SANKAR SARKAR,DURGAPUR vs. ACIT, CIR-2, DURGAPUR, DURGAPUR

Brief facts of the case are that the AO noted that the assessee has received dividend income to the tune of Rs.37,86,744/- from M/s. Subir Engineering Pvt. Ltd. (hereinafter M/s. SEPL) and claimed exemption u/s. 10(34) of the Act in respect of the dividend. The AO noted that the assessee is a Director of M/s. SEPL and the said company has not deposited tax on the distributed profit within the stipulated time i.e. within 14 days from the date of declaration or distribution or payment of dividend as per sec. 115-O of the Act. Therefore, he disallowed the same and made an addition of the said amount. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to confirm the same. Aggrieved, assessee is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee is a Director of M/s. SEPL and was in receipt of the dividend income to the tune of Rs.37,86,744/- and claimed exemption u/s. 10(34) of the Act. The AO noted that M/s. SEPL has not deposited the tax on the distributed profit within the stipulated time i.e. within 14 days from the date of declaration of dividend or distribution or payment of dividend, whichever is earlier. According to the assessee, the fact as of now is that M/s. SEPL have already remitted the amount along with interest and drew our attention to page 3 of the paper book, wherein we note that an amount of Rs.8,34,978/- has been remitted by challan drawn on State Bank of India under the head “tax on distributed profit from M/s. SEPL for AY 2010-11”. If the tax has been deposited on the dividend distributed to the assessee along with interest, then the dividend distributed to the assessee should not be disallowed and the said amount should be granted exemption u/s. 10(34) of the Act. In order to verify this fact, we deem it fit and proper to set aside the order of Ld. CIT(A) and remand the issue back to AO, to verify as to whether M/s. SEPL has deposited tax on dividend along with interest. If the tax along with interest on the dividend distributed to assessee has been deposited as per law by the assessee as discerned from page 3 of challan (supra), then the amount of dividend earned by the assessee should be exempt as per sec. 10(34) of the Act. With the aforesaid direction, we set aside the order of Ld. CIT(A) and restore the matter to the file of AO to adjudicate the issue. Thus, the appeal of assessee is allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 15th December, 2017