THE COMMISSIONER OF INCOME TAX vs. M/S KARNATAKA STATE

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ITA/359/2013HC KarnatakaKAHC01033224201313 August 2013Bench: D.V.SHYLENDRA KUMAR,B.S.INDRAKALA5 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal set aside the Commissioner's order and remanded the case for re-examination in light of the retrospective amendment to Section 24 of the Karnataka Excise Act. The High Court dismissed the Revenue's appeal against this remand order.

What were the facts?

The Assessing Officer allowed privilege fee as deductible expenditure, but the Commissioner revised the order under Section 263. The Tribunal, considering an amendment to the Karnataka Excise Act, remanded the matter back to the Commissioner for re-examination.

What were the issues?

Whether the privilege fee paid by the assessee is an allowable expenditure under Section 37, and the impact of amendments to the Karnataka Excise Act on this deduction.

Which sections of the Income-tax Act were involved?

Section 37,Section 263,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 13TH DAY OF AUGUST, 2013 PRESENT THE HON’BLE MR. JUSTICE D V SHYLENDRA KUMAR AND THE HON’BLE MRS. JUSTICE B S INDRAKALA ITA No.359 of 2013

BETWEEN:

1.

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

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(5) RASHTROTHANA BHAVAN, NRUPATHUNGA ROAD, BANGALORE

… APPELLANTS

[By Sri K V Aravind, Adv.]

AND:

M/S KARNATAKA STATE BEVERAGES CORPN. LTD., NO.78, SEETHALAKSHMI TOWERS, MISSION ROAD, BANGALORE – 560 027

… RESPONDENT

THIS APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO SET ASIDE THE ORDER DATED 13.03.2013 PASSED IN ITA NO. 191/BANG/2013, FOR THE ASSESSMENT YEAR 2008-09 AND ETC.,

THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, D V SHYLENDRA KUMAR. J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal by the Revenue is directed against the common order dated 13.03.2013 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore in ITA No.191[BNG]/2013.

2.

The assessee is a company and the assessment year is 2008-2009. The questions raised in the appeal read as under:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the orders u/s 263 without appreciating the fact that the Karnataka Excise Act was amended subsequent to the making of the orders u/s 263 only to defeat the purposes of the Income-tax Act in treating the privilege fee as not an expenditure allowable u/s 37 of the Act?

2.

Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the order u/s 263 of the Act, without appreciating the fats that the levy of privilege fee was

3 illegitimate as the renewal of license fee was not covered by the then existing provisions of section 24 of the Karnataka Excise Act?”

3.

The amount paid by way of privilege fee to the State Government was allowed as deduction as revenue expenditure under section 37 of the Income Tax Act, 1961 [for short ‘the Act’] by the Assessing Officer. However, the Commissioner exercising his suo motu revisional powers under section 263 of the Act revised that order and held that it cannot be allowed as deductible expenditure.

4.

Being aggrieved, the assessee preferred an appeal to the Appellate Tribunal.

5.

The Appellate Tribunal noticed that there was an amendment to provisions of section 24 of the Karnataka Excise Act, 1965 and subsequent to the Commissioner passing revisional order under section 263 of the Act and the effect of amendment was required to be examined as the section had been amended with retrospective effect and

4 therefore the privilege fee paid by the assessee to the State Government who was holding 100% share in the assessee – company was again to be allowed as a deductible expenditure etc.

6.

In this view of the matter, the Tribunal allowed the appeal of the assessee and has remanded the matter to the Commissioner for re-examination of the questions in the light of amendment to the provisions of section 24 of the Karnataka Excise Act, 1965.

7.

It is against this remand order, the present appeal.

8.

All aspects of the matter being left open by the Tribunal and the matter having gone back to the Commissioner who has to re-examine the whole thing and pass orders afresh, we do not think there is need for interference at this stage to examine the questions of law as raised in the memorandum of appeal.

5 9. It is open to the revenue to raise such questions as and when occasion arises.

10.

With such observation, this appeal is dismissed.

Sd/- JUDGE

Sd/- JUDGE

AN/-

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