Sumitra Securities Ltd. V. Deputy Commissioner of Income Tax (Assts.), Hyderabad

ITTA/115/2007

AI Insights

The case involves M/s. Sumitra Securities Ltd., the appellant, contesting an order by the Deputy Commissioner of Income Tax (Assts.), Hyderabad, regarding the denial of a deduction under Section 80M for the assessment year 1994-95. The primary legal contention was whether the appellant was entitled to a deduction for dividends received, offset by dividends declared. The Tribunal and subsequent court found that the appellant failed to provide necessary particulars of the investments and the related income, leading to a conclusion that the net dividend income was negative, thus no deduction could be claimed. The court also addressed the applicability of various precedents cited by the appellant, concluding that they did not support the appellant's case under the specific facts presented.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 796308 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 11-02-2014
• Assessment Year: misc
• Other Referred Cases: Veecumsees vs. Commissioner of Income Tax, Commissioner of Income Tax vs. Kanoria Investments (P) Ltd., Commissioner of Income Tax vs. Mahendra Sobhagchand Shah, Commissioner of Income Tax vs. National and Grindlays Bank Ltd., Radhasoami Satsang vs. Commissioner of Income Tax, Commissioner of Income Tax vs. Darius Pandole
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: Y RATNAKAR
• Keywords: Assessment year 1994-95; Income Tax; Interest on Loans; Dividend Deduction
• Section: 57(iii); 80M; 260 A(3)

Judgement Text

" THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. No.115 of 2007 DATED:11.2.2014 Between: M/s. Sumitra Securities Ltd., Hyderabad. … Appellant and Deputy Commissioner of Income Tax (Assts.), Hyderabad. ….Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. No.115 of 2007 Judgment: (per Sri Sanjay Kumar,J) This appeal was admitted on 5.3.2007 but no question of law was formulated in accordance with Section 260 A(3) of the Income Tax Act, 1961 (hereinafter, referred to as ‘the Act’). However, as it has already been admitted, we are bound to examine the matter on merits. The appeal was filed by the assessee against the order dated 21.7.2006 passed by the Income Tax Appellate Tribunal, Hyderabad Bench-A, Hyderabad, in the context of the assessment year 1994-95. The suggested questions of law in the appeal petition are as under: 1. Whether on the facts and in the circumstances of the case, the appellant is entitled to deduction of the sum of Rs.7,50,000/- being dividend declared by it under Section 80M against dividend received by it amounting to Rs.7,53,381/- ? 2. Whether on the facts and in the circumstances of the case, when the appellant has borrowed loans for its composite business comprising of various activities, is it open to the Assessing Officer to deduct under Section 57(iii) any interest on loans paid by the appellant as expenditure incurred “wholly and exclusively” for earning the dividend income ? 3. Whether the Income Tax Appellate Tribunal can ignore to consider the cases cited by the appellant as of ‘no application in the present case’ without even looking into what are the facts therein and without even mentioning what cases were cited and how the said cases are not applicable ? However, upon hearing the learned counsel for the parties and perusing the record, we frame the question of law which would arise for consideration in this appeal as under: “Whether the Tribunal was correct in disallowing the exemption claimed by the assessee under Section 80-M of the Act? The assessee is a company involved in the business of finance and investment in shares. It claimed a deduction under Section 80M of the Act in respect of the dividend received by it during the relevant financial year. However, the Assessing Officer found that the assessee had borrowed amounts for the purpose of business on which interest amounts had been paid and held that the assessee, not being a trader in shares, could not claim the deduction as there was no net dividend income available. The assessee raised this issue in appeal before the Commissioner of Income Tax (Appeals) in I.T.A. No. 72/Tr/SR-3/CIT(A)I/98-99. The Commissioner thereupon called upon the assessee to explain and give detailed particulars of the transactions in the subject shares during the year. But the assessee failed to explain the said transactions with evidence of the source of investment and details of the interest earned and paid thereon. The Commissioner specifically recorded in her order that, despite several opportunities, the assessee failed to produce the required particulars. On this ground, the Commissioner held against the assessee leading to the filing of the appeal before the Tribunal. On facts, the Tribunal confirmed that the net dividend receipt of the assessee during the previous year, after deducting the interest payment relatable to the investment on which the above dividend was earned, would be a negative figure and accordingly held that the assessee was not entitled to the claimed deduction under Section 80M of the Act (since deleted w.e.f. 1st April, 2004). Sri Y. Ratnakar, learned counsel for the assessee, contended that as the assessee had been granted the claimed deduction for the assessment years 1992-93, 1993-94 and again in 1995-96, there was no rationale in not extending the same for the assessment year 1994-95. He relied on case law in support of his contention that the Tribunal erred in not accepting the claim of the assessee as to this deduction. Veecumsees vs. Commissioner of Income Tax[1]; Commissioner of Income Tax vs. Kanoria Investments (P) Ltd.[2]; Commissioner of Income Tax vs. Mahendra Sobhagchand Shah[3] and Commissioner of Income Tax vs. National and Grindlays Bank Ltd.[4] are relied upon in the context of how business loans and business expenditure should be dealt with. Apropos the extension of the claimed deduction for the relevant year on par with the other financial years, learned counsel relied on Radhasoami Satsang vs. Commissioner of Income Tax[5] and Commissioner of Income Tax vs. Darius Pandole[6]. These judgments relate to the principle of issue estoppel and consistency. However, we are in agreement with the Tribunal that the case law cited by the assessee could not be applied to the case on hand. The principle or ratio of a decision would have to be applied after drawing comparable parity on the ascertained factual position. However, in the present case, the assessee admittedly failed to produce the particulars of investment in shares during the relevant period despite the Commissioner of Income Tax (Appeals) granting several adjournments to enable it to do so. Having failed to produce the material called for by the appellate authority, it is not open to the assessee to advance arguments on the basis of its own assessment of the factual position. Once the Commissioner called for particulars, relevant or otherwise, the assessee was bound to produce the same and having failed to do so. Further, the assessee did not challenge any of the findings that were arrived at by the authorities below as perverse or irrational. On facts, the Tribunal confirmed the findings of the authorities below that the net dividend receipt of the assessee during the previous year, after deducting interest payment relatable to the investment, was a negative figure. This factual aspect cannot be interfered with by this Court under Section 260 A of the Act. We are therefore of the opinion that the Tribunal was correct in denying the deduction claimed by the assessee, given the facts and circumstances obtaining. The question of law is accordingly answered in the affirmative. The I.T.T.A. is devoid of merit and is accordingly dismissed. No order as to costs. ________________ K.J. SENGUPTA, CJ ______________ SANJAY KUMAR, J 11.2.2014 PNB [1] [1996] 220 ITR 185 (SC) [2] [1998] 232 ITR 7 (Cal) [3] [1993] 203 ITR 178 (Bom) [4] [1993] 202 ITR 559 (Cal) [5] [1992] 193 ITR 329 (SC) [6] [2011] 330 ITR 485 (Bom) "