INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO not eliminated dividend income from specified foreign company before setting off of losses -

Assessee filed return declaring loss of Rs. 43,52,68,63,114 under normal provisions of the Act and income of Rs. 49,03,02,282 under section 115JB. Assessment was completed under section 143(3) read with section 144C(3) determining total loss of Rs. 36,96,63,03,000 under normal provisions of the Act and book profit of Rs. 3,90,02,85,750 under section 115JB. Subsequently, CIT invoked section 263 on the ground that assessee received dividend from specified foreign company as defined under section 115BBD of Rs. 14,21,97,83,025 and as per section 115BBD, dividend amount was required to be taxed separately @ 15% which was not done by AO. Held: After careful reading of section 115BBD, it becomes clear that there is no provision in that section to eliminate dividend income from specified foreign company before setting off of losses. The taxable income has to be determined as per provisions of the Act, i.e., first to compute total income based on Chapter-IV and then apply Chapters-VI and VI-A in order to compare aggregation and set-off of losses. After determining taxable income by applying above Chapters and if still there is profit, then such profit has to be taxed according to prevailing rates as per various applicable provisions of the Act. Since assessee was having substantial loss, as per Chapter-VI, taxable income was to be adjusted first before applying any other provisions contained in the Act, particularly when there is no specific provision contained in section 115BBD wherein to impose restriction on carrying forward any loss similar to provision contained in section 115BBE and section 115BBDA. Therefore, assessment order was neither erroneous nor prejudicial.

REFERRED :

FAVOUR : in assessee's favour

A.Y. : 2013-14

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