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TMI Blog2025 (4) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 18.05.2009 passed by the Tribunal in I.T.A. No. 997/Mds/2008 reads as under: - "2.6. After having heard both the sides and going through the written submission and case law cited, we find that interim dividend of Rs. 10,26,100/- declared by the company was paid through cheque dated 23.04.2002 unconditionally to the assessee and moreover there is no mention about having considered the inclusion of dividend income in the assessment order originally passed as is apparent from the language used in the assessment order. So it cannot be said that there is any opinion formed by the Assessing Officer at the time of passing of original assessment order and that apart, as rightly argued by the Id. DR that when reopening is within four years, there is no requirement of looking into this aspect. In this case, reasons are set out in the letter of the Assessing Officer dated 05.02.2007 so reopening is within four year as per the Hon'ble Jurisdictional High Court in the case of Apollo Hospital Enterprises Ltd., 300 ITR 167 [which overruled single member decision as reported in 287 ITR 25] has held as under: "Reassessment - notice - validity of notice - amalgamation of hospitals in 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad anything into a statutory provision which is plain and unambiguous. A statue is the edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself." 4.1 As the assessee has received the interim dividend vide cheque No.820607 dated 23.04.2002 from the concerned company so, in our considered opinion, the same could be considered and taxed in the year ending 31.03.2003 relevant to the assessment year 2003-04 only. Since such income on account of receipt of interim dividend has escaped assessment, so the Assessing Officer is legally correct to reopen the assessment by initiating reassessment proceedings and then taxing the interim dividend income in this year, in view of the facts, circumstances and precedents relied upon and the ratio of such decisions as discussed and the Id. CIT(A)'s action to hold reassessment to be not legally valid as weel as holding that interim dividend income of Rs. 10,26,100/- to be not taxable in the year under consideration being not legally and factually corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was deleted vide Finance Act, 2002. 8. For the Assessment Year 2003-2004, the Appellant/Assessee had filed Return of Income on 03.11.2003 admitting a total income of Rs. 8,43,977/- only. In the aforesaid return of income, the Appellant/Assessee did not declare the aforesaid interim dividend of Rs. 10,26,100/- received by way of cheque on 23.04.2002 from the aforesaid Company. 9. The said Return of Income filed for the Assessment Year 2003-2004 was also processed under Section 143(1) of the Act on 15.03.2004. Thereafter, the assessment was completed and an Assessment Order was passed under Section 143(3) of the Act on 30.12.2005 for the Assessment Year 2003-2004 after the case was selected for scrutiny and after issuance of a Notice under Section 143(2) of the Act on 16.11.2004. 10. Thereafter, Notice was issued under Section 148 of the Act on 28.06.2005 to the Appellant/Assessee for the Assessment Year 2003-2004 stating that though the aforesaid Company had declared interim dividend on 14.03.2002, since the interim dividend was actually received by the Appellant/Assessee on 23.04.2002 during the Financial Year 2002-2003, it was taxable in the hands of the Appellant/Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject matter of scrutiny in the Assessment Order dated 30.12.2005 passed under Section 143(3) of the Act for the Assessment Year 2003-2004. Therefore, the Assessment Order dated 28.06.2007 passed under Section 143(3) r/w Section 147 of the Act was wrongly affirmed by the Tribunal. 18. It is submitted by the learned counsel for the Appellant that change of opinion as a reason to reopen the assessment without proper evidence of income escaping assessment is impermissible in terms of the decision of the Hon'ble Supreme Court in CIT v. Kelvinator of India reported in (2010) 320 ITR 561, wherein it was held by the Hon'ble Supreme Court that the Assessing Officer has power to reopen the assessment of income of the Assessee only if there is tangible material to come to a conclusion that income has escaped from assessment. 19. That apart, it is submitted that even on merits, the issue is now covered in favour of the Appellant/Assessee by the decision of the Hon'ble Supreme Court in Rampur Distillery and Chemicals Company Ltd., v. Commissioner of Income Tax reported in (1991) 187 ITR 561 (SC), wherein the Hon'ble Supreme Court that the dividend would be said to have paid whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to its shareholders has to be included in the total income of the shareholders of the Company. 