Case Law Details

Case Name : Dy. CIT Vs KRA Holding & Trading Pvt Ltd (ITAT Pune)
Appeal Number : ITA No. 1058/PN/09
Date of Judgement/Order : 19/01/2011
Related Assessment Year : 2003- 04
Courts : All ITAT (4443) ITAT Pune (129)
Dy. CIT, Pune Vs KRA Holding & Trading Pvt Ltd (ITAT Pune)-  The view of the assessing officer was consistent with the decision of the Tribunal in the case of Castle Investment (supra). The judgement in Castle Investment insofar as is material held that Section 1150(5) does not in any way restrict the allow ability of the claim under section 80M. Under Section 80M what is claimed as a deduction is the dividend received by the company. Dividends declared, distributed or paid are not claimed as deduction under Section 80M though they constitute an outflow of funds from the company. Section 80M imposes a monetary restriction on the amount that may be claimed by way of a deduction by providing that the amount of claim cannot exceed the dividend distributed by the assessee by the due date.
Though the judgement of the Tribunal in Castle Investment was dated 18thJuly, 2007 (the order of assessment being dated 28thFebruary, 2006) it is necessary to note that the decision followed the earlier decision of the Tribunal dated 10th May, 2002 in the case of Silvassa Industries and the decision dated 7th October, 2004 in M/s. Kaikobad Byramjee (supra). The decision of the Tribunal in Castle Investment(supra) was affirmed by a Division Bench of this Court on 22nd July, 2008 in ITA 1557 of 2007.
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH ‘A’, PUNE
ITA No. 1058/PN/09 (Asstt. Year 2003-04)
Dy. CIT, Pune Vs KRA Holding & Trading Pvt Ltd
ORDER
Per D. Karunakara Rao AM

This is an appeal filed by the Revenue against the order of the CIT(A)-I, Pune dated 12/06/2009 for the assessment year 2003-04.

2. Grounds relate to the claim of deduction u/s 80M of the Act amounting to Rs. 2,18,94,555/- in respect of the corporate dividend received by the assessee during the previous year ended 31-03-2003. Relevant facts of the cased are that the assessee is engaged in investment of securities and is an investment company. The assessee received corporate dividend Rs. 2,20,34,535/- during the previous year 2002-03. The appellant declared dividend on 9th August, 2003. Rs. 2,24,72,184/- and paid dividend tax thereon Rs. 28,79,249/- on 20th Aug., 2003. Accordingly deduction has been claimed and allowed u/s. 80M in respect of corporate div. recd. Rs. 2,18,94,555/-. The learned CIT passed order u/s. 263 holding that the A.O has allowed deduction claimed u/s. 80M without considering the provisions of Section 115 0 and sub section 15 thereof. The CIT held that the assessee order was erroneous in so far as it as prejudicial to the revenue. The learned A.0 has passed order dt. 11th Dec. 2008 u/s. 143(3) r.w.s. 263 denying deduction claimed u/s. 80M. Deduction is not claimed in respect of amount of dividend charged to tax or tax paid thereon u/s. 115 O. Deduction is claimed by the assessee in respect of corporate dividend received restricted to the dividend distributed. As per the Counsel for the assessee, the issue is fully covered in favor of the assessee by the decision of the Honorable ITAT Mumbai in the case of Castle Investment and Industries Private Limited ITA no. 1713/Mum/2006 A.Y. 2003-04 and also decision of the Honorable Bombay High Court in the case of Godrej Agrovet Ltd. on identical issue (2010-TIOL-172-HC­MUM-IT) and wherein the Hon’ble High Court has observed on Page 4 Para 10 that the decision of ITAT in the case of Castle Investments and Industries Private Limited has been affirmed by the Division Bench of Hon’ble Bombay High Court in favor of the assessee allowing deduction u/s. 80M .

3. From the order of the revenue it is evident that there is reference to the order of the Tribunal in the case of Castle Investments and Industries Pvt. Ltd. ITA No. 1713/Mum/2006 and para 3.3 of the impugned order is relevant and the same reads as under:-

‘3.3 I have carefully considered the submission of the appellant and perused material on record. The issue is squarely covered by the ratio decendi of Hon ‘ble ITAT, Mumbai’s decision in case of Castle Investment & Inds. Pvt. Ltd. quoted supra. The deduction u/s. 80M of the Income Tax Act, 1961 is in respect of any income received by way of dividend from another domestic company included in the gross total income of the recipient company but such deduction has to be restricted to the dividend distributed by the recipient company on or before the due date of filing of the return. In other words, in case the gross total income ofthe domestic company includes any sum on account of dividend received from another domestic company, then statute provides a deduction which shall be limited to the amount distributed by way of dividend by the recipient company. In view of this, respectfully following the decision of the ITAT Mumbai quoted supra, it is held that the appellant is entitled to claim deduction u/s. 80M of the Income Tax Act , 1961 against the dividend income received during the assessment year under appeal. Appellant gets consequential relief.”

4. This decision of the Mumbai Bench in the case of Castle Investments and Industries Pvt. Ltd (supra) is found approved by the Jurisdictional High Court in the case of Godrej Agrovet Ltd. 2010-TIOL-172-HC-MUM-IT vide para 10 and same reads as under:-

“10. On these facts as they stand, it is impossible to contend that the assessee was not entitled to a deduction under Section 80M. Significantly, the view of the assessing officer was consistent with the decision of the Tribunal in the case of Castle Investment (supra). The judgement in Castle Investment insofar as is material held that Section 1150(5) does not in any way restrict the allow ability of the claim under section 80M. Under Section 80M what is claimed as a deduction is the dividend received by the company. Dividends declared, distributed or paid are not claimed as deduction under Section 80M though they constitute an outflow of funds from the company. Section 80M imposes a monetary restriction on the amount that may be claimed by way of a deduction by providing that the amount of claim cannot exceed the dividend distributed by the assessee by the due date. Though the judgement of theTribunal in Castle Investment was dated 18thJuly, 2007 (the order of assessment being dated 28thFebruary, 2006) it is necessary to note that the decision followed the earlier decision of the Tribunal dated 10th May, 2002 in the case of Silvassa Industries and the decision dated 7th October, 2004 in M/s. Kaikobad Byramjee (supra). The decision of the Tribunal in Castle Investment(supra) was affirmed by a Division Bench of this Court on 22nd July, 2008 in ITA1557 of 2007.”

5. Thus, it is binding that the decision of the Tribunal in Castle Investment (supra) was affirmed by the jurisdictional High Court as discussed above. Therefore, we are of the opinion, the order of the CIT(A) does not call for any interference. Accordingly, the grounds raised in this appeal by the revenue are dismissed.

6. In the result appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 19th day of January, 2011.

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