THE PR. COMMISSIONER OF INCOME TAX vs. XINDIA STEELS LTD. ,

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ITA/19/2023HC KarnatakaKAHC01001451202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The Revenue's counsel requested liberty to revive the appeal if the matter fell within the exceptions of the relevant CBDT Circulars (No. 09/2024 and No. 5/2024). The Court granted this liberty. Consequently, the appeal was disposed of with the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the questions of law raised by the Revenue. The operative direction was to dispose of the appeal with liberty to revive.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Assistant Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, before the High Court of Karnataka. The appeal challenges an order dated May 31, 2022, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru, in ITA No. 361/Bang/2019. The assessment year in question is 2014-15. The ITAT had deleted additions made by the lower authorities. The appeal was filed by the Revenue against Xindia Steels Ltd., the assessee. The procedural history involves orders from the Assessing Officer, the First Appellate Authority, and the ITAT.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the Tribunal was correct in deleting an addition of ₹2,37,76,873/- on account of disallowance of interest on borrowed funds, given that the assessee allegedly failed to provide corroborative evidence that funds advanced were exclusively for business purposes? (Question of law and fact, concerning Section 36(1)(iii) of the Income Tax Act). 2. Whether the Tribunal was correct in deleting an addition of ₹70,52,9990/- on account of disallowance of Corporate Social Responsibility (CSR) expenses, considering the assessee's alleged failure to substantiate that the expenditure was for the claimed purpose and directly incurred by the company? (Question of law and fact, concerning Section 37(1) of the Income Tax Act). 3. Whether the Tribunal's order was perverse in deleting additions made by the Assessing Authority, ignoring findings and materials on record upheld by the First Appellate Authority? (Question of law). Assessee's Contention: The assessee argued that the tax effect in the appeal was less than ₹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 sought liberty to revive the appeal if the matter fell within the exceptions provided under Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 36(1)(iii),Section 37(1)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41831-DB ITA No. 19 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. 19 OF 2023 BETWEEN:

1.

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

2.

THE ASST COMMISSIONER OF INCOME TAX CIRCLE-1, PRESENT ADDRESS DCIT CENTRAL CIRCLE, AAYAKAR BHAVAN, STAFF ROAD FORT BALLARI-583102 …APPELLANTS (BY SRI. M DILIP .,ADVOCATE A/W SRI. RAVIRAJ Y V, ADVOCATE)

AND:

XINDIA STEELS LTD. , KUNIKERE AND HIREBAGINAL VILLAGE, GINIGERA, KOPPAL TQ AND DIST PAN AAACX0521A …RESPONDENT (BY SRI. S PARTHASARATHI.,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41831-DB ITA No. 19 of 2023

APPELLATE TRIBUNAL, BENGALURU IN ITA NO.361/BANG/2019 DATED 31.05.2022 FOR ASSESSMENT YEAR 2014-2015 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE- 1, BELLARY 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

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

Heard the learned counsel Sri. Dilip. M., along with Sri. Raviraj. Y.V., for appellants/Revenue and learned counsel Sri. S. Parthasarathi., 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 31.05.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA No.361/Bang/2019 for the assessment year 2014-15, raising the following substantial questions of law:

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NC: 2024:KHC:41831-DB ITA No. 19 of 2023

“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting addition of `2,37,76,873/- made on account of disallowance of interest on borrowed funds ignoring that assessee was not able to establish with corroborative evidence that the funds advanced by the assessee to persons were exclusively for the purpose of business? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting addition of `70,52,9990/- made on account of disallowance of Corporate Social Responsibility expenses ignoring that as the assessee failed to substantiate that the expenditure incurred by the company has been expended for the purpose for which it has been claimed and the expenditure has been directly incurred by the Company? 3. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in deleting the additions made by assessing

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NC: 2024:KHC:41831-DB ITA No. 19 of 2023

authority ignoring the findings and materials brought on record by assessing authority which has been upheld by first appellate authority?”

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.

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

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NC: 2024:KHC:41831-DB ITA No. 19 of 2023

counsel for the revenue. However, the questions of law are 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.: 28

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