25. As per Section 8(b) of the Act, even an interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the Company to the members/shareholders who are entitled to it. 26. For the sake of clarity, Section 8 of the Act as it stood during the period in dispute is extracted hereunder; "8. Dividend Income. For the purposes of inclusion in the total income of an assessee - 1. any dividend declared by a company or distributed or paid by it within the meaning of sub-clause (a) or sub-clause (b) or subclause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall be deemed to be the income of previous year in which it is so declared, distributed or paid, as the case may be; 2. any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it." 27. The undisputed facts of the case is that in the Return of Income filed on 03.11.2003 for the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1999 w.e.f. 01.04.2000 Section 115(o) as amended by the Finance Act, 1997 w.e.f. 01.06.1997 (33) any income by way of - (i) dividends referred to in section 115-O or (ii) income received in respect of units from the Unit Trust of India established under the Unit Treat of India Act, 1963 (52 of 1963); or iii) income received in respect of the units of a mutual fund specified under clause (23D):] [Provided that this clause shall not apply to any income arising from transfer of units of the Unit Trust of India or of a mutual fund, as the case may be.] (1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of June, 1997, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of [ten] per cent. (2) Notwithstanding that no income-tax is payable by a domestic company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany by way of dividends (whether interim or otherwise) on or after the 1st day of June, 1997 [but on or before the 31st ?ay of March, 2002], whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of [ten] per cent. (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on distributed profits under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central Government within fourteen days from the date of- (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. (4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This view was also fortified by the Hon'ble Supreme Court in the case of Rampur Distillery and Chemicals Co.Ltd, (1991) 187 ITR 561 (SC). Relevant portion of the judgement of the Hon'ble Supreme Court in the aforesaid case is extracted hereunder; "5. From these facts the question is whether the dividend has been irrevocably placed for distribution to the shareholders of the sugar company. Admittedly cement company was one of the shareholders whose names appeared on the register of the sugar company as on that date and the appellant is entitled to receive the dividend of the amount in dispute towards its share from cement company. 6. Sub-section (2) of Section 16 of the Indian Income Tax Act, 1922 reads thus: "For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him ...." 7. Section 16(2) of the Indian Income Tax Act, 1922 prescribes spe-cial rules relating to the determination of the previous year in which the dividend is liable to be included in the total income of the assessee. It is provided there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of the revenue. It is thus settled law that if the dividend declared by a company was unconditionally available to the assessee to be paid, it is taxable only in the year in which it is paid, credited or distributed or is deemed to be paid, credited or distributed. 9. This view was reiterated in Padmavati R. Saraiya v. CIT and Punjab Distilling Industries Ltd. v. CIT and CIT v. Bikaner Trading Co. Ltd. The settled law, therefore, is that generally the dividend would be said to have been paid within the meaning of Section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the members entitled thereto. The legislatures had not made the dividend income taxable in the year in which it became due by express words of the statute. It was taxable only in the year in which it was paid, credited or distributed or was deemed to be paid, credited or distributed. From the facts it is clear that the sugar company had irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as a dividend on January 16, 1952. It has also authorised the trustees to distribute to the shareholders b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or distributed to its shareholders of the sugar company, and the dividend income of the assessee fell to be taxed in the assessment year 1952-53 and not in the assessment year 1957-58. The reference is answered in favour of the assessee and against the revenue. The appeal is accordingly allowed but in the circumstances parties are directed to bear their own costs. 44. In this case, the Appellant/Assessee has maintained a mercantile method of accounting as is evident from a cursory reading of Sl.No.8 of the table Assessment Order dated 30.12.2005 for the Assessment Year 2003-2004. Thus, the interim dividend that was declared on 14.03.2002 by the Company, had already accrued to the Appellant/Assessee on 14.03.2002 though the payment was actually made on 23.04.2002. The earlier Assessment Order dated 15.03.2005 for the Assessment Year 2003-2004 passed under Section 143(1) of the Act was reiterated on 30.12.2005 when the Assessment Order was passed under Section 143(3) of the Act for the Assessment Year 2003-2004. 45. It is clear that the income from the interim dividend is deemed to have accrued to the Appellant/Assessee during the Financial Year 2001-2002, relevant to the Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clarificatory notification would take effect retrospectively. Such a notification merely clarifies the position and makes explicit what was implicit. Clarificatory notifications have been issued to end the dispute between the parties. 16. In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory premises, it could not be said that while issuing notification No.46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory notification No.95/94 on April 25, 1994. It was not a new notification granting exemption for the first time in respect of parts of power driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit. 47. Merely because the Appellant/Assessee has rec ..... 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