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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
Date of hearing : 21-06-2022 Date of pronouncement : 09-09-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-1, Ahmedabad in Appeal no. CIT(A)-1/DCIT Cir. 1(1)(2)/10086/2017-18 vide order dated 12/09/2019 passed for the assessment year 2010-11.
Page No. 2 DCIT vs. M/s. Cadila Healthcare Ltd.
The Department has taken the following grounds of appeal:-
“(1) The CIT(A) has erred in law and facts in adjudicating the appeal of the assessee notwithstanding the fact that the same issue had already been adjudicated by the AO vide order u/s 154 dated 30-08- 2011 and has become final. (2) The CIT(A) has erred in directing the AO to give refund of Rs. 75,04,960/- to the assessee by ignoring S.115-O which is part of Special Chapter and is self contained. (3) The CIT(A) has erred in ignoring the provisions of 8.115(4) and S.115P and S.115Q and that no refund can be granted to the assessee. (4) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.”
The brief facts of the case are that the assessee filed return of income on 28-09-2010 declaring total income of Rs. 24,00,61,422/- and dividend distribution tax (DDT) of � 9,53,58,500/-. The return of the assessee was processed u/s 143(1) of the Act by order dated 03-05-2011 in which the demand of � 10,69, 99,920/- was raised upon the assessee and credit of DDT of � 9,53,58,500/- paid by the assessee and was not granted. The assessee filed rectification application under section 154 of the Act on 23- 06-2011 and pointed out that the entire DDT of � 10,43,91,098/-has been shown as payable, however the assessee had deposited excess DDT to the tune of � 75,04,960/-which was refundable to the assessee. The AO disposed of the rectification application filed by the assessee by order dated 30-08-2011, in which AO gave part relief to the assessee by reducing from the amount of dividend declared by the assessee, the amount of dividend received from two of its wholly owned subsidiaries namely German Page No. 3 DCIT vs. M/s. Cadila Healthcare Ltd. Remedies Ltd, Mumbai and Zydus wellness Ltd, as per the provisions of section 115-O (1A) of the Act. However, in the Case of Zydus Animal Health Ltd (ZAHL), the AO held that only the dividend received from the subsidiary can be reduced, but the DDT paid by the subsidiary cannot be given credit while working out the DDT payable by the assessee company. In this case, the DDT paid by ZAHL cannot be given credit against the DDT payable by the assessee, in terms of section 115-O(4) of the Act. Therefore, the AO by its order dated 30-08-2011, rejected the claim of the assessee company in respect of refund of DDT of � 75,05,960/-.
Thereafter, the assessee’s case was picked up for scrutiny for the impugned assessment year and assessment order under section 143(3) r.w.s. 144C of the Act was passed on 06-02-2015. In response thereto, the assessee filed rectification application under section 154 of the Act dated 20-03-2015 in which it was submitted that in the tax computation, the AO has not allowed credit of excess DDT paid under section 115-O of the Act of � 75,04,969. The assessee further submitted that in this regard the assessee had earlier filed rectification application dated 21-09-2011, which also had not been disposed of. Thereafter, the assessee filed another rectification application dated 08-06-2017 in which he pointed out that the assessee’s case is directly covered by the ratio of the jurisdictional Gujarat High Court in the case of Torrent Private Limited v CIT 35 Taxman.com 300 (Gujarat). Thereafter, the AO passed order dated 05-07-2017, in which it dismissed the assessee’s rectification application by holding that the issue has been already decided by the AO by its order dated 30-08-2011 and accordingly since there is no mistake in the above order, accordingly assessee’s application Page No. 4 DCIT vs. M/s. Cadila Healthcare Ltd. dated 08-06-2017 was dismissed. The AO made the following observations while passing the order:
“4. The assessee has now vide its application dated 08-06-2017 referring to the earlier application made u/s. 154 of the I.T. Act, requested to rectify the order passed on 03-08-2011, the details of which are discussed supra. The assesses company has requested a refund of excess dividend distribution tax paid u/s. 115O of the Act amounting to Rs. 75,04,969/-. The assessee's ground is found to be exactly identical to the grounds of its previous application dated 21.06.2011 which is mentioned erroneous as 21.09.2011 by the assessee. Also, the facts and figures and the contention are also identical to that of the previous application dated 23.06.2011 which was disposed off by the Assessing Officer.
The assessee company's application for rectification u/s. 154 of the IT. Act referring the earlier rectification application dated 21.09.2021 and 23.03.2015 is carefully considered. However the contention is not acceptable for the reasons that the issue has already been decided by the then Assessing Officer by passing the speaking and well reasoned order after due application of mind. The assessee's application was partly accepted which itself is sufficient to indicate that the Assessing Officer had, after considering the merits of the case, passed the order. It is pertinent to mention here that the assessee has till date filed no appeal against, the order passed u/s. 154 of the IT. Act on 30.08.2011
Apart from the above, order passed u/s. 154 cannot be rectified u/s. 154 as there is no mistake which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. In this case, there is no mistake apparent from record or is of a kind which is left untouched in the order sought to be passed.
