Setting Off of business loss against Dividend Received from Foreign Subsidiary was allowable

Tata Industries Limited Bombay House Vs DCIT (ITAT Mumbai)

Conclusion: Assessee was entitled to set-off brought forward business loss and unabsorbed depreciation against the dividend income  as the non-obstante clause provided in Section 115BBD(1) covered both current year loss as well as brought forward business loss, therefore,  Tata Industries was eligible for set off of current year business loss against the foreign dividend income received by it.

Held: Assessee received dividend from its foreign subsidiary. It had set off its business loss against the said dividend income. Further, against the said foreign dividend income, assessee claimed deduction under Section 80G. AO passed an order taxing the foreign dividend income on gross basis under Section 115BBD of the Income Tax Act, 1961, without allowing any deduction under Section 80G or set off for the business loss. It was held that dividend income received by the assessee formed a part of its business and thus, it was taxable under the head ‘income from business’, although the same was assessable under the head ‘income from other sources’ in view of Section 56(2)(i) of the Income Tax Act. Accordingly, the ITAT had held that assessee was entitled to set-off brought forward business loss and unabsorbed depreciation against the dividend income. Holdingthat the non-obstante clause provided in Section 115BBD(1) covered both current year loss as well as brought forward business loss, the ITAT held that assessee Tata Industries was eligible for set off of current year business loss against the foreign dividend income received by it. ITAT added that assessee was eligible for deduction under Section 80G from the Gross Total Income, for computation of total taxable income under Section 115BBD.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These cross appeals in ITA No.217/Mum/2020 & 421/Mum/2020 for A.Y.2016-17 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-6, Mumbai in appeal No.CIT(A)-6/IT-18/2018-19 dated 25/11/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/12/2018 by the ld. Dy. Commissioner of Income Tax-2(3)(1), Mumbai (hereinafter referred to as ld. AO).

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