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2017 (10) TMI 634 - AT - Income TaxChargeability to tax u/s 115O - Chargeability of additional income tax in respect of the amount declared distributed or paid by a domestic company by way of dividend on or after 01.04.2003 - Held that - It is noted that the facts for the A.Y. 2011-12 are almost identical as A.Y. 2010-11 and therefore in view of the finding on this issue for the A.Y. 2010-11 on principle this issue is decided in favour of the assessee because the instance of chargeability of tax arises on 30.09.2011 when the dividend was declared which would fall in the A.Y. 2012-13 and not in the A.Y. 2011-12. It is pertinent to note that there are two instances of chargeability of DDT and the dispute is only regarding the assessment year in which the dividend so declared by the assessee is chargeable to tax u/s 115O of the Act. Therefore, as far as the principle demand on account of DDT is concerned there is no dispute about the total amount of principle demand and the only dispute which may arise in any case is regarding the interest on the said demand. The dividend declared on 30.08.2011 is chargeable to DDT only during the A.Y. 2012-13 but AO has not raised any demand for the said assessment as it was assessed for the A.Y. 2011-12. Therefore, even if the tax liability is determined in the A.Y. 2011-12 it is in fact the liability for the A.Y. 2012-13 Accordingly, this issue set aside to the record of the AO to verify the payment made by the assessee on 10.10.2011 on account of DDT in respect of the dividend amount of ₹ 1,95,00,000/- declared on 30.09.2011. If the said amount is till available for credit in the account of the assessee and has not been adjusted against any other tax liability then the Assessing Officer may consider the said amount against the taxability on account of DDT which is chargeable for the A.Y. 2012-13. Assessee of the appeals are allowed.
Issues Involved:
1. Whether the CIT(A) erred in rejecting the grounds of appeal without providing cogent reasons. 2. Whether the CIT(A) erred in confirming the AO's rejection of the application under Section 154 of the Income Tax Act, 1961, when the errors were apparent on record. 3. Whether the CIT(A) erred in confirming the AO's action regarding the non-acceptance of rectification that no dividend was declared or paid for the Assessment Year 2010-11. 4. Whether the CIT(A) erred in confirming the AO's action in not allowing credit for the Dividend Distribution Tax (DDT) paid due to errors in the payment challan. Detailed Analysis: Issue 1: Rejection of Grounds of Appeal Without Cogent Reasons The assessee contended that the CIT(A) rejected the grounds of appeal without providing cogent reasons, making the action illegal, unjustified, arbitrary, and against the facts of the case. This issue was raised for both Assessment Years 2010-11 and 2011-12. The Tribunal found that the CIT(A) did not provide adequate reasoning for the rejection, which was considered a procedural lapse. Issue 2: Rejection of Application Under Section 154 The assessee filed an application under Section 154 of the Income Tax Act, 1961, claiming that no dividend was paid in the previous year relevant to the Assessment Year 2010-11. The AO rejected this application, leading to an appeal before the CIT(A), which upheld the AO's decision. The Tribunal noted that the assessee had mistakenly shown the dividend in the return of income for the A.Y. 2010-11, which was actually declared and paid in the subsequent year. The Tribunal emphasized that the DDT is chargeable only in the year when the dividend is declared, distributed, or paid, as per Section 115 O and Section 8 of the I.T. Act. Therefore, the Tribunal found that the AO and CIT(A) erred in rejecting the application under Section 154. Issue 3: Non-Acceptance of Rectification Regarding Dividend Declaration The assessee argued that the dividend was proposed in a board meeting on 20.08.2010 and declared in the AGM on 29.09.2010, falling in the A.Y. 2011-12. The AO and CIT(A) did not accept this explanation, leading to the Tribunal's review. The Tribunal found that the declaration of dividend on 29.09.2010 and its payment on 01.10.2010 meant that the liability for DDT arose in the A.Y. 2011-12, not 2010-11. The Tribunal cited relevant case laws and accounting standards to support this conclusion and set aside the orders of the lower authorities. Issue 4: Credit for DDT Paid Due to Errors in Payment Challan For A.Y. 2011-12, the assessee faced issues with the AO not allowing credit for DDT paid due to errors in the payment challan, which was wrongly paid through TAN instead of PAN and was deposited for A.Y. 2010-11 instead of 2011-12. The Tribunal noted that the dividend declared on 30.09.2011 should fall in A.Y. 2012-13. The Tribunal directed the AO to verify the payment made by the assessee on 10.10.2011 and consider it against the tax liability for A.Y. 2012-13 if the amount was not adjusted against any other tax liability. Conclusion: The Tribunal allowed both appeals by the assessee, setting aside the orders of the lower authorities and directing appropriate rectifications and verifications to ensure the correct assessment of DDT liabilities in the relevant assessment years. The Tribunal emphasized the importance of charging DDT in the year when the dividend is declared, distributed, or paid, as per the legal provisions.
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