustment made while processing the return under Section 143(1) of the Income-tax Act, 1961.
TML Benefit Trust was formulated on 05.12.2012 to hold equity shares of Tech Mahindra Limited issued to the Trust pursuant to a scheme of amalgamation and arrangement sanctioned by the Bombay High Court. Tech Mahindra Limited was the settlor and sole beneficiary of the Trust.
For A.Y. 2018–19, the Trust filed its return electronically on 10.07.2018 declaring a loss of ₹1,40,700. During the year, it received ₹86.40 crore as dividend from Tech Mahindra Limited, a domestic company. The assessee disclosed the dividend as exempt income under Section 10(34), stating that the dividend was subject to Dividend Distribution Tax under Section 115-O in the hands of the domestic company.
While processing the return under Section 143(1), CPC treated the dividend exemption claim as an “incorrect claim” under Section 143(1)(a)(ii). The adjustment was primarily based on an alleged inconsistency in the reporting of exempt income in the relevant schedules of the return. Consequently, the entire ₹86.40 crore dividend was adjusted to income.
