THE PR COMMISSIONER OF INCOME TAX vs. ONMOBILE GLOBAL LTD

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ITA/470/2023HC KarnatakaKAHC01035538202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on submissions concerning CBDT Circular No. 09/2024 dated 17.09.2024 and Circular No. 5/2024 dated 15.03.2024. The learned counsel for the Revenue sought liberty to revive the appeal if the matter fell within the exceptions under these circulars. 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 substantial questions of law.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Assistant Deputy Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 31.03.2023 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The ITAT's order was in MP No. 58/Bang/2023, relating to IT(TP)A No. 2560/Bang/2019 for Assessment Year 2015-2016. The appeal challenges the ITAT's decision to allow the deduction of tax paid outside India under Section 40A(ia) of the Act. The assessee is Onmobile Global Ltd. The appeal is before the High Court of Karnataka.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the deduction of tax paid outside India under Section 40A(ia) of the Act, by holding that tax paid outside India is outside the ambit of the definition of 'tax' in Section 2(43) of the Act, ignoring that such deduction is not allowable when tax paid in India is Nil, and allowing it would amount to payment from the Government Treasury in the absence of any tax paid in India? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in law in not appreciating that the assessing authority rightly made disallowance under Section 40(a)(ia) of the Act as the conditions for invoking it were satisfied? The Revenue contended that the ITAT erred in allowing the deduction of tax paid outside India under Section 40A(ia), arguing that it contravenes the principle of not allowing deductions from the government treasury when no tax has been paid in India. The Revenue also argued that the conditions for disallowance under Section 40(a)(ia) were met by the assessing authority. The Assessee contended that the tax effect in the 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.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40A(ia),Section 40(a)(ia),Section 2(43)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41209-DB ITA No. 470 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. 470 OF 2023 BETWEEN:

1.

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

2.

THE ASST. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 5 (1) (2), PRESENT ADDRESS DCIT, CENTRAL CIRCLE 1 (2), 3RD FLOOR, C R BUILDING, QUEENS ROAD, BENGALURU 560001 …APPELLANTS (BY SRI. DILIP M.,ADVOCATE A/W SRI. RAVIRAJ Y V, ADVOCATE)

AND:

ONMOBILE GLOBAL LTD TOWER #1, 94/1C AND 94/2, VEERASANDRA VILLAGE, ATTIBELE HOBLI, ANEKAL TALUK, ELECRONICS CITY, PHASE 1, BENGALURU 560100 PAN AAACO 3900E …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR.,ADVOCATE)

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41209-DB ITA No. 470 of 2023

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 MP NO. 58/BANG/2023 (IN IT(TP)A NO. 2560/BANG/2019) DATED 31/03/2023 FOR ASSESSMENT YEAR 2015-2016 ANNEXURE-E AND CONFIRM THE ORDER OFF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), BENGALURU 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 Smt. Tanmayee Rajkumar., 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 31.03.2023 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in

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NC: 2024:KHC:41209-DB ITA No. 470 of 2023

MP No.58/Bang/2023 (IT(TP)A No.260/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 is right in law in allowing the deduction of tax paid on outside India under section 40A(ia) of the Act by holding that tax paid outside India would be outside the ambit of definition of tax as defined in Section 2(43) of the Act ignoring that same is not allowable as the tax paid in India is Nil and allowing deduction would amount to paying the same from Government Treasury in the absence of any tax paid in India? 2. Whether on the facts and circumstances of the case, the Tribunal is right in law not appreciating the fact that assessing authority rightly made disallowance under section 40 (a)(ia) of the Act as conditions for invoking same are satisfied?”

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

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NC: 2024:KHC:41209-DB ITA No. 470 of 2023

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 question of law is 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.: 40

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