ORDER
Pramod Kumar, Accountant Member
1. This appeal, filed by the assessee, is directed against CIT(A)’s order for the assessment year 1997-98, in the matter of assessment under Section 143(3) of the Income-tax Act, 1961. The assessee is a public sector undertaking owned by the Government of India, and, as required by Hon’ble Supreme Court’s directions set out in the case of ONGC v. CC£[1992] , it has duly obtained the clearance of the High Powered Committee (Cabinet Secretariat) for pursuing this appeal.
2. By way of first ground of appeal, the assessee has raised following grievance :
That the learned C1T (Appeals) erred in confirming the action of the Assessing Officer in including tax exempt dividend income of Rs. 539.35 crores as part of ‘book profit’ of the appellant computed under Section 115JA of the Income-tax Act, 1961.
We may, at this stage itself, make it clear that though the ground of appeal gives an impression that impugned amount of Rs. 539.35 crores is an income of the current year but exempt from income tax levy, the factual position is that this amount represents income of the subsequent year but shown in the profit and loss account of the present year. However, it is correct that in that subsequent year, the aforesaid amount of Rs. 539.35 crores was exempt from income-tax under Section 10(33) which came into force in that subsequent year itself.
3. The assessee company is a large public sector undertaking and it has a number of subsidiaries from which it receives dividends. As per the method of accounting followed by the assessee, it has taken into account the dividend declared by the subsidiaries relating to the previous year 1996-97 as income in the profit and loss account for the previous year 1996-97, even though admittedly these dividends are declared, distributed and paid in the subsequent previous year. In other words, these dividends are included as income of the previous year in respect of which the dividends are declared, rather than income of the previous year during which these dividends are declared, distributed or paid – as is the scheme of the Income-tax Act. Therefore, the dividends reflected in the profit and loss account of the assessee do not constitute income of that previous year but are relatable to that previous year only in the sense that the subsidiaries have declared those dividends out of profits of that previous year. In the relevant previous year, the assessee’s profit and loss account disclosed ‘dividends from subsidiaries’ at Rs. 539.35 crores, which were in fact declared and received in the subsequent previous year and, accordingly, constituted income of that year, and the Assessing Officer duly reduced this amount from net profit, as per profit and loss account, for the computation of taxable income for that year. It is also not in dispute that this amount of Rs. 539.35 crores was taken into account while computing taxable income of the subsequent year i.e. 1997-98 but in view of the provisions of Section 10(33) as then in force, the same were treated as exempt from income-tax. The problem before us, however, has arisen because the assessee has, on account of a peculiar accounting practice followed by the assessee, shown dividend as income of the previous year to which dividends pertain – something which is alien to the income-tax law as well as standard accounting practices.
4. While the dividends of Rs. 539.35 crore thus shown in the profit and loss account of the assessee were not included in the taxable income of that previous year, and the Assessing Officer himself excluded the aforesaid sum from the profit as per profit and loss account, the problem arose in the computation of book profit for the purpose of Section 115 JA of the Act.
5. The assessee sought exclusion of the dividend credit of Rs. 539.35 crores, on the ground that the aforesaid amount being a tax exempt income is covered by the scope of Explanation (ii) to Section 115JA(2) which provides that “the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account” is required to be reduced from ‘net profit’ as per profit and loss account, before ‘book profit’ under Section 115JA can be arrived at. The Assessing Officer was, however, not impressed. The assessee’s claim was declined by the Assessing Officer on the ground that since Section 10(33), which provided for exemption of dividend income, was not in force in the relevant previous year, it could not be said that the provisions of Chapter III applied to the dividend income, so far as present assessment year is concerned. It was also pointed out that Explanation (ii) only applied to the income to which provisions of Chapter III applies, and since provisions of Chapter III are admittedly not applicable for the present assessment year, the dividend income could not be excluded for computation of book profit for the present assessment year i.e. 1997-98. It was also mentioned that once the assessee himself includes an amount in the profit and loss account, the same cannot be, without enabling legal provision, excluded from book profit. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Still aggrieved, the assessee is in second appeal before us.
