IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH ‘E’, MUMBAI
BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND
SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER
I.T.A. NO. 6571/M/2011
ASSESSMENT YEAR: 2003-2004
M/s. Trivikram Investments & Trdg Vs. Income Tax Officer,
Co. Ltd., N.K. Mehta International Ward-1(3)(3), Aayakar Bhavan,
House, 178, Backbay Reclamation, Mumbai – 400 020.
Babubhai Chinoy Marg, Mumbai-20.
Appellant by : Shri Dalpat Shah
Respondent by : Shri Pradeep Kumar Singh
Date of Hearing:1.1.2013 Date of order: 09.1.2013
O R D E R
Per D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 29.9.2011 is against the order of CIT (A)-
2, Mumbai dated 7.7.2011 for the assessment year 2003-04.
2. In this appeal assessee raised the following grounds which read as under:
“1. Re-opening of completed assessment u/s 147:
1.1. The CIT (A)-2, Mumbai erred in confirming the validity of re-
opening of completed assessment u/s 147 of the Income Tax
Act, ignoring the fact that there was neither any concealment
nor any escapement of income and the reassessment is done
merely on the change of opinion.
1.2. The Ld CIT (A) also erred in not considering the decisions of
Hon’ble Bombay High court on identical facts and grounds
involved in the case of (i) M/s. Asian Paints Ltd. vs. DIT (308
ITR 195) and (ii) M/s. Asteroids Trading and Investments Pvt.
Ltd. vs. DCIT (308 ITR 208)”
2. Rejection of claim u/s 80M of Rs. 10,00,000/-
The Ld CIT (A) erred in confirming the disallowance of claim u/s
80M of Rs. 10 lacs on the ground that dividend paid by your
appellant was subject to dividend distribution tax u/s 115-O. The
said CIT (A) erred in ignoring the fact that the claim u/s 80-M is
legitimate as the said section was deleted from statute w.e.f
3. During the proceedings before, at the outset, Shri Dalapat Shah, Ld Counsel
for the assessee mentioned that the completed assessment was invalidly re-opened
merely based on the ‘change of opinion’ emanating from the audit objection raised
by the audit parties. In this regard, Ld Counsel relied on various decisions to
demonstrate that the re-opening based on the audit objections are invalid as the
AO’s opinion is dependent on the opinion of the audit parties and not of his own.
The decisions relied upon by the Ld Counsel in this regard are (i) the Hon’ble
jurisdictional High Court judgment in the case of Purity Techtextile Private Ltd vs.
ACIT  325 ITR 459 (Bom) and (ii) IL and F S Investment Managers Ltd vs.
ITO  298 ITR 32 (Bom). Considering the binding judgment of the
jurisdictional high court, the reopening made by the AO is invalid. Accoridngly,
ground 1 is allowed.
4. Further, referring to the merits of the addition of Rs. 10 lacs, Ld Counsel
mentioned that the said issue is covered in favour of the assessee by the Hon’ble
jurisdictional High Court in the case of Godrej Agrovet Ltd. vs. DCIT  323 ITR
97 (Bom). In this regard, Ld Counsel relied on the decision of the Coordinate Bench
in the case of Radha Madhav Investment Ltd vs. DCIT in ITA No.2309/M/2010 (AY:
2003-2004). Further, Ld Counsel also filed a copy of decision of ITAT, Pune Bench
in the case of DCIT vs. KRA Holding & Trading Pvt. Ltd in ITA No. 1058/PN/2009
(AY:2003-04) which was decided in favour of the assessee relying on the Coordinate
Bench decision in the case of Castle Investment and Industries Private
Limited, ITA No.1713/M/2006 (AY:2003-04) for the proposition that the assessee is
entitled to deduction u/s 80-M in respect of any income received by way of dividend
from other domestic company which is included in the gross total of the recipient
company. In other words, in case the gross total income of domestic company
includes any sum on account of dividend received from another domestic company,
then statute provides a deduction which shall be limited to the amount distributed by
way of dividend by the recipient company and the provisions of section 115-O, sub-
section (5) does not restrict the allowability of claim u/s 80-M. This view was
affirmed by the jurisdictional High Court in the case of Godrej Agrovet Ltd. (supra).
5. On the other hand, Ld DR fairly relied on the order of the AO / CIT (A).
6. We have heard both the parties, perused the order of the Tribunal in the case
of KRA Holding & Trading Pvt. Ltd. (supra), where one of us is a party to it, and
relevant paras from 2 to 5 are reproduced hereunder for the sake of completeness
of the order.
“2. Grounds relate to the claim of deduction u/s 80-M of the Act
amounting to Rs. 2,18,94,555/- in respect of the corporate dividend received
by the assessee during the previous year ended 31.3.2003. Relevant facts of
the case are that the assessee is engaged in investment of securities and is
an investment company. The assessee received corporate dividend Rs.
2,20,34,535/- during the previous year 2002-03. The appellant declared
dividend on 9th
August, 2003. Rs. 2,24,72,184/- and paid dividend tax
thereon Rs. 28,79,249/- on 20 August, 2003. Accordingly deduction has
been claimed and allowed u/s 80-M in respect of corporate div. recd. Rs.
