THE PR COMMISSIONER OF INCOME TAX vs. M/S AGNUS HOLDINGS PVT LTD

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ITA/379/2017HC KarnatakaKAHC01032114201712 August 2024Bench: S.G.PANDIT,C.M. POONACHA7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeals were confined to the disallowance made under Section 14A and the disallowance of short-term capital loss. Regarding the disallowance under Section 14A, the Tribunal had noticed that an identical issue was considered in the assessee's own case for assessment year 2010-11, and based on similar orders, it set aside the finding of the assessing officer and remanded the matter. For the short-term capital loss, the Tribunal also followed its earlier order which had not reached finality. The High Court noted that a Coordinate Bench of the Court in the case of Deputy Commissioner of Income-Tax vs. BPL Sanyo Finance Ltd. (2009) 312 ITR 63 had answered a similar question in favour of the assessee. Therefore, by following the decision in BPL Sanyo Finance Ltd., the substantial questions of law were answered in favour of the assessee and against the Revenue. The appeals were dismissed.

What were the facts?

The assessee, M/s. Agnus Holdings Pvt. Ltd., engaged in investment, finance, and share trading, filed returns for assessment year 2009-10 declaring a loss of ₹26,67,78,608/-. The assessing authority disallowed a claim for forfeiture of money paid towards a share warrant as capital loss and made a disallowance under Section 14A of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal. Both the assessee and the Revenue appealed to the Income-Tax Appellate Tribunal (ITAT). The ITAT, by its order dated 13.10.2016, partly allowed the appeals of both parties. The Revenue has filed these appeals under Section 260-A of the IT Act against the ITAT's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the disallowance made under Section 14A of the Act by following its earlier order in the assessee's own case, which had not reached finality, and when the assessing authority had made the disallowance in compliance with Rule 8D read with Section 14A? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the disallowance of short-term capital loss made by the assessing authority by following its earlier order which had not reached finality, and when the assessing authority had rightly rejected the claim for failure to explain its correctness and substantiate it with materials? Assessee's arguments: Not recorded. Revenue's arguments: The Revenue contended that the Tribunal erred in setting aside the disallowances by relying on its own earlier orders that were not final. Specifically, for Section 14A, the Revenue argued that the assessing officer correctly applied Rule 8D. For the short-term capital loss, the Revenue argued that the assessee failed to substantiate the claim. The Revenue relied on Section 14A and Rule 8D of the IT Rules.

Which sections of the Income-tax Act were involved?

Section 14A,Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF AUGUST, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 338 OF 2017 C/W INCOME TAX APPEAL NO. 379 OF 2017 IN ITA No.338/2017 BETWEEN:

1.

THE PR COMMISSIONER OF INCOME TAX CIT(A), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560095.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), PRESENT ADDRESS, CIRCLE-1(1)(2), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD,KORAMANGALA, BENGALURU-560095. …APPELLANTS (BY SRI Y V RAVI RAJ, ADVOCATE)

AND:

M/S. AGNUS HOLDINGS PVT. LTD., STAR-2, OPP. IIMB BILEKAHALL, BANNERGHATTA ROAD, BENGALURU 560076 PAN:AAHCS 6660A …RESPONDENT (BY SMT PRATIBHA R, ADVOCATE)

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

THE 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 ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 529/BANG/2014 DATED13/10/2016 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU AND ETC.

IN ITA No.379/2017

BETWEEN:

1.

THE PR COMMISSIONER OF INCOME TAX CIT(A),5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560095.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), PRESENT ADDRESS, CIRCLE-1(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560095. …APPELLANTS (BY SRI. Y V RAVIRAJ.,ADVOCATE A/W SRI. M. DILIP., ADVOCATE)

AND:

M/S AGNUS HOLDINGS PVT LTD STAR-2, OPP. IIMB BILEKAHALL, BANNERGHATTA ROAD, BENGALURU-560076. PAN:AAHCS 6660A. …RESPONDENT (BY SMT PRATIBHA R., 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, AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 668/BANG/2014 DATED 13/10/2016 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

CONFIRM THE ORDER PASSED BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU AND ETC.

THESE APPEALS, 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 C.M. POONACHA)

ITA No.338/2017 is filed by the Revenue under Section 260 A of the Income Tax Act, 19611, challenging the order dated 13.10.2016 passed in ITA.No.529/Bang/2014 by the Income-Tax Appellate Tribunal, Bengaluru2.

2.

ITA.No.379/2017 is filed by the Revenue under Section 260A of the IT Act, challenging the order dated 13.10.2016 passed in ITA.No.668/Bang/2014 by the Tribunal.

3.

The relevant facts necessary for consideration of the present appeals are that the assessee carries on the

1 Hereinafter referred to as ‘IT Act’ 2 Hereinafter referred to as ‘Tribunal’

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

business of investment and finance and trading in shares. The assessee filed returns for the assessment year 2009- 10 declaring loss of `26,67,78,608/- and the assessing authority made disallowance under Section 141A of the IT Act and rejected the claim of forfeiture of money, paid towards share warrant as capital loss. Being aggrieved the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) -I3, wherein the said appeal was partly allowed. Being aggrieved the assessee preferred ITA.No.529/Bang/2014. The revenue also preferred ITA.No.668/Bang/2014. The Tribunal by its order dated 13.10.2016 partly allowed the appeal of the assessee as well as the revenue. Being aggrieved the assessee has preferred the present appeal.

4.

This Court vide order dated 07.11.2017 admitted the above appeal to consider the substantial questions of law formulated in the memorandum of appeal which are as under: i. “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside

3 Hereinafter referred to as ‘Commissioner Appeals’

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

the disallowance made under Section 14A of the Act by following its earlier order in case of assessee itself which has not reached finality and even when the assessing authority rightly made said disallowance in compliance with Rule 8D of I.T. Rules read with Section 14A of the Act? ii. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of shore term capital loss made by assessing authority by following its earlier order which has not reached finality and when assessing authority rightly rejected the said claim as the assessee had failed to explain correctness of said claim and failed to substantiate with any materials?”

5.

Heard submissions of learned Senior panel Counsel for the appellant - Revenue Sri. Y.V. Ravi Raj and Smt. Prathibha. R., for the respondent.

6.

It is forthcoming from the aforementioned, that the present appeal is confined to the disallowance made under Section 14A of the IT Act with regard to the disallowance of short term capital loss.

7.

With regard to the said aspect it is relevant to note that the Tribunal while considering ground Nos.2 to 7

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

with regard to the disallowance under Section 14A of the IT Act has noticed that an identical issue was considered by the Tribunal in the assessee’s own case for the assessment year 2010-11 vide order dated 30.11.2015 passed in ITA.No.1612/Bang/2014. The relevant portion of said order dated 30.11.2015 has been extracted by the Appellate Tribunal at para No.5 of its order dated 13.10.2016. In view of the similar orders passed, the Tribunal set aside the finding of the assessing officer and remanded the matter to the assessing officer to consider the said issue on similar direction.

8.

A Coordinate Bench of this Court in the case of DEPUTY COMMISSIONER OF INCOME -TAX V/S BPL SANYO FINANCE LTD4., has answered a similar question in favour of the assessee and against the revenue.

9.

Hence, by following the above decision i.e., BPL SANYO FINANCE LTD4 the substantial questions of law framed in the present appeals are answered in favour of the assessee and against the revenue.

4 (2009) 312 ITR 63

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NC: 2024:KHC:32336-DB ITA No. 338 of 2017 C/W ITA No.379 of 2017

10.

In view of the aforementioned the above appeals are dismissed.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

PNV List No.: 1 Sl No.: 45

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