The Pr Commissioner Of Income Tax And Another vs. Century Sheltors

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ITA/79/2024HC KarnatakaKAHC01005699202423 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The assessee argued that the tax effect was below the threshold stipulated in CBDT Circular No. 09/2024, making the appeal not maintainable. The Revenue sought liberty to revive the appeal if it fell within the exceptions of the said circulars. The Court granted the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no decision was made on the merits of the questions regarding the overriding nature of Section 40(b), the conditions for claiming deduction on interest paid on borrowed capital, or the attribution of case law.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Assistant Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated March 10, 2023, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench. The appeal pertains to Assessment Year 2014-2015 and challenges the ITAT's decision in ITA No. 1074/Bang/2022. The Revenue sought to set aside the ITAT's order and confirm the order of the Appellate Commissioner, which in turn had confirmed the order of the Income Tax Officer. The assessee is Century Sheltors.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was correct in holding that Section 40(b) overrides Sections 30 to 38 of the Income Tax Act, without appreciating the Supreme Court decision in Munjal Sales Corporation vs. CIT, which held Section 40 is not a stand-alone section but limits deductions under Sections 30 to 38. 2. Whether the ITAT erred in not appreciating that after the Finance Act, 1992, a partnership firm must first establish entitlement to deduction under Section 36(1)(iii) and then prove it is not disentitled due to Section 40(b)(iv) for claiming deduction on interest paid on borrowed capital. 3. Whether the ITAT misled itself by attributing findings of the ITAT Pune Bench in Quality Industries to those of the Supreme Court in R.M. Chidambaram Pillai. Assessee's contention: The tax effect in this 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. Revenue's contention: The Revenue sought liberty to revive the appeal if the matter falls within the exceptions under Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40(b),Section 30,Section 38,Section 36(1)(iii),Section 40(b)(iv)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39221-DB ITA No. 79 of 2024

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. 79 OF 2024 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX AND ANOTHER 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU -560 095.

2.

THE ASST. COMMISSIONER OF INCOME TAX CIRCLE -2(2), PRESENT ADDRESS ITO, WARD 1(2)(1) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU- 560 095. …APPELLANTS (BY SRI. SUSHAL TIWARI N., ADV.)

AND:

CENTURY SHELTORS NO.10/, LAKSHMINARAYANA COMPLEX, PALACE ROAD, VASANTHNAGAR, BENGALURU -560 052 PAN: AAFFC5111R. …RESPONDENT (BY SRI. NAGHARISH G. S., ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 10.03.2023 PASSED IN ITA NO. 1074/BANG/2022 FOR THE ASSESSMENT YEAR 2014-2015, PRAYING TO 1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39221-DB ITA No. 79 of 2024

STATED THEREIN; 2) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1074/BANG/2022 DATED 10.03.2023 FOR ASSESSMENT YEAR 2014-15 ANNEXURE-A AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX, WARD 1(2)(1), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR ORDERS, 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.Sushal Tiwari.N., for appellants/Revenue and learned counsel Sri.Nagharish.G.S., 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 10.03.2023 passed by the Income Tax Appellate Tribunal,

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NC: 2024:KHC:39221-DB ITA No. 79 of 2024

‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.1074/Bang/2022 for the assessment year 2014-15, raising the following substantial questions of law: “1. Whether in facts and circumstances of the case, the Hon’ble ITAT is right in law in holding the Section 40 (b) is an overriding Section to Section 30 to 38 without appreciating the Supreme Court decision in the case of Munjal Sales Corporation Vs. CIT (2008) 298 ITR SC which held the Section 40 is not a stand-alone section and puts limitation of the deductions under Section 30 to 38 of Income Tax Act?

2.

Whether the circumstances of case, the Hon’ble ITAT has erred in not appreciating that after the enactment of Finance Act, 1992, in case of partnership firm to claim deduction, in respect of interest paid on capital borrowed, in first instance, firm is required established that it is entitled to claim deduction under Section 36(1)(iii) and then further prove that it is not disentitled to claim such deduction on

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NC: 2024:KHC:39221-DB ITA No. 79 of 2024

account of applicability of Section 40 (b)(iv)?

3.

Whether in fact and circumstance, the Hon’ble ITAT has misled itself, attributing findings of Hon’ble ITAT Pune Bench in the case of Quality Industries to be those of Hon’ble Supreme Court in the case of R.M.Chidambaram Pillai 106 ITR 292 (SC)?”

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.

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

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NC: 2024:KHC:39221-DB ITA No. 79 of 2024

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

NC CT:bms List No.: 1 Sl No.: 20

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