Allahabad H.C : The assessing officer to allow the deduction under sec. 80M on the dividend income of Rs. 62,10,000/- on units of UTI which was not originally claimed in the return of income but was claimed subsequently through application under sec.154 for the first time after the completion of the assessment

High Court Of Allahabad

CIT (Central), Kanpur vs. Sahara India Savings & Investment Corpn. Ltd.

Assessment Year : 1990-91

Section : 80M, 154

Sibghat Ullah Khan And Dr. Satish Chandra, JJ.

IT Appeal No. 53 Of 2004

July 31, 2013

ORDER

Dr. Satish Chandra, J. – Present appeal has been filed by the department under Section 260 A of the Income Tax Act, against the judgment and order dated 15.04.2004 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A.No.1291/Alld/1995, for the assessment year 1990-91.

2. On 28.09.2004, a coordinate Bench had admitted the appeal on the following substantial questions of law:-

(a) Whether the Income Tax Appellate Tribunal has erred in law in directing the assessing officer to allow the deduction under sec. 80M on the dividend income of Rs. 62,10,000/- on units of UTI which was not originally claimed in the return of income but was claimed subsequently through application under sec.154 for the first time after the completion of the assessment.

(b) Whether the Income Tax Appellate Tribunal has erred in law in directing to allow deduction under sec.80M without considering the provisions of Section 80A(2) of the I.T. Act, 1961 which provide that the maximum limit of deduction under the Chapter VI-A shall not, in any case, exceed the gross total income.

3. The brief facts of the case are that the assessee company has claimed the deduction under Section 80M for Rs. 8,39,174/- by filing its income tax return. On 26.03.1993, the assessment was completed under Section 143(3) of the Act, and a claim under Section 80M was disallowed.

4. On 14.05.1993, the assessee has filed an application under Section 154 of the Act, seeking rectification of mistake apparent on the face of record. In the said application, it was mentioned that the assessee has received dividend from Unit Trust of India and the same is allowable deduction. So, the assessee has claimed a sum of Rs. 48,18,960/- under Section 80M of the Act. Vide order dated 31.03.1994, the A.O. has allowed a deduction under Section 80M to the extent of Rs. 8,39,174/- only. The same was upheld by the first appellate authority. Being aggrieved, the assessee has filed an appeal before the Tribunal, who vide impugned order has allowed the claim of the assessee. In the application under Section 154 of the Act, the assessee has restricted its claim to Rs. 25,07,554/- i.e. equal to gross income. Thus, in the present appeal, the amount is involved Rs. 25,07,554-Rs. 8,39,174=Rs. 16,68,380. Being aggrieved, the department has filed the present appeal.

5. With this background, Sri D.D. Chopra, learned counsel for the department, at the strength of written submission, submits that there is no dispute that the assessee was entitled for the deduction of dividend income received on the units of UTI, but the said claim cannot be accepted under Section 154 of the Act. The claim for deduction under Section 80M on dividend income of Rs. 62,10,000/- on the units of UTI, was made for the first time by the assessee. After the finalization of regular assessment, the A.O. considered the application of the assessee under Section 154 of the Act and allowed the deduction under Section 80M only to the extent of Rs. 8,39,174/- which was claimed in the original return. Thus, there was no mistake apparent on the face of record and, therefore, the A.O. has rightly restricted the deduction under Section 80M to Rs.8,39,174/- only. The Tribunal has wrongly directed to allow more deduction under Section 80M. He further submits that if the assessee was not satisfied by the original assessment, he might have filed the appeal before CIT(A). The claim cannot be allowed under Section 154 of the Act by way of rectification. It is difficult to adjudicate the issue in the limited scope of Section 154. Hence, the claim was rightly rejected under Section 154. To support his arguments, he relied on the ratio laid down in the following cases:-

1. Nathmal Bankatlal Parikh & Co. v. CIT [1980] 122 ITR 168/3 Taxman 97 (AP)

2. CIT v. Fried Krupp Industry [1981] 128 ITR 27 (Mad.)

3. Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.)

6. On the other hand, Sri P.J. Pardliwalla, learned counsel, assisted by Sri Waseeq Uddin Ahmad, learned counsel for assessee-respondent has justified the Tribunal Order. For this purpose, he relied on the ratio laid down in the case of Chokshi Metal Refinery (supra), where it was observed that:-

“Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should:-

(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but they have omitted to claim for some reason or other;

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.”

Further, learned counsel placed the reliance in the case of CIT v. Mahendra Mills [2000] 243 ITR 56/109 Taxman 225 (SC)

7. Needless to mention that the Hon’ble Apex Court in the case of Anchor Pressings (P.) Ltd. v. CIT [1986] 161 ITR 159/27 Taxman 295, observed that :

“In its return of income, the appellant had not made any claim for relief under Section 84 of the Income-tax Act, 1961, and the assessment was made without granting the relief. Even in an appeal therefrom to the Appellate Assistant Commissioner, no such claim was made. Thereafter in an application for rectification the appellant asked for the grant of the relief under Section 84. The application was rejected and the appellant took the matter in revision to the Commissioner who also rejected the claim holding that even in the super profits tax proceedings, the claim had not been examined. A writ petition filed by the appellant was dismissed by the High Court. On appeal to the Supreme Court:

Held, affirming the decision of the High Court, since it had not been shown that all the materials required for satisfying the conditions requisite for the grant of relief under Section 84 existed either in the super profits tax record or in the income-tax record at the time the income-tax assessment was completed, it could not be said that the Income-tax Officer committed a mistake apparent from the record in omitting to grant the relief under Section 84.”

8. Lastly, learned counsel for the assessee justified impugned order.

9. We have heard both the parties and gone through the material available on record.

10. It may be mentioned that Section 80 M was omitted by the Finance Act, 2003 w.e.f. 01.04.2004. At the relevant time, Section 80M was as under:-

“80M. Deduction in respect of certain inter-corporate dividends-(1) Where the gross total income of a domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction of an amount equal to so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the first-mentioned domestic company on or before the due date.

(2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.”

11. In the instant case, it appears that the assessee has received dividend income from United Trust of India and made a claim that a sum of Rs. 8,39,174/- may be allowed, as appears from the original return. But, the AO has rejected the claim. However, AO, while passing order under Section 154 of the Act, has allowed the same. Thus, the claim is allowable. The assessee has restricted his claim not exceeding gross income at Rs. 25,07,554/-, but the AO has allowed only the claim made in the original return, while passing the order under section 154 of the Act. Thus, it appears that the claim of the assessee under Section 80M is allowable. It was for the AO either to reject the entire claim or allowed the claim, but it was allowed partly. In the rectification application, the assessee has asked to restrict deduction as per law.

12. We are not in agreement with the submission made by the learned counsel for the Department that under Section 154 of the Act, the claim is not allowable, for the reason that the AO has already allowed some claim under Section 80M of the Act. The A.O. might have not allowed the friction of the claim. When the claim is allowable then why it should not be allowed as per law. Genuineness of the claim is not doubtful. Therefore, the restricted claim under Section 80M of the Act is allowable as the same is not new one for Rs. 25,07,554/- i.e. not to exceed the gross income. Out of which, the AO has already allowed a sum of Rs. 8,39,174/-. Hence, the balance of Rs. 16,68,380/- will have to be allowed as per law.

13. With the above observation, we find no reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with reasons mentioned therein.

14. The answer to the substantial questions of law is in favour of the assessee and against the revenue.

15. In the result, the appeal filed by the Department is hereby dismissed.

[Citation : 357 ITR 520]