THE PR. COMMISSIONER OF INCOME TAX vs. Century Sheltors

PDF · subscribers
ITA/85/2024HC KarnatakaKAHC01005671202430 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 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's counsel argued that the appeal should not be entertained due to the tax effect being below Rs. 2 Crores, as per CBDT Circular No. 09/2024. The Revenue's counsel sought liberty to revive the appeal if the case fell under the exceptions mentioned in the circulars. The Court granted this liberty, disposing of the appeal with the condition that the questions of law remain open for adjudication in an appropriate proceeding. No decision was made on the merits of the substantial questions of law raised by the Revenue.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Assistant Commissioner of Income Tax, has 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. The appeal pertains to Assessment Year 2013-14 and challenges the ITAT's decision in ITA No. 1073/Bang/2022. The ITAT's order is stated to have set aside the order of the Appellate Commissioner, which had confirmed the order of the Income Tax Officer. The dispute concerns the deductibility of certain expenses for the assessee, Century Sheltors.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether Section 40(b) of the Income Tax Act, 1961, overrides Sections 30 to 38, considering the Supreme Court's decision in Munjal Sales Corporation vs. CIT (2008), which held Section 40 not to be a standalone provision and to impose limitations on deductions under Sections 30 to 38. 2. Whether, 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 under Section 40(b)(iv) to claim deduction for interest paid on borrowed capital. 3. Whether the ITAT erred by attributing findings of the ITAT Pune bench in Quality Industries to the Supreme Court's decision in R.M. Chidambaram Pillai (106 ITR 292 SC). Assessee's contention: The appeal should not be entertained as the tax effect is less than Rs. 2 Crores, citing CBDT Circular No. 09/2024 dated 17.09.2024, which binds the Revenue. Revenue's contention: Liberty to revive the appeal if the matter falls 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 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

- 1 -

NC: 2024:KHC:41145-DB ITA No. 85 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH 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. 85 OF 2024 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX 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.,ADVOCATE)

AND:

CENTURY SHELTORS NO.10/1, LAKSHMINARAYANA COMPLEX, PALACE ROAD, VASANTHNAGAR BENGALURU 560 052 PAN AAFFC5111R …RESPONDENT (BY SMT. NAGHARISH G S.,ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO.1073/BANG/2022 DATED

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

- 2 -

NC: 2024:KHC:41145-DB ITA No. 85 of 2024

10/03/2023 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE-A AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, 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 Smt.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, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA No.1073/Bang/2022 for the assessment year 2013-14, raising the following substantial questions of law:

1.

Whether in facts circumstances of the case, the Hon’ble ITAT is right in law in holding the Section 40(b) is an overriding

- 3 -

NC: 2024:KHC:41145-DB ITA No. 85 of 2024

Section to Section 30 to 38 without appreciating the Supreme Court decision in the case of Munjal Sales Corporation versus 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 a 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 account of applicability of Section 40 (b)(iv)?

3.

Whether in fact circumstance, the case 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.Chidamabaram 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,

- 4 -

NC: 2024:KHC:41145-DB ITA No. 85 of 2024

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 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.: 28

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →