THE PR. COMMISSIONER OF INCOME-TAX vs. KOLA VENKAT RAMA NAIDU

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ITA/103/2023HC KarnatakaKAHC01012742202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions of the cited CBDT Circulars. The assessee contended that the tax effect was below the threshold specified in CBDT Circular No. 09/2024, making the appeal non-maintainable. The Court granted the liberty as prayed for by the Revenue. However, the Court explicitly kept the substantial questions of law open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the substantial questions of law. The operative direction was to dispose of the appeal with liberty to revive, and the questions of law were left undecided.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income-Tax and the Commissioner of Income-Tax (Appeal), filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated August 5, 2022, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2010-2011 and challenges the ITAT's decision regarding the taxation of capital gains. The assessee is Kola Venkat Rama Naidu. The dispute centers on when capital gains should be recognized: in the year of the Joint Development Agreement (2010-2011), the year of possession handover to the builder (2014-2015), or the year the assessee actually received their share of constructed area. The ITAT had ruled in favor of the assessee, holding that capital gains should be taxed in the year of actual receipt of the constructed area.

What were the issues?

1. Whether the ITAT's order is perverse in holding that capital gains should be taxed in the Assessment Year of actual receipt of the constructed area, when alternatively, capital gains under Section 45 of the Act should have been offered in the year of entering into the Joint Development Agreement (2010-2011) or the year of possession handover (2014-2015), as conditions for 'transfer' under Section 2(47) were satisfied. 2. Whether the ITAT was correct in not appreciating that a 'transfer' under Section 53A of the Transfer of Property Act occurred and that the ratio in the case of T.K. Dayalu is applicable. Assessee's Contention: The assessee argued that the tax effect in this appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in view of 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 outlined 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 45,Section 2(47),Section 53A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41275-DB ITA No. 103 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH 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. 103 OF 2023 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX CENTRAL, 3RD FLOOR C R BUILDING QUEENS ROAD BENGALURU 560001

2.

THE COMMISSIONER OF INCOME TAX (APPEAL)-6 PRESENT ADDRESS DCIT, CENTRAL CIRCLE -1(3) 3RD FLOOR, C R BUILDING QUEENS ROAD BENGALURU 560001 …APPELLANTS (BY SRI. DILIP M.,ADVOCATE A/W SRI. RAVIRAJ Y V, ADVOCATE)

AND:

KOLA VENKAT RAMA NAIDU NO 13, 4TH CROSS 1ST MAIN ROAD DOLLARS COLONY BENGALURU 560094 PAN ABMPN 6059K …RESPONDENT (BY SRI. G.S. NAGHARISH.,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A 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

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41275-DB ITA No. 103 of 2023

APPELLANT TRIBUNAL, BENGALURU IN ITA NO. 206/BANG/2020 DATED 05.08.2022 FOR ASSESSMENT YEAR 2010-2011 ANNEXURE- C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(3), BENGALURU AND ETC.

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

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. Dilip M., for appellants/Revenue and learned counsel Sri G.S. Nagharish, learned counsel for the 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 05.08.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA No.206/Bang/2020 for the assessment year 2010-11, raising the following substantial questions of law: “1. Whether the facts and circumstances of the case, the Tribunal’s order can be said as perverse in nature in holding that capital gain

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NC: 2024:KHC:41275-DB ITA No. 103 of 2023

has to be taxed in the Assessment Year in which assessee actually received his share of constructed Area ignoring that capital gains under section 45 of the Act should have been offered in the year of entering into Joint Development Agreement i.e. 2010-2011 or alternatively in the year 2014-15 being the year of handing over possessing to the builder as conditions set out in section 2(47) are satisfied to hold that there is Transfer in accordance to parameters of said section?

2.

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not appreciating that there is transfer under section 53A of the Transfer of Property Act and the ration laid down in the case of T.K.Dayalu is applicable to facts of present case?”

3.

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.

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NC: 2024:KHC:41275-DB ITA No. 103 of 2023

4.

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.

5.

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

BS List No.: 4 Sl No.: 2

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