6. We have heard Shri Mukerjee, learned counsel for the assessee, and Shri Mishra, learned Senior Departmental Representative. We have also carefully perused the orders of the authorities below, as indeed the paper book filed before us, and deliberated upon the applicable legal position.
7. We may first refer to the fact that Chapter XIID, consisting of special provisions relating to tax on distributed profits of domestic companies, was inserted vide Finance Act, 1997 and with effect from 1st June, 1997. In this scheme of provisions and as provided by Section 115-O of the Act, any domestic company declaring, distributing or paying dividend after 1st June, 1997 was to pay additional income-tax at the rate of twenty per cent on such dividends so declared, distributed or paid. As a corollary to this taxation of dividends in the hands of the company, taxation of dividends in the hands of shareholders was no longer necessary and corresponding exemption of the same was introduced by inserting Section 10(33) of the Act, with effect from 1st April, 1998, which provided that ‘any income by way of dividends referred to in Section 115-O’ shall not be included in total income. In the normal course these complementing provisions do not offer any difficulty because dividends declared after 1st June, 1997, which are subject matter of source taxation under Section 115-O, can only be included in taxable income of the previous year 1997-98 or later previous years and the corresponding assessment years offers tax exemption to that dividend income. In the instant case, irrespective of the accounting treatment by the assessee, the aforesaid credit for dividends from subsidiaries was excluded in the computation of income from the present year and was reflected as income of the subsequent year, i.e. the year in which the dividends were declared, distributed or paid, and since Section 10(33) provided for specific exemption of such dividends, effectively these dividends were not subjected to income-tax in the hands of the assessee company. Learned counsel for the assessee has been fair enough to concede that, as elaborated above, there is no dual taxation of dividends – i.e. in the hands of the company distributing dividend as well as the shareholder receiving the dividend – and that assessee’s grievance is only confined to the rejection of his claim for exclusion of the aforesaid dividend credits from the book profits of the current year. The learned counsel for the assessee, in response to bench’s query, has also accepted the fact that the impugned dividend credit of Rs. 539.35 crores is admittedly not the income of the current year, and yet reflected in profit and loss account of the current year. The question then arises whether such an amount can be excluded in computation of book profits of the assessee for the current year.
8. There is little dispute about the proposition that the very purpose of Section 115JA is to ensure a system whereby every company pays a minimum corporate tax on the profits declared by it in its own accounts. Section 115JA(2), however, provides for certain adjustments to be made from such profits reflected by assessee’s profit and loss account, which is to required to be prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, in order to arrive at the ‘book profit’, which is subject matter of the tax under the scheme of Section 115JA. One of these adjustments provides that the “the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account” is inter alia required to be reduced from the net profit, as shown in the profit and loss account for the relevant previous year. A careful analysis of this clause shows that in order to be covered by this exclusion clause :
– the amount should be in the nature of income;
– the income should be liable to be excluded from computation of total income under Chapter III of the Income-tax Act, or, in other words, the income should be in the nature of income exempt from tax;
– the amount should be credited to profit and loss account.
As we conduct the exercise of ascertaining whether or not the impugned amount of Rs. 539.35 crores can be covered by the above exclusion clause, we must also bear in mind the settled position that in the income-tax assessment proceedings each assessment year is a distinct unit and all the above tests must hold good in the context of the particular assessment year with which we are concerned. For example an amount being credited in profit and loss account would not mean that the amount is credited in profit and loss account of the assessee for any of the previous years and yet the same will meet the condition for the purpose of the aforesaid exclusion clause. These conditions, therefore, should be satisfied in the context of the assessment year with which we are concerned. Similarly, the above three conditions, being conjunctive in nature, should be satisfied is entirety and when the case fails even on one test, the exclusion clause will have no application.
9. Section 8 of the Income-tax Act, which deals with the taxability of dividends, provides as follows :
For the purpose of inclusion in total income of the assessee,-
(a) any dividend declared by a company or distributed or paid by it…shall be deemed to be income of the previous year in which it is so declared, distributed or paid,
(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.
