PRINCIPAL COMMISSIONER OF INCOME TAX-4 vs. M/S EMULEX COMMUNICATIONS PVT LTD

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ITA/99/2021HC KarnatakaKAHC01016195202024 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 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 under exceptions to the circulars. The Court granted the liberty as prayed for by the revenue. Consequently, the appeal was disposed of without a decision on the merits of the substantial questions of law. The Court expressly kept the questions of law open to be adjudicated in an appropriate proceeding. No finding was recorded on the specific issues of comparable selection or the deletion of M/s. E-Info Chips Ltd.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-4 and the Deputy Commissioner of Income Tax, Circle-2(1)(2), Bangalore, filed an appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated 28.08.2019 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru, in ITA.No.267/Bang/2016. The assessment year in question is 2011-12. The High Court of Karnataka admitted the appeal on 13.12.2022 to consider substantial questions of law concerning the Tribunal's exclusion/inclusion of comparables and the deletion of a specific comparable, M/s. E-Info Chips Ltd. The amount in dispute is not explicitly stated, but the tax effect is mentioned as less than Rs. 2 Crores.

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether, on the facts and circumstances and in law, the Tribunal erred in excluding/including comparables by ignoring the parameters of analysis prescribed under Rule 10B, which are exhaustive, and if so, whether it is legally permissible to bypass the same partially or by implication? 2. Whether, on the facts and circumstances and in law, the Tribunal is right in deleting M/s. E-Info Chips Ltd. as a comparable without acknowledging that it performs functions similar to those of the taxpayer, rendering the Tribunal's order perverse? The assessee contended that the appeal should not be entertained by the revenue 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 requested liberty to revive the appeal if the matter falls within the exceptions mentioned in 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

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39703-DB ITA No. 99 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH 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. 99 OF 2021 BETWEEN:

1.

PRINCIPAL COMMISSIONER OF INCOME TAX-4, BMTC COMPLEX, KORAMANGALA, BENGALURU.

2.

DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), BANGALORE. …APPELLANTS (BY SRI SANMATHI E. I., ADV.)

AND:

M/S. EMULEX COMMUNICATIONS PVT. LTD., THE MILLENIA TOWER-C, LEVEL 2 AND 3, NO.1 AND 2, MURPHY ROAD, ULSOOR, BANGALORE – 560 008. …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 28/08/2019 PASSED IN IT(TP)A NO.267/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012, PRAYING TO (A) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND ETC.

THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39703-DB ITA No. 99 of 2021

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 Smt.Tanmayee Rajkumar for 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 28.08.2019 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.267/Bang/2016 for the assessment year 2011-12. 3. This

Court,

admitted the appeal on 13.12.2022 to consider the following substantial question of law: “1.Whether on the facts and circumstances of the case and in law, the Tribunal erred in excluding/including comparable’s ignoring the parameters of analysis prescribed under Rule 10B,

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NC: 2024:KHC:39703-DB ITA No. 99 of 2021

which are exhaustive and, if so, whether it is legally permissible to bypass the same partially or by implication? 2. Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in deleting M/s.E-Info Chips Ltd., as comparable without acknowledging the fact that it is into the functions similar to functions carried out by the taxpayer and as such order passed by Tribunal is perverse in nature?” 4. 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. 5. 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.

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NC: 2024:KHC:39703-DB ITA No. 99 of 2021

6.

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

MPK List No.: 2 Sl No.: 17

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