DCIT, Circle-3(2), Hyderabad, Hyderabad V. M/s Spectra Shares & Scrips Private Limited, Hyderabad

ITA 1547/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87327 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: V RAGAHVENDRA RAO
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1547/HYD/2014 (ASSESSMENT YEARS 2006 - 07) DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(2), HYDERABAD V/S. M/S. SPECTRA SHARES & SCRIPS PVT. LTD., HYDERABAD (PAN AAOCS 4013 R ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJAT MITRA DR RESPONDENT BY : SHRI V.RAGAHVENDRA RAO DATE OF HEARING 19 .0 2 .201 5 DATE OF PRONOUNCEMENT 20.02.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) IV, HYDERABAD DATED 25.7.2014, WHEREBY HE DELETED THE DISALLOWANCE OF RS.44,66,686 MADE BY THE ASSESSING OFFICER UNDER S.14A OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF INVESTMENT AND TRADING IN SHARES AND SECURITIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT DECLARING A LOSS OF RS.45,38,701. IN THE SAID RETURN, DIVIDEND INCOME OF RS.47,19,169 RECEIVED ON SHARES AND RS.2,71,85,732 RECEIVED ON MUTUAL FUNDS WA S CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWANCE ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME WAS, HOWEVER, OFFERED BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF S14A OF I TA NO. 1547/HYD/2014 M/S.SPECTRA SHARES & SCRIP S PVT. LTD, HYDERABAD 2 THE ACT. IN THIS REGARD, THE ASSESSING OFFICE R FOUND THAT THE INCOME RECEIVED BY THE ASSESSEE ON ACCOUNT OF DIVIDEND ON SHARES AND MUTUAL FUNDS WAS ABOUT 14% OF THE GROSS RECEIPTS OF THE ASSESSEE. APPLYING THE SAID RATIO, HE ESTIMATED THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME ON PRO RATA BASIS AT RS.44,66,686, BEING 14% OF THE TOTAL EXPENDITURE OF RS.3,19,104,901 AND MADE A DISALLOWANCE TO THAT EXTENT UNDER S.14A IN THE ASSESSMENT COMPLETED UNDER S.143(3) VIDE ORDER DATED 16.2.2008. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER S.143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A), AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER S.14A FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004 - 05 RENDERED VIDE ORDER DATED 3.10.2008 IN ITA NO. 477 /HYD/2008 WHEREIN IT WAS HELD T HAT NO DISALLOWANCE COULD BE MADE UNDER S.14A IN VIE W OF THE FACT THAT NO MATERIAL HAD BEEN BROUGHT ON RECORD TO SHOW THAT THE INVESTMENT IN SHARES AND MUTUAL FUNDS WAS MADE BY THE ASSESSEE OUT OF BORROWED FUNDS AND THAT ANY DIRECT EXPENDITURE ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME WAS INCURRED BY THE A SSESSEE. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES, A SIMILAR ISSUE INVOL V ED IN ASSESSEE S OWN CA S E FOR ASSESSMENT YEAR 2004 - 05 HAS BEEN DE CIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 3.10.2008 IN ITA NO. I TA NO. 1547/HYD/2014 M/S.SPECTRA SHARES & SCRIP S PVT. LTD, HYDERABAD 3 477/HYD/2008 , WHEREBY A DISALLOWANCE MADE BY THE ASSESSING OFFICER UN D ER S.14 A WAS HELD TO BE NOT SUSTAINABLE AS THE INVESTM E N T IN SHARES AND MUTUAL FUN D S WAS MADE BY THE ASSESSEE OUT OF ITS OWN FUN D S AND DISALLOWANCE OF RS.51,70,705 WAS MADE BY THE ASSESSING OFFICER UN D ER S.14A WITHOUT B R IN G ING ON RECOR D A N Y NEXUS BETWEEN THE EXPENDIT URE INCURRED BY THE ASSESSEE R E L A TING TO THE EA RNING OF THE EXEMPT DIVIDEND INCOME. THE DECISION RENDERED BY THE TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 HAS BEEN SUBSEQUENTLY FOLLOWED IN ASSESSMENT YEAR 2005 - 06, WHILE UPHOLDING THE O RD ER OF THE LEARNED CIT(A) , DELETING A SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER UN D ER S.14A, VIDE ITS ORDER DATE D 23.1.2009 PASSED IN ITA NO.1434/HYD/2008. THE ISSUE INVOLVED IN THE YEAR UN D E R CONSIDERATION REL A TING TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UN D E R S.14A THUS, IS SQU A RELY COV E RED IN F A VOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CA S E FOR THE IMMEDIATELY TWO PRE C EDING YEARS, I.E. 2004 - 05 AND 2005 - 06 AND RESPECTFULLY FOLLO WI N G THE SAME, WE UPHOLD THE IMPUGNED ORD E R OF THE LEA RNED CIT(A) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER S.14A. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20 TH FEBRUARY, 2015. SD/ - SD/ - ( SAKTIJIT DEY) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 20 TH FEBRUARY, 201 5 COPY FORWARDED TO: 1. M/S. SPECTRA SHARES & SCRIPS PVT. LTD., 104/105 PANCOM BUSINESS CENTRE, AMEERPET, HYDERABAD I TA NO. 1547/HYD/2014 M/S.SPECTRA SHARES & SCRIP S PVT. LTD, HYDERABAD 4 2 . DY. COMMISSIONER OF INCOME - TAX, CIRCLE 3(2), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) IV, HYDERABAD COMMISSIONER OF INCOME - TAX III, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S