2,18,94,555/-. The Ld CIT passed order u/s 263/- holding that the AO has
allowed deduction claimed u/s 80-M without considering the provisions of
Section 115-O and sub-section (5) thereof. The Cit held that the assessee
order was erroneous in so far as it as prejudicial to the Revenue. The Ld AO
has passed order dated 11 December, 2008 u/s 143(3) r.w.s 263 denying
deduction claimed u/s 80M. Deduction is not claimed in respect of amount of
dividend charged to tax or tax paid thereon u/s 115 O. Deduction is claimed
by the assessee in respect of corporate dividend received restricted to the
dividend distributed. As per the Counsel for the assessee, the issue is fully
covered in favour of the assessee by the decision of the Hon’ble ITAT
Mumbai in the case of Castle Investment and Industries Private Limited ITA
No.1713/M/2006 (AY: 2003-04) and also decision of the Hon’ble Bombay
High Court in the case of Godrej Agrovet Ltd. on identical issue (2010-TIOL-
172-HC-MUM-IT) and wherein the Hon’ble High Court has observed on Page
4 para 10 that the decision of ITAT in the case of Castle Investments and
industries Private Limited has been affirmed by the Division Bench of Hon’ble
Bombay High Court in favour of the assessee allowing deduction u/s 80-M.
3. From the order of the Revenue it is evident that there is reference to
the order of the Tribunal in the case of Castle Investments and Industries
Pvt. Ltd. ITA No.1713/M/2006 and para 3.3 of the impugned order is relevant
and the same reads as under:
“3.3 I have carefully considered the submission of the appellant and
perused material on record. The issue is squarely covered by the ration
decidendi of Hon’ble ITAT, Mumbai’s decision in case of Castle Investment &
Inds. Pvt. Ltd. quoted supra. The deduction u/s 80-M of the Income Tax Act,
1961 is in respect of any income received by way of dividend from another
domestic company included in the gross total income of the recipient
company but such deduction has to be restricted to dividend distributed by
the recipient company on or before the due date of filing of the return. In
other words, in case the gross total income of the domestic company
includes any sum on account of dividend received from another domestic
company, then statute provides a deduction which shall be limited to the
amount distributed by way of dividend by the recipient company. In view of
this, respectfully following the decision of the ITAT Mumbai quoted (supra), it
is held that the appellant is entitled to claim deduction u/s 80M of the
Income Tax Act, 1961 against the dividend income received during the
assessment year under appeal. Appellant gets consequential relief.”
4. This decision of the Mumbai Bench in the case of Castle Investments
and Industries Pvt. Ltd (supra) is found approved by the jurisdictional High
court in the case of Godrej Agrovet Ltd. 2010-TIOL-172-HC-MUM-IT vide
para 10 and same reads as under:
“10. On these facts as they stand, it is impossible to contend that the
assessee was not entitled to a deduction under Section 80M. Significantly,
the view of the assessing Officer was consistent with the decision of the
Tribunal in the case of Castle Investment (supra). The judgment in Castle
investment insofar as is material held that Section 115-O(5) does not in any
way restrict the allowability of the claim under section 80M. Under section
80M what is claimed as a deduction is the dividend received by the Company.
Dividend declared, distributed or paid are not claimed as deduction under
section 80M though they constitute an outflow of funds from the company.
Section 80M imposes a monetary restriction on the amount that may be
claimed by way of a deduction by providing that the amount of claim cannot
exceed the dividend distributed by the assessee by the due date. Though
the judgment of the Tribunal in Castle Investment was dated 18 July, 2007
(the order of assessment being dated 28th
February, 2006) it is necessary to
note that the decision followed the earlier decision of the Tribunal dated
10tyh May, 2002 in the case of Silvassa Industries and the decision dated 7th
October, 2004 in M/s. Kaikobad Byramjee (supra). The decision of the
Tribunal in Castle Investment (supra). The decision of the Tribunal in Castle
Investment (supra) was affirmed by a Division Bench of this Court on 22nd
July, 2008 in ITA No.1557 of 2007.”
5. Thus, it is binding that the decision of the Tribunal in Castle Investment
(supra) was affirmed by the jurisdictional High Court as discussed above.
Therefore, we are of the opinion, the order of the CIT (A) does not call for
any interference. Accordingly, the grounds raised in this appeal by the
Revenue are dismissed.”
7. From the above, it is evident for the assessment year 2003-04 subject to the
conditions related to the fact of distribution of dividend before the due date for filing
of return of income, the provisions of section 115-O of the Act do not restrict the
allowability of deduction of Rs. 10 lacs. In the instant case, the assessee received
higher amount of dividend from another domestic company than the dividend
distributed, and the said dividend received has undisputedly formed part of the gross
total of the assessee and therefore, the claim of the assessee u/s 80M is proper.
This view has been affirmed by the Hon’ble jurisdictional High Court in the case of
Godrej Agrovet Ltd (supra) which was discussed in the paras above. Considering
the settled nature of the issue at the level of the jurisdictional high court in the case
of Godrej Agrovet Ltd, supra, the assessee is entitled to deduction in respect of a
sum of Rs. 10 lacs u/s 80-M of the Act, distributed by the assessee. Thus, assessee
is entitled to get relief in ground no.2 on merits too.
8. In the result, appeal of the assessee is allowed .
Order pronounced in the open court on this 9 day of January, 2013.
(D.K. AGARWAL) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 9.1.2013
Copy to :
1. The Appellant.
2. The Respondent.
3. The CIT (A), Concerned.
4. The CIT concerned.
5. The DR “E”, Bench, ITAT, Mumbai.
6. Guard File.
// True Copy//
ITAT, Mumbai Benches, Mumbai