Claim u/s 80M of Income Tax Act Allowable when Deduction of Amount was Equal to Dividend Distributed within Due Date: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) held that claim under Section 80M of Income Tax Act, 1961 is allowable when deduction of amount was equal to dividend distributed within due date.

The assessee, Purnasons Pvt. Ltd is a private limited company earning income from commission. The return of income was filed electronically. It was successfully e-verified and processed. In processing the CPC disallowed the deduction claimed by the assessee under Section 80M. The assessee filed for re-processing, but CPC did not make any correction. The CIT(A) also disallowed the deduction and confirmed the order of the AO.

It was noted that the question to decide is whether the assessee is entitled to claim deduction worth of Rs. 30 Lakh under Section 80M of Income Tax act. From the documents filed it was evident that the assessee had received dividend of Rs. 37,12,500/- from another domestic company and distributing the dividend amounting to Rs. 30 Lakh to its shareholder.

Section 80M of the Income Tax Act, was introduced by the Finance Act 2020 to exempt inter-corporate dividends from tax when received from a domestic company before 1st April 2020.

The two member Bench of the ITAT comprising of Pradip Kumar Choubey (Judicial Member) and Dr. Manish Borad (Accountant Member) found that in the year in which the dividend was received, the assessee company would be allowed a deduction of an amount equal to and not exceeding the amount of dividend “distributed” on or before the due date. Further observed that the dividend was paid to the shareholders of the assessee before due date under section  139(1) via cheques. The ITAT allowed the assessee’s appeal.

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