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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI SANJAY GARG, HON’BLE & DR. MANISH BORAD, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The appeal in has been filed by the revenue directed against the order of the Learned Commissioner of Income Tax (Appeals)-1, Kolkata (hereinafter ‘the ld. CIT(A)’) passed u/s 250 of the Income Tax Act, 1961 (hereinafter ‘the Act’), dt. 11/10/2018, for Assessment Year 2014-15. I.T.A. No. 206/Kol/2019 Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 2 The assessee has filed a cross-objection bearing C.O. No. 57/Kol/2019, against the appeal filed by the revenue.
We first take up the revenue’s appeal in ITA No. 206/Kol/2019 for adjudication. The Registry has pointed out that there is a delay of 19 (nineteen) days in filing the present appeal by the department. Petition for condonation of delay is placed on record by revenue explaining the reasons. On perusing the same, we are convinced that the department was prevented by sufficient cause from filing this appeal in time. Accordingly, we condone the delay and proceed to admit the appeal for hearing.
Ground No. 1 of the revenue’s appeal is against the relief granted by the ld. CIT(A) deleting the disallowance made by the Assessing Officer on account of expenditure incurred towards Corporate Social Responsibility (CSR) of Rs.1,01,86,507/-.
We have heard rival contentions and perused the material available on record. We notice that the assessee incurred following amount claiming them to be expenditure for business purposes under the head CSR expenses:- Particulars Amount (Rs.) Payment to UNICEF for awareness regarding 1,00,00,000 environment/return of old batteries T-Shirts for WBPCB programme, Water Conservation 56,008 activity in association with Rotary club of Hosur Fabrication of steel cage for plantation at Shamnagar 1,30,499 Factory Total 1,01,86,507 Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 3 4.1. We notice that the first ground on which the Assessing Officer denied the benefit is that the assessee has claimed it as a CSR expense and as per explanation (2) to Section 37 (1) of the Act, if the assessee claims such CSR expense as referred in Section 135 of the Companies Act, 2013, the same shall not be deemed to be an expenditure incurred by the assessee for the purpose of business or profession. We notice that explanation (2) was inserted by the Finance Act, 2014 w.e.f., 01/04/2015, which is applicable from Assessment Year 2015-16, whereas the impugned Assessment Year is 2014-15. Therefore, the same is not applicable to the assessee.
The second observation of the ld. Assessing Officer is that the alleged expenses is not in the nature of business expenditure. We find that the assessee company is into the business of manufacturing of batteries which has negative impact on the environment but due to the necessity of batteries being used for various purposes, the assessee company has carried out awareness program through UNICEF for the purpose of returning the old batteries for the awareness regarding the environment. Even though the said expenditure is not directly related towards the earning of revenue but the same indirectly help to earn good-will and also a name in the society and adds to the brand value which somehow gives a positive impact on the future revenue of the company. Considering this aspect, we find that the said expenditure is in the nature of commercial expediency and deserves to be allowed as Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 4 business expenditure. Thus, no interference is called for in the finding of the ld. CIT(A) and Ground No.1 raised by the revenue is dismissed.
Ground No. 2 raised by the revenue relates to relief u/s 32(1)(iia) of the Act towards brought forward unabsorbed portion of additional depreciation. We notice that similar issue came up for our consideration for Assessment Year 2015-16, which has been decided by us in ITA No. 207/Kol/2019; order dt. 10/08/2023, wherein the grounds raised
by the revenue was as follows:- “That on the facts and circumstances of the case and on law ld. CIT(A) has erred in granting relief u/s 32(1)(iia) of the I.T. Act, on account of brought forward unabsorbed portion, of additional depreciation of Rs.2,86,20,208/- (Rs.3,79,10,416/- minus Rs.92,90,208/-)”. 6.1. We also notice that the said issue has been decided against the revenue observing as follows:- “7. We have heard the rival contentions and perused the relevant material placed before us. We notice that the assessee has claimed additional depreciation of Rs.3,79,10,416/- @ 10% of the amount of depreciation on assets, which were put to use in the second half of the preceding financial year. In other words, the assessee purchased certain fixed assets during financial year 2013-14 in the second half and though entitled to 20% of additional depreciation for the whole year, only claimed 10% under section 32(1)(iia) and the remaining 10% was claimed in the subsequent financial year, i.e. financial year 2014-15 relevant to assessment year 2015-16. The ld. Assessing Officer disallowed the said claim.
8. We observe that the Hon’ble Supreme Court in the case of CIT –vs.- Bajaj Tempo Limited (1992) 196 ITR 188 (SC) has held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally and the sections pertaining to incentives, exemptions and deductions where the spirit is to promote exports, increase earnings in foreign convertible exchange, promote industrialization, infrastructure development etc. should be construed liberally and decided in I.T.A. No. 206/Kol/2019 Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 5 favour of the assessee. Accordingly the provision of section 32(1)(iia) of the Act should be construed liberally.
