THE PR COMMISSIONER vs. M/S KBD SUGARS & DISTILLERIES LTD.,

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ITA/560/2016HC KarnatakaKAHC01044235201606 December 2022Bench: P.S.DINESH KUMAR,T.G. SHIVASHANKARE GOWDA4 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that questions 2 and 3, concerning additions under Section 36(1)(iii), were already decided in favour of the assessee in a previous case. Questions 1 and 4 were kept open to be considered in a related appeal.

What were the facts?

The Revenue appealed against an ITAT order concerning assessment year 2011-12. The appeal raised questions regarding additions made under Section 14A and Section 36(1)(iii) of the Income Tax Act, as well as capitalization of interest on work in progress.

What were the issues?

The key issues were the justification for deleting additions made under Section 14A and Section 36(1)(iii), and the correct rate for capitalizing interest on work in progress.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(iii),Section 37

AI-generated summary — verify with the full judgment below

ITA No. 560 of 2016

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF DECEMBER, 2022 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE T.G.SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 560 OF 2016

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALUUR-560 095.

2.

THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-11(5) PRESENT ADDRESS CIRCLE-4(1)(1) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095. …APPELLANTS

(BY SHRI. K.V.ARAVIND, SENIOR STANDING COUNSEL)

AND:

M/s KBD SUGARS & DISTILLERIES LTD NO.17, SANKEY ROAD BENGALURU-560 020. PAN:AAACK 5851A …RESPONDENT (BY SHRI. A.SHANKAR, SENIOR ADVOCATE FOR SHRI. M.LAVA, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 29/04/2016 PASSED IN ITA NO.1073/BANG/2014, FOR

Digitally signed by ANUSHA V Location: High Court Of Karnataka

ITA No. 560 of 2016

THE ASSESSMENT YEAR 2011-2012, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU AND ETC.

THIS INCOME TAX APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal by the Revenue challenging the order dated April 29, 2016, in ITA No.1073/Bang/2014 for the A.Ys. 2011-12 has been admitted to consider the following questions of law: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition made under section 14A r/w/s 8D(2)(ii) and (iii) holding that there was no fresh investment and the assessing authority has not expressed or recorded any satisfaction by identifying the expenditure which has been incurred in contravention to the provisions in section 14A and also contrary to the Board's Circular No.14 of the 2001 and 5 of 2001? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition made under section 36(1)(iii) of the Act by holding that the assessee is having its own free fund which is sufficient for advance the interest free loan to the sister concern event though the assessee has diverted the funds which has been established by the assessing authority? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the disallowance made under section 36(1)(iii) read with section 37 of the Act towards the advance diverted in respect of borrowed capital without appreciating the facts of the and materials brought out by assessing

ITA No. 560 of 2016

authority on record and as such the order passed by Tribunal is perverse in nature? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in restricting the disallowance in respect of capitalization of interest to an extent of 11% as against 15% held by the assessing authority in respect of work in progress (WIP) by following its earlier order which has been challenged before this Hon'ble Court in ITA No.552 to 5556/2016 and the assessing authority has restricted the same at 15% considering the materials on record?"

2.

Heard Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue and Shri A.Shankar, learned Senior Advocate for the assessee.

3.

At the outset, Shri A.Shankar submitted that questions No.1 and 4 have also been raised in ITA No.559/2016 to be considered in the said appeal. Questions No.2 and 3 are answered in favour of the assessee and against the Revenue in the decision of Division Bench of this Court in The Pr.Commissioner of Income-Tax and Another Vs. M/s.KBD Sugars & Distilleries Ltd1.

1 ITA No.553/2016 decided on 14.12.2021.

ITA No. 560 of 2016

4.

Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue does not dispute the above submission made by Shri A.Shankar. 5. Hence, the following; ORDER

(i) Questions No. 2 and 3 are answered in

favour of the assessee and against the

Revenue; and

(ii) Questions No.1 and 4 are kept open to be

considered in ITA No. 559/2016.

Appeal disposed of.

No costs.

Sd/- JUDGE

Sd/- JUDGE

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