RAMVALLABH ASAWA and SONS (HUF) vs. THE DEPUTY COMMISSIONER

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ITA/100023/2014HC KarnatakaKAHC02006469201415 April 2019Bench: G.NARENDAR,BELLUNKE.A.S.5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court answered the substantial question of law in the affirmative. The Court held that the appeal requires to be allowed in part and the order under challenge is set aside. The matter is remitted back to the competent authority for re-assessment in accordance with law, with particular reference to Sections 10(37) and 145A of the Income Tax Act. The Court acknowledged that Section 10(37) was inserted effective April 1, 2005, and Section 145A was substituted effective April 1, 2010. The reasoning for remand is that the applicability of these provisions was not considered during the original assessment, and the Revenue conceded that these points needed examination by the Assessing Officer. No order as to costs was made.

What were the facts?

The assessee, Sri Ramvallabh Asawa & Sons (HUF), represented by its Kartha, filed an appeal before the High Court of Karnataka against an order of the Income Tax Appellate Tribunal (ITAT), Bangalore. The appeal concerns the Assessment Year 2006-07. The assessee's grievance is that the assessments were made without reference to Sections 10(37) and 145A of the Income Tax Act, 1961. The Revenue contended that these arguments were not raised before the lower authorities and therefore require examination by the Assessing Officer. The assessee had declared income by way of interest and compensation on an accrual basis, while the Revenue pointed to the Supreme Court's decision in CIT vs. Ghanshyam, which settled the law on computation of income on a receipt basis.

What were the issues?

1. Whether the appeal requires to be remanded in light of assessments made without reference to Section 10(37) of the Income Tax Act, 1961? (Question of law/mixed law and fact) 2. Whether the appeal requires to be remanded in light of assessments made without reference to Section 145A of the Income Tax Act, 1961? (Question of law/mixed law and fact) Assessee's Contention: The assessments were made without considering the applicability of Sections 10(37) and 145A of the Income Tax Act. The assessee relied on Section 10(37) which provides for exemption of capital gains arising from compulsory acquisition of agricultural land and Section 145A concerning the method of computation of income. The assessee had declared income on an accrual basis. Revenue's Contention: The arguments based on Sections 145A and 10(37) were not canvassed before the authorities below. Therefore, the new case requires examination by the Assessing Officer. The Revenue also referred to the Supreme Court's decision in CIT vs. Ghanshyam, which held that income should be computed on a receipt basis.

Which sections of the Income-tax Act were involved?

Section 10(37),Section 145A,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 15TH DAY OF APRIL, 2019 PRESENT THE HON’BLE MR. JUSTICE G.NARENDAR AND THE HON’BLE MR. JUSTICE BELLUNKE A.S.

I.T.A.NO.100023/2014 BETWEEN :

SRI RAMVALLABH ASAWA & SONS (HUF) SINCE DECEASED REPRESENTED BY KARTHA SRI PADAM NARAYAN ASAWA S/O LATE RAMVALLABH ASAWA AGE: 52 YEARS, R/O. NO. 22, NEHRU COLONY, 4TH CROSS, BELLARY-583-103. ... APPELLANT

(BY SRI M.V.SESHACHALA, SENIOR COUNSEL FOR SRI H.R.KAMBIYAVAR & SRI ARAVIND CHAVAN, ADVOCATES)

AND :

1.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I, AAYAKAR BHAVAN, STAFF ROAD, BELLARY -583102.

2.

THE COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, SADEM ROAD,

GULBARGA-585 105. ... RESPONDENTS (BY SRI Y.V.RAVIRAJ, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE

ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALORE IN ITA NO.1048/BANG/2012 DATED 17.01.2014 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER. THIS APPEAL COMING ON FOR FURTHER HEARING THIS DAY, G.NARENDAR J., DELIVERED THE FOLLOWING: J U D G M E N T Heard the learned senior counsel Sri Seshachala along with Sri H.R.Kambiyavar and Sri Aravind Chavan learned advocates for the appellant and Sri Y.V.Raviraj, Senior standing counsel for the Revenue in detail. 2. The substantial question of law that arises for consideration is: “Whether the appeal requires to be remanded in the light of the fact that assessments have been made without reference to Section 10(37) and 145A of the Income Tax Act?” 3. The learned counsel for the Revenue would vehemently submit that the arguments now being advanced, by placing a reliance on Sections

145A and 10(37) of the Income Tax Act is not the case that was canvassed before the authorities below and that the new case now being canvassed by the appellant requires to be examined by the Assessing Officer, which is not in dispute that is for the Assessment Year 2006-07. The income by way of interest and the compensation amount were declared on accrual basis. That the law with regard to the method of computation of the income came to be settled by the Hon’ble Apex Court in the case of Commissioner of Income Tax Vs. Ghanshyam [(2009) 315 ITR 1 (SC)], wherein the Hon’ble Apex Court was pleased to lay down the law that the computation of income sought to be made on receipt basis. 4. It is not in dispute that under the amended provision of sub-section 37 of section 10 of the Income Tax Act the income in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital Gains” arising from the transfer of

agricultural land and such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India and where such income has arisen from the compensation or consideration for such transfer received by such assessee on or after received, such income would not form part of the total income. 5. Learned counsel for the revenue would vehemently contend that the point now raised by the learned Senior Counsel is not a case that has been canvassed before the Assessing Officer and hence the same requires to be appreciated by the Original Authority. 6. During the course of arguments, the learned Senior counsel placed reliance on the provisions of Section 10(37) of the Income Tax Act which undoubtedly came to be inserted vide amendment dated 01.04.2005 and the provision of

Section 145A came to be substituted with effect from 01.04.2010. 7. In that view of the matter, the substantial question of law is answered in the affirmative. 8. Accordingly, the appeal is allowed in part. The order under challenge is set aside. The appeal is remitted back to the competent authority for re-assessment in accordance with law and more particularly with reference to Sections 10(37) and 145A of the Income Tax Act. In that view of the matter, there shall be no order as to costs.

Sd/- JUDGE

Sd/- JUDGE EM/Kmv

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