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2017 (1) TMI 397 - AT - Income TaxAddition on account of dividend income - AO made the addition on the basis of letter dated 12.01.1999 allegedly received by auditors from Mazda Industries and leasing ltd. as observed that Mazda Industries and Leasing Ltd declared dividend for the year ending 31 March 1992 - Held that - The said dividend income was received in the subsequent year. We have noticed that the letter written by Special Auditor was not confronted to the assessee. The date of declaration of dividend by M/s Mazda Industries and Leasing Ltd was also not brought on record. We noticed that Section 8 provides a legal fiction for taxing the dividend on the date of declaration of dividend. Since, facts relating to the issue were not brought on record. We are of the view that the issue require fresh examination. Accordingly, we restore this issue to the file of AO for his fresh consideration. The assessee should provide with all the material on which the AO place reliance. Thus this Ground of appeal is allowed for statistical purpose.
Issues:
1. Addition of dividend income in the assessment year. 2. Disallowance of deduction on account of interest expenses. 3. Charging interest under sections 234A, 234B, 234C, and 220(2). Issue 1: Addition of Dividend Income: The appeal was against the order of the Commissioner of Income Tax for the assessment year 1993-94. The appellant, a company involved in hiring motorcars and trading in shares, was directed to get its accounts audited by Chartered Accountants by a Special Court order. The assessment for the year was reopened under section 147 based on information from Special Auditors. The Assessing Officer (AO) made additions, including on dividend income, which the appellant contested. The appellant argued that the dividend income was received in a subsequent year and was duly accounted for in that year. The AO and CIT(A) held that under the Mercantile System of Accounting, the dividend should be taxed in the year of declaration. However, the tribunal found the facts peculiar as the dividend was attached due to legal proceedings, and the exact timing of declaration and crediting of income was not established. Citing legal precedents, the tribunal allowed the appeal, directing a fresh examination by the AO. Issue 2: Disallowance of Deduction on Interest Expenses: The appellant contested the disallowance of deduction on interest expenses, citing favorable decisions in previous years. The tribunal, following precedents in the appellant's favor, directed the AO to reconsider the issue in accordance with the law. Thus, the ground of appeal was allowed for statistical purposes. Issue 3: Charging Interest under Sections 234A, 234B, 234C, and 220(2): These grounds were considered consequential to the decisions on the first and second issues. As the tribunal had restored the related issues to the AO for fresh consideration, it directed the AO to pass an order in line with the Circular No. 334 dated 3rd April 1982. Therefore, these grounds of appeal were also allowed for statistical purposes. In conclusion, the tribunal allowed the appeal of the assessee for statistical purposes, directing a fresh examination of the dividend income issue, reconsideration of the deduction on interest expenses, and appropriate orders regarding charging interest under specified sections.
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