2023 (3) TMI 965 - AT - Income Tax

Refund of excess dividend distribution tax - HELD THAT - As assessee is entitled to pay dividend distribution tax on the dividends declared by it after reducing the dividends received from its subsidiary company during the financial year, provided such subsidiary company had duly remitted the dividend distribution tax on the dividends declared by it. In the instant case, it is not in dispute that the wholly owned subsidiary company had duly remitted the dividend distribution tax on the interim dividend declared by it to the assessee company. Hence, the action of the lower authorities in the instant case is clearly contrary to the provisions of Section 115O(1A) - we hold that assessee is entitled as per the Act to seek refund in respect of excess payment of dividend distribution tax. Interest u/s.244A - computational issue - HELD THAT - As we have directed the ld. AO to grant refund of excess payment of dividend distribution tax the same would partake the character of any amount due u/s.244A of the Act, hence assessee would be entitled for interest on said amount also u/s.244A. This being a computational issue, we direct the ld. AO to relook the workings and grant interest u/s. 244A of the Act strictly in accordance with law. Accordingly, the ground No.2 raised by the assessee is allowed for statistical purposes. Interest levied u/s.234D - HELD THAT - In response to the return filed by the assessee, the return was processed u/s.143(1) of the Act determining refund due to the assessee including interest u/s 244A of the Act. Later, the said refund was converted into demand in the scrutiny assessment framed u/s.143(3) of the Act wherein interest u/s.234D was charged by the AO on the refund including interest u/s.244A of the Act determined u/s. 143(1) of the Act, instead of calculating interest u/s.234D of the Act only on the refund of tax portion determined u/s.143(1) - This would be correct understanding of the provisions of Section 234D r.w.s. 244A of the Act. We direct the ld. AO to charge interest u/s.234D of the Act in view of the aforesaid provisions and recompute the same in accordance with law. Interest u/s.220(2) - This is purely consequential issue and a computational issue. Hence we direct the ld. AO to recompute the same, if any, chargeable, in accordance with law.

Summary

Issues involved:
1. Refund of excess dividend distribution tax.
2. Entitlement to interest under section 244A of the Act.
3. Challenge against interest levied under section 234D of the Act.
4. Challenge against interest levied under section 220(2) of the Act.

Issue 1: Refund of excess dividend distribution tax:
The appeal pertains to the refund of excess dividend distribution tax amounting to Rs.81,11,250. The assessee, engaged in telecommunication services, had paid dividend distribution tax based on the declaration of dividends. However, the subsidiary company's dividend received later affected the tax liability. The subsidiary had already remitted the tax on the interim dividend, reducing the assessee's tax liability. The lower authorities failed to consider this, leading to the excess payment. The Tribunal held that the assessee is entitled to seek a refund of the excess tax amount as per Section 115O(1A) of the Act, allowing the ground raised by the assessee.

Issue 2: Entitlement to interest under section 244A of the Act:
The second ground raised by the assessee was regarding interest under section 244A of the Act. As the Tribunal directed a refund of the excess dividend distribution tax, it deemed this amount as "any amount due" under section 244A. Therefore, the assessee was entitled to interest on this amount. The Tribunal instructed the Assessing Officer to reevaluate and grant interest in accordance with the law, allowing the ground raised by the assessee for statistical purposes.

Issue 3: Challenge against interest levied under section 234D of the Act:
The third ground challenged the interest levied under section 234D of the Act. The dispute arose from the conversion of a processed refund into a demand during scrutiny assessment, leading to incorrect calculation of interest under section 234D. The Tribunal directed the Assessing Officer to recalculate the interest under section 234D in alignment with the provisions of the Act.

Issue 4: Challenge against interest levied under section 220(2) of the Act:
The final ground raised was against the interest levied under section 220(2) of the Act. This issue was considered consequential and computational. The Tribunal directed the Assessing Officer to recompute any chargeable interest in accordance with the law, with the assessee required to provide necessary workings. The ground raised by the assessee was allowed for statistical purposes.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, addressing the various issues related to refund of excess dividend distribution tax, entitlement to interest under section 244A, challenges against interest levied under sections 234D and 220(2) of the Act. The judgment provided detailed analysis and interpretation of relevant provisions to resolve the disputes raised by the assessee.