THE COMMISSIONER OF INCOME TAX vs. M/S MANIPAL FINANCE CORPORATION LTD

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ITA/812/2009HC KarnatakaKAHC01085492200919 January 2015Bench: B.VEERAPPA,N.KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial question of law was answered in favour of the assessee and against the Revenue. The Court referred to its own previous judgment in the assessee's case (I.T.A. Nos. 795/2008 and 794/2008 decided on 7th October, 2014), which had taken note of the Apex Court's judgment on the point. The reasoning implies that the ITAT's finding that Section 41(1) of the Income Tax Act is attracted only when an amount is charged to the profit and loss account reducing tax liability in earlier years, was upheld. The Court did not decide any issue expressly left undecided. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, comprising the Commissioner of Income-tax and the Dy. Commissioner of Income-tax, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 07.08.2009 passed by the Income Tax Appellate Tribunal (ITAT), Bangalore. The ITAT's order had confirmed the order of the Appellate Commissioner, which in turn had set aside the order of the Deputy Commissioner of Income Tax, Circle-1, Udupi. The assessment year in question is 2005-2006. The dispute pertains to whether certain amounts written back and borrowings settled constitute revenue receipts. The High Court admitted the appeal to consider a substantial question of law.

What were the issues?

1. Whether the Appellate Authorities were correct in holding that a sum of Rs.64,16,000/- with depositors and debenture holders, which was written back, and a sum of Rs.78,17,000/- representing borrowings from Karnataka Bank, Corporation Bank, and UCO Bank, which were settled and the bank liability ceased, is not a revenue receipt as held by the Assessing Officer? (Question of mixed law and fact, concerning Section 41(1) of the Income Tax Act, 1961). Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, it notes that the Appellate Authorities (Appellate Commissioner and ITAT) had held in favour of the assessee. Revenue's Contentions: The Revenue contended that the amounts written back and settled borrowings should be treated as revenue receipts. The judgment implies the Revenue argued for the applicability of Section 41(1) of the Income Tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 19th DAY OF JANUARY 2015

PRESENT

THE HON’BLE MR. JUSTICE N.KUMAR AND THE HON’BLE MR. JUSTICE B.VEERAPPA

I.T.A. NO.812/2009

BETWEEN :

1.

The Commissioner Of Income-tax, C.R.Building, Attavara, Mangalore.

2.

The Dy. Commissioner Of Income-tax, Circle-1, Udupi. ...APPELLANTS

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

AND :

M/s.Manipal Finance Corporation Ltd., Manipal House, Manipal – 576 104. …RESPONDENT

(By Sri.S.Parthasarathy & Smt.Jinita Chatterjee, Advs.)

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This I.T.A. is filed under Section 260A of the Income Tax Act, 1961, arising out of order dated 07.08.2009 passed in ITA No.298/BNG/2009, for the Assessment Year 2005-2006, praying to :

(i) formulate the substantial questions of law stated therein,

(ii) Allow the appeal and set-aside the order passed by the Income Tax Appellate Tribunal, Bangalore in I.T.A. No.298/BNG/2009, dated 07.08.2009 confirming the order of the Appellate Commissioner and confirm the order passed by the Deputy Commissioner of Income Tax, Circle-1, Udupi in the interest of justice and equity.

This I.T.A. coming on for hearing, this day, N.Kumar J., delivered the following:

JUDGMENT

The Revenue has preferred this appeal against the order passed by the Tribunal holding that Section 41(1) of the Income Tax Act would get attracted only when there is an amount that is charged to the profit and loss account reducing the tax liability of any of the earlier years.

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2.

The appeal was admitted to consider the following substantial question of law:

Whether the Appellate Authorities were correct in holding that a sum of Rs.64,16,000/- with the depositors and the debenture holders was written back and a sum of Rs.78,17,000/- borrowings from three banks viz., Karnataka Bank, Corporation Bank and UCO Bank, were settled and the Bank liability ceased is not a revenue receipt as held by the Assessing Officer?

3.

We have heard the learned counsel for the parties. The said question of law arose for consideration before this Court in the assessee’s case in I.T.A. Nos. 795/2008 and 794/2008 decided on 7th October, 2014. After taking note of the judgment of the Apex Court on the point, the substantial question of law was answered in favour of the assessee and against the Revenue.

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4.

Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue. Appeal is dismissed.

Sd/- JUDGE

Sd/- JUDGE

SPS

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