PRINCIPAL COMMISSIONER OF INCOME TAX-4 vs. M/S MAHARASTRA APEX CORPORATION LTD

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ITA/102/2021HC KarnatakaKAHC01015277202024 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal with liberty granted to the Revenue to revive it as prayed for by its counsel. The Court noted the submissions made by both parties, particularly the assessee's reliance on CBDT Circular No. 09/2024 regarding the tax effect threshold for appeals. The Revenue sought liberty to revive the appeal based on exceptions in the circulars. Consequently, the appeal was disposed of with the requested liberty. The substantial question of law was kept open to be adjudicated in an appropriate proceeding. No specific finding was made on the merits of the disallowance or the applicability of Section 28(1)(iv) of the Act.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-4 and the Deputy Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated September 20, 2019, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2008-2009 and challenges the ITAT's decision to set aside a disallowance made by the assessing authority. The disallowance was in respect of an amount surrendered by depositors, specifically the principal portion of the amount, amounting to Rs. 3,77,52,631/-. The Revenue contended that this retained portion represented a benefit accrued to the assessee in the course of business and was taxable under Section 28(1)(iv) of the Act.

What were the issues?

1. Whether, on the facts and circumstances of the case, the Tribunal was right in law in setting aside the disallowance made by the assessing authority in respect of the amount surrendered by depositors out of the principal portion of the amount to an extent of Rs. 3,77,52,631/-, ignoring the provisions of Section 28(1)(iv) of the Act, wherein it was stated that the part of the deposits retained by the assessee is a benefit accrued to the assessee in the course of carrying on the business and is liable for tax under Section 28(1)(iv) of the Act? Assessee's Contention: The assessee argued that the appeal should not be entertained by the High Court due to the tax effect being less than Rs. 2 Crores, citing CBDT Circular No. 09/2024 dated September 17, 2024, which binds the Revenue. Revenue's Contention: The Revenue requested liberty to revive the appeal if the matter falls within the exceptions provided in Circular No. 09/2024 and Circular No. 5/2024 dated March 15, 2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 28(1)(iv)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39705-DB ITA No. 102 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 102 OF 2021 BETWEEN:

1.

PRINCIPAL COMMISSIONER OF INCOME TAX-4, BMTC COMPLEX, KORAMANGALA, BENGALURU.

2.

DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BMTC COMPLEX, KORAMANGALA, BENGALURU. …APPELLANTS (BY SRI SANMATHI E. I., ADV.)

AND:

M/S. MAHARASTRA APEX CORPORATION LTD., SYNDICATE HOUSE, MANIPAL, PAN: AACCM2741B. …RESPONDENT (BY SRI TATA KRISHNA, ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 20/09/2019 PASSED IN ITA NO.253/BANG/2018, FOR THE ASSESSMENT YEAR 2008-2009, PRAYING THIS COURT TO (A) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND ETC.

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

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39705-DB ITA No. 102 of 2021

CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri.Sanmathi.E.I., for appellants/Revenue and learned counsel Sri.Tata Krishna for respondent/assessee. 2. The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 20.09.2019 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.253/Bang/2018 for the assessment year 2008-09. 3. This

Court,

admitted the appeal on 17.02.2022to consider the following substantial question of law: “Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside disallowance made by assessing authority in respect of amount surrendered by depositors out of

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NC: 2024:KHC:39705-DB ITA No. 102 of 2021

principal portion of the amount to an extent of Rs.3,77,52,631/- ignoring the provisions of section 28(1)(iv) of the Act, wherein, it was clearly stated that the part of the deposits retained by the assessee is the benefit accrued to the assessee in the course of carrying on the business and the same is liable for tax under section 28(1)(iv) of the Act?” 4. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue. 5. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

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NC: 2024:KHC:39705-DB ITA No. 102 of 2021

6.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

MPK List No.: 2 Sl No.: 19

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