The above provision makes it quite clear that the dividends can only be brought to tax in the year in which the dividends are declared by the company or distributed or paid by it, and in the case of interim dividends only in the year in which such dividends are unconditionally made available by it. Barring the case of interim dividends, other dividends are declared, distributed or paid only after the relevant previous year has ended, and, accordingly, all such dividends are taxable in the previous year(s) subsequent to the previous year with respect to profits of which the dividends are declared. Even in the ease of interim dividends, since these dividends are taxable only in the year in which the same are unconditionally made available to the members, which can only be done after the relevant previous year has ended, the taxability falls in the year(s) subsequent to the relevant previous year. It is thus clear that, under the scheme of the Act as in force at the relevant point of time, dividends could not be treated as income of the previous year in respect of which the company had declared dividends. The accounting method adopted by the company receiving dividends, however, reflected dividends in the previous year in respect of profits of which the subsidiaries had declared dividends. It is thus clear that the dividend credits in the hands of the assessee did not constitute income of the assessee for that year, and it was for this reason that the assessee-company had excluded the same from being considered as income of that year. Having satisfied ourselves that the impugned credit of Rs. 539.35 crores was not in the nature of income, we are of the considered view that the assessee’s case fails on the very basic requirement of the exclusion clause. Similarly, when we examine the impugned adjustment on the second test, since the amount is not even in the nature of income in the sense that in the present year and in terms of the provisions of Section 8, it cannot be included in the total income of the assessee, there is no question of its being covered by Chapter III of the Act which refers to incomes exempt from tax. It is thus clear that assessee’s case fails on both these tests. In our considered view, therefore, the assessee’s claim regarding exclusion of the aforesaid amount under Explanation (if) to Section 115JA(2) of the Act is not sustainable in law. We do not also find any other enabling provisions for exclusion of this amount from the book profits. Once the assessee itself includes an amount in the profit and loss account, and unless there is an enabling provision for exclusion of such an item for the purpose of computation of ‘book profit’, it is not open to Assessing Officer allow any adjustment in the same. Their Lordships of Hon’ble Supreme Court, in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273′, have inter, alia observed that “the Assessing Officer does not have jurisdiction to go behind the net profit shown in the profit and loss account, except to the extent provided in the Explanation to Section 115 J”. Section 115 J and Section 115 JA being identical in material respect, i.e. being in pari materia, the same ratio applies to the powers of the Assessing Officer in the context of Section 115JA of the Act. Earlier in this judgment, Their Lordships had observed that “If the statute mandates that income prepared in accordance with the Companies Act shall be deemed to be income for the purpose of Section 115J of the Act, then it should be the income which is acceptable to the Companies Act. There cannot be two incomes – one for the purpose of Companies Act and another for the purpose of the income-tax – both maintained under the same Act. If the Legislature intended the Assessing Officer to reassess the company’s income, then it would have stated in Section 115 J that “income of the company as accepted by the Assessing Officer”. We are referring to these observations only to emphasize that unless supported by a specific enabling provision, the Assessing Officer cannot make any adjustment in the profits disclosed by assessee’s own profit and loss account, and, as we have observed earlier, we are unable to support assessee’s claim that the impugned adjustment is covered by the scope of Explanation (if) to Section 115JA(2).
10. We may mention that it is not for this Tribunal to supply the casus omissus, even if any, in the statute. A casus omissus, which broadly refers to a matter which has not been provided in the statute but should have been there to make the statute workable, cannot be supplied by us, as, to do so will be clearly beyond the call and scope of our duty which is only to interpret the law as it exists. Hon’ble Supreme Court, in the case of Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 at page 356 has observed :
We have given anxious thought to the persuasive arguments… (which) if accepted, will certainly soften the rigour of this extremely drastic provision and bring it more in conformity with logic and equity. But the language of sections…is clear and unambiguous. There is no scope for importing into the statute the words which are not there. Such interpretation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation….To us, there appears no justification to depart from normal rule of construction according to which the intention of legislature is primarily to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 (KB) at page 71, that : ‘…in a taxing Act one has to look at merely what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be, implied. One can only look fairly at the language used.’ Once it is shown that the case of the assessee comes within the letter, of law, he must be taxed, however great the hardship may appear to the judicial mind to be.
