THE PR. COMMISSIONER OF INCOME TAX vs. M/S AMCO BATTERIES LTD

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ITA/259/2022HC KarnatakaKAHC01022258202223 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 assessee argued that the tax effect was below the threshold stipulated in CBDT Circular No. 09/2024, making the appeal non-maintainable. The Revenue requested liberty to revive the appeal if it fell under the exceptions of the mentioned circulars. In light of these submissions, the Court granted the liberty as prayed for by the Revenue. Consequently, the substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the case regarding whether a transfer had occurred or if capital gains tax was leviable. The operative direction was to dispose of the appeal with liberty to revive, leaving the legal questions undecided.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Deputy 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 December 3, 2021, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, in ITA No. 94/Bang/2013. The assessment year in question is 2004-05. The Revenue seeks to set aside the ITAT's order and confirm the order of the Appellate Commissioner, which in turn had confirmed the order of the Deputy Commissioner of Income Tax. The dispute pertains to whether a Joint Development Agreement entered into by the assessee, M/s Amco Batteries Ltd, constituted a transfer of property and consequently attracted capital gains tax.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in holding that the assessee had only given permissive possession, thus not constituting a transfer under Section 53A of the Transfer of Property Act read with Section 2(47) of the Income Tax Act, despite the assessee agreeing to sell its property at 25% in favour of itself and 72% in favour of a developer, which arguably falls under Section 53A of the Transfer of Property Act. 2. Whether the Tribunal's order was perverse in holding that no transfer occurred, ignoring the Joint Development Agreement and related documents that indicated the assessee had extinguished its share in the property and received consideration in the form of an undivided share of 28%. 3. Whether the Tribunal's order was perverse in not appreciating that the conditions under Section 2(47) of the Act were satisfied, making the assessee liable for capital gains tax upon entering the Joint Development Agreement. The assessee contended that the tax effect in the appeal was 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. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions of 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 53A,Section 2(47)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39416-DB ITA No. 259 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD 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. 259 OF 2022 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX ROOM NO.403 WANAPARTHY BLOCK, 4TH FLOOR AAYAKAR BHAWAN, 121, NUNGAMBAKKAM HIGH ROAD CHENNAI – 34

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(1), PRESENT ADDRESS CORPORATE CIRCLE-1(1) ROOM NO.403, WANAPARTHY BLOCK, 4TH FLOOR, AAYAKAR BHAWAN 121 NUNGAMBAKKAM HIGH ROAD CHENNAI - 34 …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M, ADVOCATE)

AND:

M/S AMCO BATTERIES LTD 3RD FLOOR, UNITY BUILDING N R SQUARE BENGALURU - 560 002 AABCA 1726F …RESPONDENT (BY MISS. JINITHA CHATTERGEE, ADVOCATE FOR SRI. S PARTHASARATHI.,ADVOCATE)

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39416-DB ITA No. 259 of 2022

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 APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 94/BANG/2013 DATED 03/12/2021 FOR ASSESSMENT YEAR 2004- 2005 ANNEXURE-D AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(1), CHENNAI AND ETC.

THIS APPEAL, COMING ON FOR FINAL 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 Raviraj Y.V, along with learned counsel Sri Dilip M, for appellants/Revenue and learned counsel Miss Jinitha Chattergee appearing for learned counsel Sri Parthasarathi, 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 3.12.2021 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.94/Bang/2013 for the

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NC: 2024:KHC:39416-DB ITA No. 259 of 2022

assessment year 2004-05, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that assessee had given only permissive possession and as such there was no transfer as required under section 53A of the Transfer of Property Act read with Section 2(47) of the Act ignoring that assessee had agreed to sell its property near Hebbal Flyover at 25% in favour of the assessee and 72% in favour of Developer which falls under the purview of Section 53A of the Transfer of Property Act ?

2.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in holding that there is no transfer ignoring the contents of Joint Development Agreement entered into by assessee and other related documents which established that assessee had extinguished his share in overall property and had received consideration in the form of undivided share in property to an extent of 28%?

3.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in not appreciating that conditions set out Section 2(47) of the Act were fully satisfied in case of assessee and as such assessee was liable to pay capital gain on entering into Joint Development Agreement with Developer?”

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NC: 2024:KHC:39416-DB ITA No. 259 of 2022

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 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 ND List No.: 3 Sl No.: 0

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