THE PR. COMMISSIONER OF INCOME TAX vs. M/S INDIABUILD HOMES PVT LTD

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ITA/278/2023HC KarnatakaKAHC01020739202327 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 regarding the tax effect and the relevant CBDT circulars. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no specific finding was given on the merits of the questions of law. The operative direction was to dispose of the appeal with liberty to revive, without deciding the substantial questions of law.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income-Tax and the Income-Tax Officer, 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 11.10.2021 passed by the Income Tax Appellate Tribunal, 'B' Bench, Bengaluru, in ITA.No.184/Bang/2019 for the assessment year 2015-16. The dispute pertains to the disallowance of business loss claimed by the assessee, M/s. Indiabuild Homes Pvt. Ltd. The Tribunal had remanded the matter to the assessing authority for fresh consideration. The tax effect in this appeal was 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's order remanding the matter to the assessing authority is perverse, considering the assessing authority's finding that the assessee's business had not commenced during the financial year, thus disallowing the business loss claim (Section 37 of the Income Tax Act, 1961). 2. Whether the Tribunal was right in law in not following the Hon'ble Apex Court's decision in Tuticorn Alkali Chemicals & Fertilisers Ltd. V/s CIT, which held that income earned before commencement of business, such as interest on deposits, should be taxed as income from other sources. Assessee's Contention: The assessee argued that the appeal should not be entertained by the Revenue due to the tax effect being less than Rs. 2 Crores, citing 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 falls within the exceptions mentioned in 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 37

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40396-DB ITA No. 278 of 2023

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. 278 OF 2023

BETWEEN:

1.

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

2.

THE INCOME-TAX OFFICER, WARD-3(1)(1), PRESENT ADDRESS DCIT, CIRCLE-3(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095. …APPELLANTS (BY SRI. DILIP M., A/W SRI. RAVIRAJ Y.V., ADVOCATES) AND:

M/S. INDIABUILD HOMES PVT. LTD., NO.6/A, 2ND FLOOR, KABRA EXCELSIOR, 7TH CROSS, 1ST BLOCK, KORAMANGALA, BENGALURU - 560 034. PAN. AACCI 5152L. …RESPONDENT (BY SRI. BALARAM R RAO, ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO 1 FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ETC.

THIS APPEAL, COMING ON FOR ADMISSION, 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:40396-DB ITA No. 278 of 2023

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., learned counsel for appellants/Revenue and Sri.Balaram.R.Rao, 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 11.10.2021 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short ‘Appellate Authority’) in ITA.No.184/Bang/2019 for the assessment year 2015-16, raising the following substantial questions of law: 1. "Whether, on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in remanding the matter to assessing authority to consider afresh without acknowledging that assessing authority right held

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NC: 2024:KHC:40396-DB ITA No. 278 of 2023

that business of assesse activity of assesse has not yet commenced during financial year and as such assesse cannot claim loss. Therefore, assessing authority rightly disallowed business"?

2.

"Whether, on the facts and in the circumstances of the case the Tribunal right in law in not following Hon'ble Apex court in case of Tuticorn Alkali Chemicals & Fertilisers Ltd V/s CIT (reported in 227 ITR page 172) whereby Hon'ble Apex Court has held that before commencement of business, assesse's income earned in the form of interest on deposits and other income as well will be taxed as income form other business"?

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

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NC: 2024:KHC:40396-DB ITA No. 278 of 2023

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

SMJ List No.: 4 Sl No.: 7

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