9. Further we notice that this Tribunal in the cases of Birla Corporation Limited (supra), Century Enka Limited (supra) has taken a consistent view that if the assessee had not claimed the total amount of depreciation in the year of purchase of assets for the reason that it is held for less than six months, then the assessee is entitled to claim the remaining amount of additional depreciation in the subsequent financial year.
10. We further notice that 3rd proviso to section 36(1)(iia) has been inserted by the Finance Act, 2015, which clearly clarifies that the claim of balance amount of additional depreciation for assets, which were put to use for less than 180 days, which was restricted to 50%, would be allowed to be claimed in the immediately succeeding year. The same has been clarified in the Memorandum to the introduction of third proviso to section 32(1)(i) of the Finance Bill 2015. We are thus of the considered view that the ld. CIT(Appeals) has rightly allowed the said claim of assessee towards the balance amount of depreciation. Thus no interference is called for and the sole Ground raised by the Revenue is dismissed.”
Taking consistent view as the facts are identical, we fail to find any infirmity in the finding of the ld. CIT(A) and dismiss Ground No. 2 raised by the revenue.
Ground No. 3 is general in nature. 9. Now, we take the cross-objection and the only issue raised by the assessee relates to the rate of Dividend Distribution Tax (hereinafter referred to as 'DDT') paid by the respondent assessee on dividend distributed / paid to Chloride Eastern Limited (Singapore) which is claimed to have been restricted to 10 percent as per the provisions of Article 10(2) of the India-Singapore Tax Treaty (herein after referred to as Tax Treaty') instead of 16.995 percent at which the respondent Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 6 assessee had paid the DDT as per the provision of section 115-0 of the Income-tax Act, 1961 (hereinafter referred to as the Act') and as such, the assessee would be eligible for refund under the provisions of section 237 of the Act read with the aforesaid Article of the relevant Tax Treaty for the previous year relevant to the assessment year 2014- 15.
From perusal of the above ground, we note that similar issue came up for consideration for Assessment Year 2015-16, where after placing reliance on the decision of the Hon’ble Special Bench of ITAT Mumbai in the case of DCIT vs. Total Oil India Private Limited in & Ors., dt. 20/04/2023, the issue was decided against the assessee observing as follows:- “18. We have heard the rival contentions and perused the material placed before us. In the Cross Objection, the assessee has raised a ground that dividend distribution tax payable on the dividend distributed /paid to Chloride Eastern Limited, a foreign company and tax resident of Singapore, ought to have been charged only @ 10% being the tax rate as per provisions of Article 10(2) of the India-Singapore Tax Treaty instead of 16.995% of the DDT rate provided under section 115-O of the Act. We notice that the assessee has deposited the dividend distribution tax @ 16.995% only but at the later stage, the claim has been made for restricting DDT rate at 10% based on India-Singapore Tax Treaty and refund has been claimed. Though detailed submission has been filed by the assessee but prima facie indicates that the decision referred by ld. Counsel for the assessee in its favour, is not applicable on the facts before us and are thus distinguishable. We, however, would like to peruse the question for consideration before the Hon’ble Special Bench, ITAT, Mumbai of this Tribunal in the case of Total Oil India Private Limited (supra), which reads as under:- “Where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts additional income- tax (tax on distributed profits) referred to in section 115-O of the Income Tax Act, 1961 (in short ‘the Act’), whether such I.T.A. No. 206/Kol/2019 Assessment Year: 2014-15 C.O. No. 57/Kol/2019 Assessment Year: 2014-15 Exide Industries Limited 7 additional income- tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act or the rate of tax applicable to the non-resident shareholder(s) with reference to such dividend income”.
Thereafter in the decision of the Special Bench, judicial jurisprudence has been dealt with and the conclusion of the decision reads as under:- “83. For the reasons given above, we hold that where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income Tax (Tax on Distributed Profits) referred to in Sec. 115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income. Nevertheless, we are conscious of the sovereign’s prerogative to extend the treaty protection to domestic companies paying dividend distribution tax through the mechanism of DTAAs. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. Thus, the question before the Special bench is answered, accordingly”.
After going through the decision of the Special Bench, we find that the issue raised by the assessee in its Cross Objection is similar to the issue dealt with by the Special Bench, wherein the matter was related to dividend distribution tax rate applicable to the dividend distributed/paid to a foreign company located at France and whether the DDT was leviable at the prescribed rate between India and France and the Hon’ble Special Bench held that where dividend is declared or distributed by domestic company to a non- resident holder, such additional income tax payable under section 115-O of the Income Tax Act shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident holder as specified in the relevant DDT with reference to such dividend income. Accordingly, respectfully placing reliance on the said decision of Special Bench, ITAT in the case of Total Oil India Pvt. Limited (supra) and the same being squarely applicable against the assessee on the issue raised in Cross Objection, we are inclined to hold that the assessee is liable to pay dividend distribution tax @ 16.995% on the dividend distributed/paid to non-resident namely Chloride Eastern Limited, a foreign company and tax resident of Singapore. Thus Ground No. 1 of the Cross Objection filed by the assessee is dismissed.”