Spectra Shares & Scrips Private ... vs Department Of Income Tax

Dy. Commissioner of Income- V/s. M/s. Spectra Shares & Scrips Pvt. tax Circle 3(2), Hyderabad Ltd., Hyderabad

(PAN - AAOCS 4013 R)

(Appellant) (Respondent)

Appellant by : Shri Rajat Mitra DR

Respondent by : Shri V.Ragahvendra Rao Date of Hearing 19.02.2015 Date of Pronouncement 20.02.2015

ORDER

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 was 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 2 ITA No. 1547/Hyd/2014 M/s.Spectra Shares & Scrips Pvt. Ltd, Hyderabad

the Act. In this regard, the Assessing Officer 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 assessee's own case for assessment year 2004-05 rendered vide order dated 3.10.2008 in ITA No.477/Hyd/2008 wherein it was held that no disallowance could be made under S.14A in view 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 assessee. 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 involved in assessee's own case for assessment year 2004-05 has been decided by the Tribunal vide its order dated 3.10.2008 in ITA No. 3 ITA No. 1547/Hyd/2014 M/s.Spectra Shares & Scrips Pvt. Ltd, Hyderabad

477/Hyd/2008, whereby a disallowance made by the Assessing Officer under S.14A was held to be not sustainable as the investment in shares and mutual funds was made by the assessee out of its own funds and disallowance of Rs.51,70,705 was made by the Assessing Officer under S.14A without bringing on record any nexus between the expenditure incurred by the assessee relating to the earning 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 order of the learned CIT(A), deleting a similar disallowance made by the Assessing Officer under S.14A, vide its order dated 23.1.2009 passed in ITA No.1434/Hyd/2008. The issue involved in the year under consideration relating to the disallowance made by the Assessing Officer under S.14A thus, is squarely covered in favour of the assessee by the decision of the Tribunal in assessee's own case for the immediately two preceding years, i.e. 2004-05 and 2005-06 and respectfully following the same, we uphold the impugned order of the learned 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 20th February, 2015.

Sd/- Sd/- (Saktijit Dey) (P.M.Jagtap) Judicial Member Accountant Member

Dt/- 20th February, 2015

Copy forwarded to:

1. M/s. Spectra Shares & Scrips Pvt. Ltd.,

104/105 Pancom Business Centre, Ameerpet, Hyderabad 4 ITA No. 1547/Hyd/2014 M/s.Spectra Shares & Scrips Pvt. Ltd, Hyderabad

2. Dy. Commissioner of Income-tax, Circle 3(2), Hyderabad

3. Commissioner of Income-tax(Appeals) IV, Hyderabad

4. Commissioner of Income-tax III, Hyderabad

5. Departmental Representative, ITAT, Hyderabad.

B.V.S