COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION vs. M/S MYNTRA DESIGNS PVT LTD

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ITA/433/2023HC KarnatakaKAHC01031368202330 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court disposed of the appeal with liberty to the revenue to revive it if exceptions under the relevant CBDT circulars apply. The substantial questions of law were kept open for future adjudication.

What were the facts?

The Revenue appealed against an ITAT order that deleted an addition made under Section 56(2)(viib) concerning share premium collected from a closely held company. The assessee argued that the appeal should not be entertained due to low tax effect as per CBDT circulars.

What were the issues?

Whether the ITAT was right in deleting the addition made under Section 56(2)(viib) regarding share premium, and whether the ITAT's order was perverse in its findings on share valuation.

Which sections of the Income-tax Act were involved?

Section 56(2)(viib),Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41276-DB ITA No. 433 of 2023

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. 433 OF 2023 BETWEEN:

1.

COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA BENGALURU-560095

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 1 (2), 4TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA BENGALURU-560095 …APPELLANTS (BY SRI. SANMATHI E I.,ADVOCATE)

AND:

M/S MYNTRA DESIGNS PVT LTD, AKR TECK PARK, 3RD FLOOR, 7TH MILE, KRISHNA REDDY INDUSTRIAL AREA, HOSUR ROAD BENGALURU-560068 PAN AAECM 9636P …RESPONDENT (BY SRI. AJAY J NANDALIKE., ADVOCATE)

THIS ITA / INCOME TAX APPEAL UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41276-DB ITA No. 433 of 2023

ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(IT)A NO. 598/BANG/2020 DATED 03.09.2021 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 1(2), 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. E.I. Sanmathi for appellants/Revenue and learned counsel Sri Ajay J. Nandalike, 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 03.09.2021 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(IT)A No.598/Bang/2020 for the assessment year 2012-13, raising the following substantial questions of law: “1. Whether the facts and in the circumstances of the case, the Tribunal is

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NC: 2024:KHC:41276-DB ITA No. 433 of 2023

right in law in deleting addition made under section 56(2)(viib) of the Act towards share premium collected from closely held company which is contrary to the intention lying behind the introduction of the said provision to bring to tax the unaccounted income brought into books of account through unwarranted or unjustified share premium by Corporate entities? 2. Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in deleting the addition made under section 56(2)(viib) pertaining to share premium collected when asessee had been incurring huge loss and there was no justification provided for fixing such high share value and ignoring findings recorded in assessment order that common director of the assesse-company and investor- company namely, M/s.UKN Properties ltd had given a statement during the course of Survey conducted in case of investor company on 18.11.2015 that there was no valuation report obtained for determining the value of the share allotted on which premium was collected?

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NC: 2024:KHC:41276-DB ITA No. 433 of 2023

3.

Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in setting aside disallowance made in share premium by erroneously holding that the valuation report on DCF method produced during assessment proceedings was a valid report justifying valuation of shares without appreciating that there was no basis for projections made under DCF method and also ignoring the reasons assigned by assessing authority and CIT(A) on this issue?

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 the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

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NC: 2024:KHC:41276-DB ITA No. 433 of 2023

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.: 4 Sl No.: 0

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