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TMI Blog2016 (7) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The CIT(A) erred on the facts and circumstances and legality of the case in deleting the addition of unclaimed dividend of ₹ 53,13,800/- ignoring the fact that the assessee ceases to exercise right over amount set aside for distribution of dividend and hence, cessation of liability, by not following the decision of Supreme Court in the case of CIT Vs. TVS Sundaram Iyangar and Sons Ltd. 222 ITR 344. 2. For these and such other grounds as may be urged at the time of hearing, the order of the Ld.CIT(A) may be vacated and that of the Assessing Office be restored. 3. The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon ble Tribunal. 3. Facts of the case, in brief, are that the assessee is a Cooperative society carrying on the banking business and also providing depository services like general insurance services, providing safe deposit lockers etc. It filed its return of income on 23-09-2011 declaring total income of ₹ 10,55,67,220/-. During the course of assessment proceedings the AO noticed from the details of general reserve fund account that apart from crediting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be carried to the Reserve Fund of the Bank as per the said rules. Accordingly, the bank has transferred the said sum of ₹ 53,13,800/- to the Reserve Fund A/c. It was argued that the shareholder had a right to claim his dividend by making an application on plain paper, his right to get dividend cannot be deprived merely because he has not collected his dividend. It was contended that the bank was only custodian of the money of members/shareholders and accordingly to safeguard their interest the assessee had transferred the unpaid amount to the Reserve Fund A/c. It was argued that the Co-op Bank has to keep record of members/shareholders who have not collected their dividend and most of the members who have not collected their dividend were those whose dividend amount were very small and did not have bank account. It was submitted that the assessee bank has distributed the dividend declared for F.Y. 2006-07 amounting to ₹ 1,21,19,127/- as under : F.Y. 07-08 Rs.56,78,215/- F.Y. 08-09 Rs.6,45,307/- F.Y. 09-10 Rs.3,83,038/- F.Y.10-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend declared by the bank in earlier years and adjusted the same in the reserve account. Needless to say, the dividend declared was application of income and not an expenditure claim above the line. In my opinion, as the appellant has not claimed expenditure when dividend was paid, the writ back of the unclaimed dividend cannot be taxed as income under the provisions of the Income Tax Act, just because the same was taken to the General Reserve account as per RBI norms and provisions of Co-op. Society s Act. This issue came up before ITAT, Mumbai in the case of Apex Urban Co-op. Bank of Maharashtra and Goa Ltd. (134 ITD) 118), wherein it is clearly held that when the assessee has not claimed expenditure when dividend was paid, the write back of the unclaimed dividend cannot be treated as income under the provisions of the Act, just because the same was credited to the P L Account. In such a situation, unclaimed dividend transferred to general reserve during the year as per RBI norms and provisions of Co-op. Society s Act cannot be brought to tax either under sec.41(1) or under sec 28 of the I.T. Act. In this context, reference can also be made to the decision of ITAT, Pune in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.02.2015, and Tribunal had allowed the claim of the assessee. We find that similar issue/addition made on account of unpaid dividend arose before the Tribunal and it was held as under :- 5. We have carefully considered the rival stands and find no merit in the stand of the Revenue. Quite clearly, the dividend is paid by the bank out of tax paid profits. Dividends are declared out of such profits and is to be understood as an apportionment of income. If for any reason, the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. Therefore, there is no justification for taxing unclaimed dividend as a cessation of liability. No doubt, cessation of liability may be a taxable event but only in situations where such liability has entered the computation of taxable income on an earlier occasion. Quite clearly, the declaration of dividend does not enter the computation of taxable income as the dividend is declared out of the profits remaining after taxation. 6. In so far as, the reliance placed by the CIT(A) on the judgement of the Hon ble Supreme Court in the case of TVS Sundaram Iyengar and Sons Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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