In view of the above, assessee's application 08.06.2017 is hereby rejected.”
Page No. 5 DCIT vs. M/s. Cadila Healthcare Ltd.
5. The assessee filed an appeal against the above order before Ld. CIT(Appeals) seeking refund of excess DDT to the tune of � 75,04,960/-. The Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations:
“3.3 I have carefully considered the facts of the case, assessment order and submission of the appellant. The appellant has paid dividend distribution tax of Rs. 9,53,58,500/- on the dividend payable of Rs.61,42,45,559/-. The appellant while computing the dividend on which dividend distribution tax is payable has reduced dividend of Rs. 1,20,00,000/- received from German Remedies Ltd., Mumbai, Rs. 4,11,48,207/- from Zydus Wellness Ltd. and Rs. 4,41,59,816/- from Zydus Animal Health Ltd. as these companies were subsidiary companies of the appellant company and DDT was paid by these companies in accordance with sec. 115O(1A) of the I. T. Act. The dividend distribution tax payable as per above computation is Rs.8,78,53,540/- and DDT paid by the appellant was Rs.9,53,58,500/- and appellant therefore has claimed refund of Rs.75,04,960/-. The AO in the order passed u/s. 143(1) has not allowed the reduction of dividend received from above three subsidiary companies on which dividend was paid and therefore appellant had filed 154 application. The AO in the order passed u/s.154 had allowed the reduction in respect of dividend from German Remedies Ltd. and Zydus wellness Ltd. but has not allowed deemed dividend of Rs.4,41,59,816/- from ZAHL u/s. 2(22)(d) of the I. T. Act and thus not granted refund of excess DDT of Rs.75,04,960/-. Appellant has filed rectification petition against the above order and the AO has rejected the claim following the earlier order u/s. 154 passed by the AO. The appellant is in appeal against the non granting credit of excess DDT paid. The AO has noted that the issue has already been decided by previous AO by passing the speaking and well reasoned order u/s. 154 after due application of mind and therefore there is no mistake apparent from record. Appellant has contended that the appellant company has reduced the dividend received from subsidiaries companies as per section 115(1A) of the I. T. Act and the AO himself has allowed deduction of dividend from two companies namely German Remedies Page No. 6 DCIT vs. M/s. Cadila Healthcare Ltd.
Ltd. and Zydus Wellness Ltd. but has not allowed divided received from ZAHL. The appellant also submitted that the AO has incorrectly invoked provision of section 115O(4) while not giving the refund which appellant is eligible as per section 237 of the I. T. Act.
3.4. It is seen that the AO has rejected the 154 application on the ground that the claim has already been rejected by the earlier AO by passing order u/s.
The AO in, earlier order has invoked the section 115O(4) that the DOT paid by M/s. ZAHL as per section 2(22)(d) r.w.s. 115O shall be treated as the final payment of tax by M/s. ZAHL and credit of the said tax paid by the ZAHL cannot be given against the DDT payable by the Assessee. However, it is seen that the appellant is not asking for credit of DDT paid by ZAHL but it is claiming DDT of Rs. 9,53,58,500/- paid on 11/08/2009 on net dividend of Rs. 51,69,37,536/- computed as per section 115O(1A) of the I. T. Act. I agree with the submission made by the appellant that dividend income of M/s. ZAHL is to be reduced while computing the dividend on which dividend distribution tax is payable as M/s. ZAHL is a subsidiary company of the appellant and the later has paid DDT on the same. The appellant is therefore eligible for refund of excess tax paid on dividend computed as per section 115O(1A) of the I. T. Act. The appeal is accordingly allowed.”
6. The Department is in appeal before us against the aforesaid order of the Ld. CIT(Appeals).
Ground number 1: Ld. CIT(Appeals) erred in adjudicating the appeal of the assessee since the same issue has already been adjudicated by the AO vide order dated 30-08-2011 which has become final: 7. At the outset, the Department challenged the action of the Ld. CIT(Appeals) in passing the order on the ground that the same is barred by limitation. The original order was passed by the AO under section 154 of the Act on 30-08-2011, which has become final and hence the order of the Ld. CIT(Appeals) dated 12-09-2019 is barred by limitation.
Page No. 7 DCIT vs. M/s. Cadila Healthcare Ltd.
