THE PR COMMISSIONER OF INCOME -TAX vs. M/S GOKALDAS IMAGES PVT LTD

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ITA/132/2020HC KarnatakaKAHC01024400202027 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal in view of the submissions made by both parties. The assessee contended that the tax effect was below the threshold stipulated in CBDT Circular No. 09/2024, making the appeal non-maintainable. The Revenue sought liberty to revive the appeal if it met the exceptions outlined in the circulars. Consequently, the Court granted the liberty as prayed for by the Revenue. The substantial question of law framed at the time of admission was kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the transfer pricing method or the ALP determination.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income-Tax and the Deputy Commissioner of Income-Tax, has filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 05.02.2020 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to the assessment year 2011-12 and challenges the ITAT's decision regarding the determination of the Arm's Length Price (ALP). The High Court admitted the appeal on 17.12.2020 to consider a substantial question of law concerning the appropriateness of the 'Integral CUP' method used by the Tribunal. The dispute involves the tax effect, which is stated to be less than Rs. 2 Crores.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Integral CUP method is the most appropriate method for determining the Arm's Length Price without examining the necessary conditions for its application and failing to appreciate that transactions should be exactly similar for its application, which is not possible in the instant case? (Question of law/mixed law and fact, concerning the application of transfer pricing methods under the Income Tax Act, 1961). Assessee's Contention: 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 17.09.2024, which binds the Revenue. Revenue's Contention: The Revenue seeks liberty to revive the appeal if the matter falls within the exceptions provided under CBDT Circular No. 09/2024 dated 17.09.2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40412-DB ITA No. 132 of 2020

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH 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. 132 OF 2020

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME -TAX, CIT (A), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU - 560 095.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU - 560 095. …APPELLANTS

(BY SRI. SUSHAL TIWARI, ADVOCATE)

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40412-DB ITA No. 132 of 2020

AND:

M/S. GOKALDAS IMAGES PVT. LTD., 7 AND 12, INDL. SUBURB, 2ND STAGE, YESHWANTHPUR, BENGALURU - 560 022, PAN: AAACG6637Q. …RESPONDENT

(BY SRI. ANNAMALAI S, ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05/02/2020 PASSED IN IT(TP)A NO.439/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ETC.

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

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

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NC: 2024:KHC:40412-DB ITA No. 132 of 2020

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

Heard the learned counsel Sri.Sushal Tiwari for appellants/Revenue and learned counsel Sri. Annamalai.S., 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 05.02.2020 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.439/Bang/2016 for the assessment year 2011-12.

3.

This Court, admitted the appeal on 17.12.2020 to consider the following substantial question of law:

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law holding that Integral CUP method is most appropriate method for determining Arm's Length Price

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NC: 2024:KHC:40412-DB ITA No. 132 of 2020

without examining the necessary conditions for application of said method and failing appreciate that transactions should be exactly similar for the application of said method which is not possible in the instant case?"

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:40412-DB ITA No. 132 of 2020

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

SMJ List No.: 4 Sl No.: 24

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