It, therefore, leads us to the conclusion that this ground of appeal, raised by the assessee, is devoid of any legally sustainable basis. We, therefore, support the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
11. Before parting with the matter, however, we wish to make some observations with regard to the proceedings before the High Powered Committee (Cabinet Secretariat) granting permission for this litigation. While granting the permission, the Committee observed as follows :
Both the appellant and respondent agreed to the fact that, in terms of Section 115-O of the Income-tax Act, 1961, which came in force on 1-6-1997, subsidiaries of Coal India Ltd. paid dividend tax on dividends declared to CIL and CIL was again taxed for the same dividend [Emphasis supplied by us]. Both these events took place before the Income-tax Act was amended to exempt dividend income from tax w.e.f. 1-4-1998. Thus, there has been double taxation due to the extant provisions of the Act….
(Item No 10 of HPC minutes dated 10-5-2001, at page 7 of compilation filed before us)
It was in the backdrop of the above observations that the matter was cleared for litigation. However, in response to the specific query by us, both the parties agreed that it was not a case of double taxation of same divided at all and that the dividends, which were subject matter of tax under Section 115-O of the Act, were admittedly not taxed in the hands of the shareholder. It would thus appear that the parties did not bring out the correct controversy before the Hon’ble Committee of Disputes. Be that as it may, now that the issue has been resolved on merits, that aspect of the matter is no longer relevant for us. We leave it at that.
12. In the result, Ground No. 1 is dismissed.
13. We now move on to second grievance of the assessee, covered by Ground Nos. 2 and 3, which is directed against charging of interest under Sections 234B and 234C of the Act.
14. The relevant material facts are that even though the assessee had no taxable income, but only deemed income on book profits computed under Section 115JA of the Act, and the Assessing Officer levied interest under Sections 234B and 234C in respect of the same. The Assessing Officer rejected assessee’s claim that interest under Sections 234B and 234C is not applicable in respect of the same. Aggrieved, assessee carried the matter in appeal before the CIT(A) who confirmed the action of the Assessing Officer by observing that he is unable to agree with the contentions of the assessee ‘because Section 115JA(4) clearly specifies that all other provisions of the Income-tax Act shall apply to an assessee being a company for the purpose of Section 115JA of the Act’ and that ‘all other provisions include Sections 234B and 234C of the Act’. The assessee is aggrieved and in appeal before us.
15. Heard the parties, perused the orders of the authorities below and deliberated upon the applicable legal position.
16. Learned counsel for the assessee did not make any specific submissions in support of this grievance and merely submitted that he leaves it to this issue to the bench. In these circumstances, we treat this grievance as not pressed, and, accordingly, dismiss ground Nos. 2 and 3 of the assessee.
17. In any event, we are in considered agreement with the learned CIT(A) that the controversy regarding applicability of Sections 234B and 234C on the book profits computed under Section 115J, which resulted in conflicting judgments by various High Courts, no longer exists as Section 115JA(4) specifically provides that other provisions of the Act, unless otherwise specifically excluded, will apply on the profits computed under Section 115JA of the Act. As there is no specific exclusion provision for the purpose of levy of interest under Sections 234B and Section 234C, the authorities below were quite justified in holding that interest under Sections 234B and 234C will apply in this case, even though only taxable income of the assessee is deemed income on the book profits computed under Section 115.IA. In this view of the matter, we support the conclusions arrived at by the authorities below and decline to interfere in the matter.
18. Ground Nos. 2 and 3 are, accordingly, dismissed.
19. Ground No. 4 is general in nature and does not call for any specific adjudication by us. It is, therefore, liable to be treated as dismissed.
20. Ground No. 4 is also, therefore, dismissed.
21. In the result, assessee’s appeal is dismissed.