DCIT, Circle - 16(2), Hyderabad V. M/s Maruthi Securities Ltd., Secunderabad

ITA 1345/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0350 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 30-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Earning of tax free income; Notional interest; Revised return
• Section: 143(3); 14A; 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 1303/HYD/2014 ASSESSMENT YEAR: 2007-08 MARUTI SECURITIES LIMITED, HYDERABAD [PAN: AABCM3651M] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD (APPELLANT) (RESPONDENT) I.T.A. NO. 1345/HYD/2014 ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD VS MARUTI SECURITIES LIMITED, HYDERABAD [PAN: AABCM3651M] (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR DATE OF HEARING : 30 - 0 3 - 201 5 DATE OF PRONOUNCEMENT : 17 - 04 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, HYDERABA D DATED I.T.A. NOS. 1303 & 1345/HYD/2014 MARUTI SECURITIES LTD., :- 2 -: 31-01-2014 GIVING PARTIAL RELIEF ON THE TWO ADDITIO NS MADE BY ASSESSING OFFICER (AO). 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN T HE BUSINESS OF INVESTMENT IN SECURITIES, FILED ITS RETURN OF INCOM E FOR THE AY.2007-08 ON 30-10-2007 AND DECLARED A TOTAL INCOME OF RS. 71,39 ,680/- UNDER NORMAL COMPUTATION OF INCOME TAX ACT [ACT]. ASSESS EE-COMPANY FILED REVISED RETURN OF INCOME ON 31-03-2009 REVISING THE INCOME AND CLAIMING LOSS AT RS.2,95,61,957/- UNDER NORMAL COMP UTATION AND BOOK PROFIT FOR THE PURPOSE OF 115JB AT NIL. THE ASSESS MENT WAS COMPLETED U/S. 143(3) BY THE AO ON 31-03-2009 DETERMINING LOS S AT RS.2,37,51,957/- AFTER MAKING AN ADDITION OF RS.58, 10,000/- TOWARDS NOTIONAL INTEREST ON CERTAIN ADVANCES. AGGREIVED B Y THE SAID ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND AS THE FIRST APPELLATE AUTHORITY CONFIRMED THE ORDER OF THE AO, HAS PREFER RED FURTHER APPEAL TO ITAT. 2.1 SUBSEQUENTLY, THE CIT-IV, HYDERABAD FOUND THE S AID ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF REVENUE, AND ACCORDINGLY PASSED ORDER U/S. 263 ON 26-03-2012. A SSESSEE AGGRIEVED BY THE SAID REVISIONARY ORDER HAS PREFERRED AN APPE AL BEFORE ITAT, HYDERABAD VIDE ITA NO.841/HYD/2012. 2.2 PURSUANT TO THE DIRECTIONS OF CIT, THE AO COMPL ETED THE ASSESSMENT U/S. 143(3) R.W.S.263 OF THE ACT DETERMI NING THE TOTAL INCOME OF ASSESSEE AT RS.3,14,29,958/- UNDER NORMAL PROVIS IONS BY MAKING THE FOLLOWING DISALLOWANCES: I. DISALLOWANCE U/S. 14A AMOUNTING TO RS.64,86,571/- II. ADDITION ON ACCOUNT OF VARIATION OF CLOSING STOCK A MOUNTING TO RS.4,86,94,344. I.T.A. NOS. 1303 & 1345/HYD/2014 MARUTI SECURITIES LTD., :- 3 -: 2.3 AGGRIEVED BY THE ABOVE ASSESSMENT, ASSESSEE IS IN APPEAL. 3. LD.CIT(A) AFTER CONSIDERING ASSESSEE'S SUBMISSIO NS DELETED THE ADDITION U/S. 14A WHILE CONFIRMING THE ADDITION ON VALUATION OF CLOSING STOCK. HENCE, CROSS APPEALS. 4. AT THE OUTSET, IT WAS SUBMITTED THAT THE ITAT HA S CONSIDERED THE ORDER OF CIT U/S. 263 IN ITA NO.841 & 1176/HYD/2012 DT. 03-12-2014, WHEREIN THE PROCEEDINGS WERE UPHELD BUT THE DIRECTI ON OF LD.CIT ON ISSUE OF VALUATION OF CLOSING STOCK WAS NOT UPHELD, WHEREAS ON ISSUE OF SECTION 14A, THE DEDUCTION WAS MODIFIED TO CONSIDER 10% OF SUCH EXEMPTED INCOME AS EXPENDITURE U/S. 14A. CONSEQUEN TLY, IT SUBMITTED THE ORDER OF LD.CIT(A) REQUIRES MODIFICATION. 5. ON THE ISSUE OF VALUATION OF CLOSING STOCK, THE ITAT VIDE PARA 21 AND 22 OF THE ORDER DID NOT UPHOLD THE DIRECTION OF CIT. THEREFORE, IN THIS CONSEQUENTIAL ORDER, THE ADDITION CANNOT BE SU STAINED. THEREFORE, AO IS DIRECTED TO DELETE THE SAME. CIT(A) ORDER ST AND MODIFIED AND ASSESSEE APPEAL ON THIS ISSUE IS ALLOWED. 6. ON THE ISSUE OF DISALLOWANCE U/S. 14A, WHILE UPH OLDING DIRECTION OF CIT U/S. 263 TO EXAMINE 14A, CONSISTENT WITH THE ORDER OF ITAT IN ASSESSEE'S OWN CASE IN ITA NO. 468/HYD/2009 AND OTH ERS DT. 05-09- 2014 FOR THE AY. 2005-06 AND 2006-07, WE UPHOLD DIS ALLOWANCE OF EXPENDITURE U/S. 14A AT 10% OF EXEMPT INCOME EARNED DURING THE YEAR. CONSEQUENTLY, ON THE ISSUE ALSO LD.CIT(A) ORDER STA NDS MODIFIED AND AO IS DIRECTED TO DISALLOW 10% OF THE EXEMPT INCOME U/ S. 14A AS EXPENDITURE. REVENUE'S APPEAL IS ALLOWED PARTIALLY . I.T.A. NOS. 1303 & 1345/HYD/2014 MARUTI SECURITIES LTD., :- 4 -: 7. IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED WHER EAS REVENUE'S APPEAL IS ALLOWED PARTIALLY. ORDER PRONOUNCED IN OPEN COURT ON 17 TH APRIL, 2015. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED 17 TH APRIL, 2015 TNMM COPY TO : 1. M ARU TI SECURITIES LIMITED, FLAT NO.66, GROUND FLOOR, PA R K VIEW ENCLAVE, MANOVIKAS NAGAR, SECUNDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), AAYAKAR BHAVAN, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD 4. CIT-IV, HYDERABAD 5. D.R. ITAT, HYDERABAD