THE PR. COMMISIONER OF INCOME-TAX CIT(A) vs. M/S TEJAS NETWORKS LTD

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ITA/129/2020HC KarnatakaKAHC01015421202014 October 2026Bench: CHIEF JUSTICE,K.S. HEMALEKHA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial questions of law projected by the Revenue did not arise from the impugned order passed by the ITAT in the Revenue's appeal. The Court noted that the questions pertained to the allowance for deduction under Section 35(2AB) of the Act, which was the subject matter of the Assessee's appeal before the ITAT (IT(TP)A.No.281/Bang/2014), and not the Revenue's appeal (IT(TP)A.No.237/Bang/2014). The Revenue had filed a separate appeal, ITA.No.155/2020, against the ITAT's order in the Assessee's appeal. Consequently, the present appeal was deemed misconceived. The Court did not decide on the merits of the disallowance under Section 35(2AB) or any other provision. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax, filed an appeal under Section 260A of the Income Tax Act, 1961, before the High Court of Karnataka. The appeal challenged an order dated October 1, 2019, passed by the Income Tax Appellate Tribunal (ITAT) in IT(TP)A.No.237/Bang/2014 for Assessment Year 2009-10. This ITAT order had confirmed an order of the Dispute Resolution Panel (DRP) and an assessment order dated January 31, 2014, passed by the Assessing Officer under Section 143(3) read with Section 144C(13) of the Act. The Revenue sought to set aside the ITAT's order and confirm the Assessing Officer's order.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was justified in directing the assessing authority to re-examine the issue of disallowance under Section 35(2AB) of the Act concerning product development expenditure, by following this Court's judgment in W.P.No.7004 of 2014, when that decision was under challenge in W.A.No.2473/2015 which was pending? (Question of law) 2. Whether, on the facts and in the circumstances, the Tribunal was justified in directing the assessing authority to re-examine the issue of disallowance under Section 35(2AB) of the Act concerning product development expenditure, ignoring that the assessing authority had rightly rejected the claim as the assessee had not fulfilled the conditions of the said section, and the expenditure was otherwise not allowable under Section 35(1)(i) read with Section 43(4)(ii) of the Act? (Question of law) Assessee's contentions: Not recorded. Revenue's contentions: The Revenue argued that the substantial questions of law projected by them did not arise from the impugned ITAT order. They contended that these questions related to the allowance for deduction under Section 35(2AB) of the Act, which was the subject matter of the Assessee's appeal (IT(TP)A.No.281/Bang/2014), not the Revenue's appeal (IT(TP)A.No.237/Bang/2014).

Which sections of the Income-tax Act were involved?

Section 260A,Section 35(2AB),Section 143(3),Section 144C(13),Section 35(1)(i),Section 43(4)(ii)

AI-generated summary — verify with the full judgment below

HC-KAR IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 14TH DAY OF OCTOBER, 2026

PRESENT

THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE

AND

THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA

INCOME TAX APPEAL NO.129 OF 2020

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX, CIT(A) CENTRAL CIRCLE,

C.R. BUILDING, QUEEN'S ROAD,

BENGALURU-560 001.

2.

THE ASST. COMMISSIONER OF INCOME-TAX,

CIRCLE-12(4), PRESENT ADDRESS

ACIT, CENTRAL CIRCLE-2(1),

C.R. BUILDING, QUEEN'S ROAD,

BENGALURU-560 001. …APPELLANTS

(BY SRI. RAVI RAJ Y.V., ADVOCATE)

AND:

M/S. TEJAS NETWORKS LTD., PLOT NO.25, 5TH FLOOR, J.P. SOFTWARE PARK, ELECTRONIC CITY, PHASE-I, HOSUR ROAD, BENGALURU–560 100. …RESPONDENT

(BY SRI. ANNAMALAI S., ADVOCATE)

Digitally signed by MAHALAKSHMI B M Location: High Court of Karnataka HC-KAR THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.237/BANG/2014 DATED 01.10.2019 FOR ASSESSMENT YEAR 2009-2010 ANNEXURE-D CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MRS. JUSTICE K.S. HEMALEKHA

ORAL JUDGMENT

(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)

1.

The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 [the Act] impugning the order dated 01.10.2019 [the impugned order] passed by the learned Income Tax Appellate Tribunal [the ITAT] in IT(TP)A.No.237/Bang/2014 in respect of Assessment Year [AY] 2009-10. 2. The Revenue had preferred the said appeal impugning the Assessment Order dated 31.01.2014 passed by the Assessing Officer [the AO] under Section 143(3) read with Section 144C(13)

HC-KAR of the Act pursuant to directions issued by the Dispute Resolution Panel [the DRP]. 3. The Revenue had projected the following substantial questions of law for consideration of this Court: “1. Whether on the facts and in the circumstances of the case, the Tribunal is justified in directing the assessing authority to re-examine the issue pertaining to disallowance made under section 35(2AB) of the Act relating to produce development expenditure by following the principles laid down by this Hon'ble Court in judgment passed in W.P.No.7004 of 2014 dated 24/04/2015 when said decision has been challenged in W.A.No.2473/2015 which is pending before this Hon'ble Court?

2.

Whether on the facts and in the circumstances of the case, the Tribunal is justified in directing the assessing authority to re-examine the issue pertaining to disallowance made under section 35(2AB) of the Act relating to produce development expenditure ignoring that assessing authority rightly rejected the claim made under section 35(2AB) of the Act relating to product development expenditure since assessee has not fulfilled the conditions set out said section and even otherwise said expenditure is also not allowable under section 35(1)(i) read with section 43(4)(ii) of the Act?”

4.

Concededly, the said questions do not arise from the impugned order passed by the learned ITAT in the Revenue’s appeal. The said questions relate to allowance for deduction under Section 35(2AB) of the Act, which is the subject matter of the Assessee’s appeal [IT(TP)A.No.281/Bang/2014].

HC-KAR

5.

The Revenue has preferred a separate appeal being ITA.No.155/2020 against the learned ITAT’s order in IT(TP)A.No.281/Bang/2014. 6. In view of the above, the present appeal is misconceived and accordingly, is dismissed.

Sd/- (VIBHU BAKHRU) CHIEF JUSTICE

Sd/- (K.S. HEMALEKHA) JUDGE

AT List No.: 2 Sl No.: 12.1

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