As a relief to Tata Industries, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) allowed the set offof brought forward business losses against foreign dividend income.
The assessee challenged the order of CIT(A) in not granting set off of current year business loss against foreign dividend income and upholding the levy of tax u/s 115BBD of the Income Tax Act, 1961 on gross foreign dividend income.
The assessee company is engaged in the business of providing business investment and finance and promotion of new companies in various fields to their customers. The AO noted that the assessee company had received an amount of Rs 132,40,04,883/- as a dividend from M/s Apex Investments (Mauritius) Holding Private Ltd ( a 100% foreign subsidiary of the assessee company).
The AO further noted that in the computation of income, the assessee had set off the current year’s business loss amounting to Rs 51,74,40,547/- against the aforesaid foreign dividend income. The assessee company claimed a deduction under Chapter VIA of the Act amounting to Rs 1,27,24,300/- against the foreign dividend income.
The AO concluded that the foreign dividend income is to be taxed at the rate of 15% on a gross basis u/s 115BBD of the Income Tax Act without allowing any set off of losses and deduction u/s 80G of the Act. Further, the set off of the current year’s business loss amounting to Rs 51,70,40,547/- and deduction u/s 80G of the Act amounting to Rs 1,27,24,300/- against the foreign dividend income was denied. On appeal, the CIT(A) upheld the observations of the AO.
A Coram comprising of Shri M Balaganesh, Accountant Member & Shri Rahul Chaudhary, Judicial Member observed that the assessee company is in the business of making investments in various companies and promotion of companies in various fields and it could be construed as an investment company.
The income in the form of the dividend would partake the character of business receipts, though it is taxed under the head’s income from other sourcesundera specific provision contained in section 56(2)(i) of the Income Tax Act.
It was viewed that the non-obstante clause is provided in section 115BBD(1) of the Income Tax Act itself. Hence it would cover both current year loss as well as brought forward business loss. In light of the judicial precedents, the Tribunal held that “the assessee would be entitled to set off of brought forward business losses against foreign dividend income. Hence the assessee would also be eligible for set off of current year loss against foreign dividend income. “
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
