THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL), SURAT vs. ASHADEVI MITTAL (PROP. MITTAL CHEMICALS)

Facts

This is a Tax Appeal filed by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year (AY) 2012-13. The ITAT had deleted an addition of Rs. 43,12,165 made by the Assessing Officer (AO) on account of dividend income. The assessee, Ashadevi Mittal (Prop. Mittal Chemicals), argued before the ITAT that no dividend income was received during AY 2012-13. The ITAT noted that the CIT(A) had previously directed the AO to verify dividend receipt. The Tribunal's finding was that the dividend was received in FY 2012-13 on 16.10.2012, but this was not in the year ending 31.03.2012, making it not liable for taxation in AY 2012-13. The Tribunal also noted that the AO had erred in treating an amount in Sri Lankan currency from a dividend warrant as income.

Held

The Tribunal held that the dividend income was received in FY 2012-13 on 16.10.2012, as evident from the bank statement. However, this receipt did not fall within the financial year ending 31.03.2012, and therefore, was not liable to be taxed in AY 2012-13. The Tribunal also noted that the assessee had declared dividend income pertaining to AY 2012-13 in AY 2013-14, which was accepted by the Revenue. Furthermore, the AO had erred in treating an amount in Sri Lankan currency from a dividend warrant as dividend income for the year under consideration. The Tribunal concluded that the addition made by the AO was without any basis and documentary evidence. Consequently, the addition was directed to be deleted. The ratio decidendi is that dividend income is taxable in the year of receipt, and if not received in the relevant financial year, it cannot be taxed in that assessment year. The AO also erred in currency conversion for the dividend warrant.

Key Issues

1. Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs 43,12,165/- on account of dividend income received by the assessee during AY 2012-13? (Question of law and fact, concerning the taxability of dividend income under the Income Tax Act, 1961). Assessee's contention: No dividend income was received by the assessee during the Assessment Year 2012-2013, therefore, no addition could be made. Revenue's contention: The Revenue's contention is implicit in the question of law framed, which challenges the ITAT's deletion of the addition made by the AO. The Revenue likely argued that the dividend income was indeed taxable in AY 2012-13.