PR. COMMISSIONER OF INCOME TAX-2 vs. M/S KARNATAKA STATE POLICE HOUSING AND

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ITA/499/2022HC KarnatakaKAHC01048278202220 January 2025Bench: KRISHNA S DIXIT,G BASAVARAJA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court agreed with the submission made by the learned counsel for the Assessee. The Court found that the substantial questions of law framed by the Revenue did not arise from the fact matrix of the appeal or the impugned order passed by the ITAT. Consequently, the appeal was liable to be rejected. The Court did not delve into the merits of the questions as they were deemed not applicable to the present case. No specific finding was given on the taxability of interest income under Section 56 of the Income Tax Act, 1961, or the validity of the Government order, as the appeal was dismissed on a procedural ground. The costs were made easy.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-2 and the Assistant Commissioner of Income Tax, filed an Income Tax Appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated 25/11/2021 passed by the Income Tax Appellate Tribunal (ITAT), 'A' Bench, Bengaluru, in ITA No. 142/BANG/2020. The assessment year in question is 2012-2013. The respondent is M/s Karnataka State Police Housing and Infrastructure Development Corporation Ltd. (KSPHC). The Revenue sought to set aside the ITAT's order and grant other reliefs. The appeal was admitted for hearing.

What were the issues?

The Tribunal had to decide the following substantial questions of law framed by the Revenue: 1. Whether the Tribunal's order was perverse in holding that interest earned by the assessee on Government assets is not taxable under Section 56 of the Income Tax Act, 1961. 2. Whether the Tribunal was justified in not appreciating that an order dated 05.01.2012 from the Government of Karnataka, directing that interest earned on grants from the State Government should not be treated as income, was issued at the behest of the DGP & CMD of KSPHC and was an afterthought to avoid taxes, with the issue being detected by the Revenue. 3. Whether the Tribunal was justified in not appreciating that a self-serving order of the State Government, issued at the behest of the assessee's DGP & CMD, without any such condition attached at the time of fund receipt, is bad in law and cannot override Section 56 of the Income Tax Act, 1961. Assessee's Contention: The assessee's counsel submitted that the framed questions do not arise from the fact matrix of the appeal or the impugned order. Revenue's Contention: The Revenue framed the above questions of law, arguing that the Tribunal erred in its findings regarding the taxability of interest income and the validity of a government order influencing the tax treatment.

Which sections of the Income-tax Act were involved?

Section 56,Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2025:KHC:2114-DB ITA No. 499 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF JANUARY, 2025 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE G BASAVARAJA INCOME TAX APPEAL NO. 499 OF 2022 BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX-2, BMTC COMPLEX, KORAMANGALA, BANGALORE.

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4(3)(1), BMTC BUILDING, KORAMANGALA, BANGALORE-95. …APPELLANTS (BY SRI. SANMATHI E I., ADVOCATE AND SRI. DILIP M., ADVOCATE)

AND:

M/S KARNATAKA STATE POLICE HOUSING AND INFRASTRUCRTURE DEVELOPMENT CORPORATION LTD., (KSPHC) NO.59, RICHMOND ROAD, BENGALURU-560 025. PAN:AAACK6902E, …RESPONDENT (BY SRI. ASHOK A KULAKARNI.,ADVOCATE)

THIS ITA/INCOME TAX APPEAL UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 25/11/2021 PASSED IN ITA NO.142/BANG/2020, FOR THE ASSESSMENT YEAR 2012-2013, PRAYING TO (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT AND (2) SET ASIDE THE APPELLATE ORDER DATED 25/11/2021 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS NO. ITA NO.142/BANG/2020 (ANNEXURE-‘A’)

Digitally signed by SHARADA VANI B Location: HIGH COURT OF KARNATAKA

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NC: 2025:KHC:2114-DB ITA No. 499 of 2022

FOR ASSESSMENT YEAR 2012-2013 AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, INTEREST OF JUSTICE.

THIS ITA, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT and HON'BLE MR JUSTICE G BASAVARAJA

ORAL JUDGEMENT

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

The appeal is preferred by the Revenue by framing the following questions as the Substantial Questions of Law: 1. "Whether on the facts and circumstances of the case and in law, the Tribunal's order can be said as perverse in nature in holding that interest earned by the assessee on the Government assets is not taxable u/s 56 of the Income Tax Act, 1961" 2. "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not appreciating the fact that the order dated 05.01.2012 issued by the Government of Karnataka directing that interest earned on the grants received from State Government should not be treated as income of the corporation was issued on the behest of the DGP & CMD of KSPHC vide their letter dated 29.11.2011 and therefore was an afterthought to avoid paying taxes, hence the issue was detected by the Revenue"?

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NC: 2025:KHC:2114-DB ITA No. 499 of 2022

3.

'Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not appreciating that a self-serving order of the State Government Issued on the behest of DGP & CMD of the assessee company, while no such order or condition was attached at the time of receipt of funds by the assessee company, is bad in law and cannot over rule the provisions of Section 56 of the Income Tax Act, 1961"?.

2.

Learned counsel appearing for the Assessee submits and we agree that these questions do not crop up in the fact matrix of appeal in question and the order which is impugned. In the above circumstances, this appeal is liable to be and accordingly rejected, costs having been made easy.

Sd/- (KRISHNA S DIXIT) JUDGE

Sd/- (G BASAVARAJA) JUDGE

cbc List No.: 2 Sl No.: 0

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