THE COMMISSIONER OF INCOME TAX vs. M/S KARNATAKA POWER TRANSMISSION

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ITA/730/2007HC KarnatakaKAHC01056608200711 February 2014Bench: B.MANOHAR,DILIP B.BHOSALE5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the Revenue argued that Section 115JA had been amended retrospectively by the Finance Act, 2009, with effect from 01-04-1998, and this amendment could have a bearing on the decision. The Revenue submitted that the Tribunal should reconsider the matter afresh in light of this retrospective amendment. The assessee's counsel did not dispute this submission and agreed to a remand of the matter to the Tribunal for a decision on the issues in light of the retrospective amendment to Section 115JA. Consequently, the High Court set aside the ITAT's order dated 11-05-2007 and the Miscellaneous Petition order dated 13-08-2007. The matter was remanded to the Tribunal to consider the issues afresh and pass an order on merits in accordance with law, keeping all contentions of the parties open. The Tribunal was directed to pass the order expeditiously, preferably within six months.

What were the facts?

The Revenue (Commissioner of Income-Tax and Income Tax Officer) filed an appeal before the High Court of Karnataka against an order dated 11/05/2007 passed by the Income Tax Appellate Tribunal (ITAT), Bangalore Bench 'B', in ITA No.457/BNG/2006, and a Miscellaneous Petition order dated 13.08.2007 in M.P. No.80/BNG/2007. The ITAT's order had set aside an earlier order dated 24-03-2006 passed by the Commissioner of Income-Tax (Appeals)-I, which had partly granted relief to the assessee, M/s. Karnataka Power Transmission Corporation Ltd. The assessment year in question is 2002-03. The dispute revolves around the treatment of a provision for doubtful debts amounting to Rs.116,15,14,951/-.

What were the issues?

1. Whether the Tribunal was correct in holding that a sum of Rs.116,15,14,951/- reflected by the assessee as provision for doubtful debts cannot be treated as a reserve and added back as per clause (b) to Explanation 1 of Section 115JB(2) of the Income Tax Act, 1961, in accordance with the judgments in CIT vs. Saran Engineering and State Bank of Patiala vs. CIT? 2. Whether the Tribunal was correct in holding that the provision for bad and doubtful debts cannot be added back, as held by the assessing officer and confirmed by the appellate commissioner, by relying on JCIT vs. USHA MARTIN INDUSTRIES and CIT vs. Eicher Ltd., when these judgments interpreted Explanation 1(c) of Section 115JB(2) and not Explanation 1(b) of Section 115JB(2), which is applicable to the present case? Revenue's Contentions: The Revenue argued that Section 115JA was amended retrospectively by the Finance Act, 2009, effective from 01-04-1998, and this amendment might affect the decision. They contended that the matter should be reconsidered by the Tribunal in light of this retrospective amendment. Assessee's Contentions: The assessee's counsel did not dispute the Revenue's statement regarding the amendment to Section 115JA and agreed to a remand of the matter to the Tribunal for a fresh decision.

Which sections of the Income-tax Act were involved?

Section 115JB(2),Section 115JA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Bangalore Bench ‘B’

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 11TH DAY OF FEBRUARY 2014

PRESENT

THE HON'BLE MR.JUSTICE DILIP B.BHOSALE

AND

THE HON'BLE MR.JUSTICE B.MANOHAR

ITA NO.730/2007

BETWEEN:

1.

The Commissioner of Income-Tax, C.R Building, Queens Road, Bangalore.

2.

The Income Tax Officer, Ward -11(2), C.R Building, Queens Road, Bangalore.

…Appellants

(By Sri.K.V.Aravind, Advocate)

AND:

M/s.Karnataka Power Transmission Corporation Ltd., Cauvery Bhavan, K.G.Road, Bangalore – 560 009.

…. Respondent

(By Sri.S.Parthasarathi, Adv. a/w Sri.Mallaharao.K., Adv)

This ITA is filed under Sec.260-A of Income Tax Act 1961, arising out of Order dated 11/05/2007 passed in ITA No.457/BNG/2006 and the Misc.Petition.No.80/BNG/2007 dated 13.08.2007, for the Assessment Year 2002-03, praying that this Hon'ble Court may be pleased to:

i. formulate the substantial questions of law stated therein,

ii. allow the appeal and set aside the Order passed by the ITAT, Bangalore in ITA No.457/BNG/2006 dated 11/05/2007 and the Misc.Petition.No.80/BNG/2007 dated 13.08.2007, confirm the orders of the Income Tax Officer, Ward-11(2), Bangalore

This appeal coming on for hearing this day, B.MANOHAR.J., delivered the following:

J U D G M E N T

The Revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act’) being aggrieved by the order dated 11-05-2007 made in ITA No.457/Bang/2006 and order dated 13-08-2007 made in M.P. No.80/2007 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘B’

(for short ‘the Tribunal’) for the assessment year 2002-03, wherein the Tribunal set aside the order dated 24-03-2006 passed by the Commissioner of Income-Tax (Appeals)-I, partly granting the relief to the assessee.

2 This appeal was admitted for considering the following substantial questions of law:

“1. Whether the Tribunal was correct in holding that a sum of Rs.116,15,14,951/- reflected by the assessee as provision for doubtful debts cannot be treated as the reserve and added back as per clause b to Explanation 1 of Section 115JB(2) of the Act, (under whatever name called) in accordance with the Judgment of the Apex Court in CIT vs. Saran Engineering 161 ITR 761 and in State Bank of Patiala vs. CIT 219 ITR 706?

2.

Whether the Tribunal was correct in holding that the provision for bad and doubt debts cannot be added back as held by the assessing officer and confirmed by the appellate commissioner by relying on JCIT vs USHA MARTIN INDUSTRIES special Bench Tribunal Kolkata, 104 ITD 249 and CIT vas Eicher Ltd., when these Judgments were interpreting Explanation 1(c) of Section 115JB(2) of the Act and not Explanation 1(b) of Section 115JB(2) of the Act, which arises in the facts of the present case?

3.

Learned counsel appearing for the Revenue submitted that Section 115JA has been amended vide Finance Act, 2009 with effect from 01-04-1998 and the amendment may have some bearing on the decision of the issues framed in this appeal. In view of the retrospective amendment to Section 115JA, the Tribunal has to reconsider the matter afresh.

4.

Learned counsel for the respondent/assessee does not dispute the statement made by the learned counsel for the Revenue and he also agreed for remanding the matter to the Tribunal for decision on the issue referred to above, in the light of retrospective amendment to Section 115JA.

5.

In the circumstances, we pass the following: ORDER

The order dated 11-05-2007 made in ITA No.457/2006 and order dated 13-08-2007 made in M.P. No.80/2007 for the assessment year 2002-03 are set

aside and the matter is remanded to the Tribunal. The Tribunal shall consider the matter afresh and pass order on merits in accordance with law, as expeditiously as possible and preferably within a period of six months from the date of receipt of a copy of this order. All contentions of the parties are kept open.

Accordingly, the appeal is disposed of.

Sd/-

JUDGE

Sd/-

JUDGE

mpk/-*

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