PRINCIPAL COMMISSIONER vs. M/S DELTA INFRALOGISTICS

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ITA/608/2019HC KarnatakaKAHC01029194201923 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryRemanded

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 explicitly kept the substantial questions of law open to be adjudicated in an appropriate proceeding. This means the Tribunal's order was not set aside on merits by the High Court in this instance. The decision was based on the submissions regarding the tax effect and the relevant CBDT circulars, rather than a determination of the substantive tax issues raised in the appeal. No specific finding was made on the disallowance of speed money expenditure or inflated expenses through sub-contractors by the High Court in this judgment.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax (Mangalore) and the Assistant Commissioner of Income Tax, Circle-1(1), Mangalore, filed an appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated 08.05.2019 passed by the Income-Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, concerning Assessment Year 2006-07. The assessee is M/s Delta Infralogistics (Worldwide) Ltd. The appeal was filed to set aside the Tribunal's order, which had addressed disallowances made by the assessing authority regarding speed money expenditure and inflated expenses through sub-contractors. The procedural history indicates the matter reached the High Court after the Tribunal's decision.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in setting aside the disallowance of speed money expenditure, considering it might not be allowable under Section 37(1) of the Income Tax Act, 1961, and whether the assessee discharged the onus of proving the genuineness of the expenditure. 2. Whether the Tribunal was correct in setting aside the disallowance of inflated expenses through sub-contractors, especially when the alleged sub-contractors denied performing the work and the Tribunal allegedly clubbed this issue with another concerning inflated expenses. The assessee contended that the appeal should not be entertained 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. 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 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39246-DB ITA No. 608 of 2019

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. 608 OF 2019

BETWEEN:

1.

PRINCIPAL COMMISSIONER OF INCOME TAX (MANGALORE), C.R. BUILDING, ATTAVARA, MANGALORE 575001

2.

ASSISTANT COMMISSIONER INCOME TAX, CIRCLE-1(1) MANGALORE 575001 …APPELLANTS (BY SRI. SANMATHI E I.,ADVOCATE)

AND:

M/S DELTA INFRALOGISTICS (WORLDWIDE) LTD., (FORMERLY HML AGENCIES PVT. LTD.,) NO.202, VEEKAY TOWERS, KULUR BANGRA ROAD, KULUR, MANGALORE 575001 PAN AAACH7083 B …RESPONDENT (BY SRI. LAVA M., ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE APPELLATE ORDER DATED 08.05.2019 PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BENGALURU IN ITA. No.820/BANG/2012 (ANNEXURE-A) FOR ASSESSMENT YEAR 2006-2007 AS SOUGHT FOR

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39246-DB ITA No. 608 of 2019

IN THIS APPEAL, AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE 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.Sanmathi E.I., for appellants/Revenue and learned counsel Sri LAVA M., learned counsels 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 08.05.2019 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA No.820/Bang/2012 for the assessment year 2006-07, raising the following substantial questions of law: “1. Whether under the facts and circumstances of the case, the Tribunal is right in law in setting aside the disallowance made in respect of speed money expenditure even though said expenditure even though said expenditure is

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NC: 2024:KHC:39246-DB ITA No. 608 of 2019

of such nature which cannot be considered to be allowable under Section 37(1) of the Income Tax Act, 1961 and when the onus to prove the genuineness of expenditure claimed has not been discharged by the assessee?

2.

Whether under the facts and circumstances of the case, the Tribunal is right in law in setting aside the disallowance of inflated expenses through the sub-contractors even though the assessing authority after thorough verification and examination had held that the said expenses are bogus as the alleged sub- contractors during enquiry by assessing authority denied having done any work as claimed by assessee and Tribunal erroneously clubbed this issue with issue pertaining to inflated expenses?

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.

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NC: 2024:KHC:39246-DB ITA No. 608 of 2019

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.: 1 Sl No.: 62

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