As observed by us earlier, the AO disposed of the rectification application filed by the assessee by order dated 30-08-2011, in which he gave part relief to the assessee. Thereafter, the assessee’s case was picked up for scrutiny and assessment order under section 143(3) r.w.s. 144C of the Act was passed on 06-02-2015. In response thereto, the assessee filed another rectification application under section 154 of the Act dated 20-03- 2015 in which it was submitted that in the tax computation, the AO has not allowed credit of excess DDT paid under section 115-O of the Act of � 75,04,969.Thereafter, the assessee filed another rectification application dated 08-06-2017 in which he pointed out that the assessee’s case is directly covered by the ratio of the jurisdictional Gujarat High Court in the case of Torrent Private Limited v CIT 35 Taxman.com 300 (Gujarat). Thereafter, the AO passed order dated 05-07-2017, in which it dismissed the assessee’s rectification application by holding that the issue has been already decided by the AO by its order dated 30-08-2011. It is against this order that the Ld. CIT(Appeals) passed order dated 12-09-2019, against which the present appeal has been filed before us. Therefore, the issue for consideration before us is whether limitation of passing order u/s 154 of the Act dated 05-7-2017 has to be seen from the original rectification order u/s 154 of the Act passed on 30-08-2011 or from date of assessment order passed u/s 143(3) r.w.s. 144 of the Act dated 06-02-2015. We note that the assessee made claim of refund of excess DDT of � 75,04,969 in the return of income. The said claim was neither allowed to the assessee in the initial return processed u/s 143(1) of the Act vide order dated 03-08-2011 and neither in the assessment order passed u/s 143(3) r.w.s. 144 of the Act dated 06-02-2015. In our considered view, there is no bar on the assessee to file rectification Page No. 8 DCIT vs. M/s. Cadila Healthcare Ltd. application u/s 154 of the Act against assessment order passed u/s 143(3) r.w.s. 144 of the Act dated 06-02-2015, wherein claim of the assessee for refund of DDT was not granted and no reason for non-grant of DDT was specified. Therefore, given the chain of events presented before us, we are of the view that the dated 05-07-2017 is not time-barred and the order passed by the AO under section 154 dated 05-07-2017 was within the of limitation of 4 years from the date of the assessment order dated 06-02-2015, which is sought to be rectified.
In the result, ground number 1 of the Department’s appeal is dismissed.
Ground Numbers 2-3: Ld. CIT(Appeals) erred in directing AO to give refund of � 75,04,960/- by ignoring the provisions of section 115-O, 115(4) and 115P and 115Q of the Act: 10. On this issue, it would be useful to reproduce the relevant statutory provisions for better understanding of the issue:
Tax on distributed profits of domestic companies. 115-O. 1A) The amount referred to in sub-section (1) shall be reduced by,— (i) the amount of dividend, if any, received by the domestic company during the financial year, if such dividend is received from its subsidiary and,— Page No. 9 DCIT vs. M/s. Cadila Healthcare Ltd.
(a) where such subsidiary is a domestic company, the subsidiary has paid the tax which is payable under this section on such dividend; or (b) where such subsidiary is a foreign company, the tax is payable by the domestic company under section 115BBD on such dividend: Provided that the same amount of dividend shall not be taken into account for reduction more than once;
In the instant case, we observe that the assessee received an amount of � 4,41,59,816/- from ZAHL as deemed dividend under section 2(22)(d) of the Act (as per Explanation to section 115Q as it stood at the relevant time, dividend also includes “deemed dividend” under section 2(22)(d) of the Act). It is also not in dispute that ZAHL paid DDT on such deemed dividend u/s 2(22)(d) of the Act at the time of distribution of dividend to the assessee company consequent reduction of its share capital to the extent to which the said company possessed accumulated profits. It is also not in dispute that ZAHL is a wholly-owned subsidiary of the assessee company. Accordingly, in view of the language of section 115-O (1A) of the Act, the above amount of � 4,41,59,816/- received as dividend from ZAHL was required to be deducted from the total amount of dividend on which DDT was required to be paid by the assessee company. Accordingly, in the instant facts we find no infirmity in the order of the Ld. CIT(Appeals) when he observed that the AO is incorrect in coming to the conclusion that the assessee is claiming credit of DDT paid by its subsidiary ZAHL against its DDT liability, but Page No. 10 DCIT vs. M/s. Cadila Healthcare Ltd. instead the assessee is seeking that the dividend income received from ZAHL (on which DDT has been paid by the ZAHL)be reduced from the dividend on which DDT is required to be paid by the assessee company u/s section 115-O (1A) of the Act. We are of the view that Ld. CIT(Appeals) has not erred in facts and in law in allowing the assessee’s appeal in the instant facts.
In the result, Ground No. 2 and 3 of the Department’s appeal are dismissed.
Ground No. 4 of the assessee’s is general in nature and does not require a specific adjudication.
In the result, appeal of the Department is dismissed.
Order pronounced in the open court on 09-09-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 09/09/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file.
Page No. 11 DCIT vs. M/s. Cadila Healthcare Ltd.