2006 (5) TMI 67 - HC - Income Tax

Electricity charges for electricity consumed are a known expenditure to the assessee and the assessee, on the basis of average, could make a provision for this expenditure for every year of assessment even if no bill is received in a particular year of assessment. - assessee has failed to claim this expenditure in the earlier assessment year, and if the assessee, has failed to discharge this duty of providing for a known expenditure, the assessee cannot claim the same expenditure in the subsequent assessment years. - Section 80M of the Income-tax Act requires that the dividend should have been distributed before the due date for filing of returns under section 139(1) of the Act. If this requirement of law is not complied with and a mere resolution is passed declaring the dividend that would not satisfy the requirement under section 80M for claiming deduction. No deeming provision can be introduced into the section and the section cannot be interpreted to say that if dividend has been declared or a resolution has been passed, deduction under section 80M should be given.

Summary

Issues:
1. Disallowance of deduction under section 80M for electricity charges and inter-corporate dividends.
2. Interpretation of section 80M in relation to the distribution of dividends.
3. Disallowance of electricity charges for the period prior to the assessment year.

Analysis:
1. The appellant claimed deductions for electricity charges and inter-corporate dividends under section 80M for the assessment year 1995-96. The Assessing Officer disallowed the deductions, which was upheld by the Commissioner of Income-tax and the Income-tax Appellate Tribunal. The Tribunal also remanded the matter back to the Assessing Officer for interest charges under section 234A of the Income-tax Act.

2. The appellant contended that a resolution approving the payment of proposed dividends was passed before the due date, entitling them to the deduction under section 80M. However, the court held that the deduction is for dividends actually distributed to shareholders before the due date, not just declared. Therefore, the resolution alone does not satisfy the requirement for claiming the deduction under section 80M.

3. The court also addressed the disallowance of electricity charges amounting to Rs. 2,10,845 for the period prior to April 1, 1994. The appellant argued that since the bill was received in a later year, the entire amount should be allowed as a deduction. However, the court ruled that known expenditures should be provisioned for in advance, and failure to do so in previous assessments does not warrant claiming the same expenditure in subsequent years. Consequently, the appeal was dismissed as no substantial question of law arose from the Tribunal's order.