THE COMMISSIONER OF INCOME-TAX vs. M/S NAMDHARI SEEDS

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ITA/356/2012HC KarnatakaKAHC01043437201207 November 2014Bench: B.MANOHAR,N.KUMAR3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal (ITAT) was correct in setting aside the order passed under Section 263 of the Income Tax Act, 1961. The reasoning was based on a prior judgment of the same High Court in ITA No.488/2013, dated April 30, 2014. In that earlier case, it was decided that dividend income should be taxed in the hands of the shareholder and not the firm. Therefore, following this precedent, the High Court found no merit in the Revenue's appeal and accordingly set aside the appeal. The operative direction was to set aside the appeal. No issues were expressly left undecided.

What were the facts?

The Revenue, represented by the Commissioner of Income-Tax and Assistant Commissioner of Income-Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated May 21, 2012, passed by the Income Tax Appellate Tribunal (ITAT), Bangalore. The ITAT had set aside an order passed under Section 263 of the Act. The assessment year in question is 2007-2008. The dispute concerns whether 'deemed dividend' should be taxed in the hands of the shareholder or the firm. The High Court noted a previous decision in ITA No.488/2013 dated April 30, 2014, which held that dividend should be taxed in the hands of the shareholder and not the firm.

What were the issues?

1. Whether the ITAT was correct in setting aside the order passed under Section 263 of the Income Tax Act, 1961, concerning the assessment year 2007-2008? (Question of law and fact, turning on Section 263). Assessee's Contention: The assessee implicitly relies on the High Court's previous ruling in ITA No.488/2013, which held that dividend is taxable in the hands of the shareholder, not the firm. This precedent supports the ITAT's decision to set aside the Section 263 order. Revenue's Contention: The Revenue's appeal challenges the ITAT's order, implying they believe the Section 263 order was valid and the deemed dividend should have been taxed differently, or that the ITAT erred in setting it aside. No specific authorities or precedents were mentioned by the Revenue in the provided text.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 07TH DAY OF NOVEMBER, 2014 PRESENT THE HON' BLE MR.JUSTICE N.KUMAR

AND

THE HON' BLE MR.JUSTICE B.MANOHAR

ITA NO.356 OF 2012 BETWEEN

1.THE COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD, BANGALORE

2.THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1), C.R. BUILDING, QUEENS ROAD, BANGALORE ... APPELLANTS

(By Sri.K V ARAVIND- ADV.)

AND

M/S NAMDHARI SEEDS NO.119, 9TH MAIN ROAD, IDEAL HOMES TOWNSHIP, RAJARAJESHWARI NAGAR, BANGALORE ... RESPONDENT

(By M/s. A SHANKAR & M LAVA- ADVS.)

THIS ITA IS FILED UNDER SEC.260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 21/05/2012 PASSED IN ITA NO.384/BANG/2011, FOR THE

ASSESSMENT YEAR 2007-2008, 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 ORDERS PASSED BY THE ITAT, BANGALORE IN ITA NO.384/BANG/2011 DATED 21/05/2012 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), BANGALORE.

THIS APPEAL COMING ON FOR HEARING THIS DAY, N.KUMAR J., DELIVERED THE FOLLOWING:

ORDER

The Revenue has preferred this appeal challenging the order passed by the Tribunal which has set aside the order passed in a proceeding initiated under Section 263 of the Income Tax Act,1961. The question involved is, whether deemed dividend is to be taxed at the hands of the shareholder or the firm? 2. In the assessee’s case, in ITA No.488/2013 dated 30.4.2014 it is held that the dividend should be taxed in the hands of the shareholder and not the firm. In view of the said judgment, the order passed under Section 263 of the Income Tax Act, 1961 has been

rightly set aside by the Tribunal. Therefore, we do not see any merit in this appeal. Accordingly, it is set aside.

Sd/- JUDGE.

Sd/-

JUDGE

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