THE CLEARING CORPORATION OF INDIA LTD.,MUMBAI vs. DCIT CIR. 7(3), MUMBAI

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ITA 710/MUM/2017Status: DisposedITAT Mumbai16 July 2018AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the liability to pay dividend distribution tax arises upon the declaration of dividend. Therefore, the tax rate applicable for the financial year in which the dividend was declared should be applied.

What were the facts?

The assessee declared a dividend of ₹11.50 crores on 21.6.2011. The assessee mistakenly applied the tax rate applicable to the previous financial year instead of the financial year in which the dividend was declared. The CIT(A) dismissed the ground due to lack of clarity on the payment date.

What were the issues?

The primary issue was the correct financial year for applying the dividend distribution tax rate when the dividend was declared in a particular financial year but the assessee applied the rate of a prior year.

Which sections of the Income-tax Act were involved?

Section 115-O,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” Bench, Mumbai

Before: Shri B.R. Baskaran (AM) & Shri Ramlal Negi (JM)

For Appellant: Shri N.H. Gajaria
For Respondent: Shri Rajat Mittal
Hearing: 16.7.2018Pronounced: 16.7.2018

O R D E R Per B.R. Baskaran (AM) :

The appeal filed by the assessee is directed against the order dated 5.1.2.1016 passed by the learned CIT(A)-14, Mumbai and it relates to A.Y. 2011-12.

2.

This appeal relates to tax payable under section 115-O of the Act relating to dividend distribution. The case of the assessee is that it has declared dividend of ` 11.50 crores on 21.6.2011 for the year ending 31.3.2011. Hence tax rate including surcharge and education cess applicable to financial year 1.4.2011 to 31.3.2012 should have been considered for computing tax u/s 115-O of the Act. However, the assessee has committed a mistake and applied tax rate applicable to the financial year 1.4.2010 to 31.3.2011.

3.

The Learned AR submitted that the assessee has already moved a petition u/s. 154 of the Act, but the same has not been disposed of yet by the AO. He submitted that the learned CIT(A) dismissed this ground of the assessee on the reasoning that the assessee has not given categorically actual

2 The Clearing Corporation of India Ltd. date of payment of dividend. The Learned AR submitted that the dividend has been declared on 21.6.2011, i.e. in the F.Y. 2011-12 and hence, the tax rate applicable for that financial year should be adopted for computing dividend distribution tax. In support of his contentions, the Learned AR placed his reliance on the decision rendered by Jaipur SMC Bench of the ITAT in the case of Drawmet Wires (P) Ltd. Vs. ACIT (2017) 167 ITD 357, wherein the Tribunal has held that instance of chargeability of dividend distribution tax on the amount of dividend declared would depend on when it is declared or paid and not for which year it is paid.

4.

We heard learned DR and perused the record. We noticed that Jaipur SMC bench of the Tribunal has held in the case of Drawmet Wires (P) Ltd. (supra) that liability to pay dividend distribution tax would arise only on declaration of dividend. In the instant case, dividend has been declared on 21.6.2011 and hence the tax rate applicable for the financial year 1.4.2011 to 31.3.2012 should be adopted as per the decision rendered in the case of Drawmet Wires P Ltd (supra). Accordingly we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to compute dividend distribution tax as per ratio of decision rendered by Jaipur SMC Bench in the case of Drawmet Wires (P) Ltd. (supra).

5.

In the result, appeal filed by the assessee is treated as allowed. Order has been pronounced in the Court on 16.7.2018.

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