M/S COURSE5 INTELLIGENCE PVT. LTD., vs. THE INCOME TAX OFFICER

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ITA/389/2014HC KarnatakaKAHC01020230201401 September 2021Bench: S.SUJATHA,RAVI V HOSMANI9 pages
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What did the High Court hold?

The High Court answered substantial question of law No. 1 in favour of the revenue, and questions 2 to 7 in favour of the assessee. The appeals were disposed of based on these answers.

What were the facts?

The appeals were filed by both the assessee and the revenue against an ITAT order concerning assessment year 2005-06. The core issues revolved around disallowances under Section 40(a)(i) and eligibility for deduction under Section 10A.

What were the issues?

The key issues concerned the correct computation of disallowances under Section 40(a)(i) and the eligibility of income for deduction under Section 10A, particularly in light of various High Court and Supreme Court decisions.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 10A,Section 2(24)(x),Section 36(1)(va),Section 43B,Section 260-A

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Cases cited in this judgment(4)Show list

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 1ST DAY OF SEPTEMBER, 2021

PRESENT

THE HON’BLE MRS. JUSTICE S. SUJATHA AND

THE HON’BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.389/2014 C/W I.T.A. No.392/2014 IN I.T.A.No.389/2014:

BETWEEN:

M/s. COURSE5 INTELLIGENCE PVT. LTD., (FORMERLY KNOWN AS CROSS-TAB MARKETING SERVICES PRIVATE LIMITED), BUILDING 2A, EMBASSY TECH VILLAGE, GROUND FLOOR, DEVARABEESANAHALLI, OUTER RING ROAD, BANGALORE-560 103. REP. BY ITS FINANCE CONTROLLER MR.CHANDRAKANTH RAO, AGED 36 YEARS S/O LATE SRI. S.M.RAO.

… APPELLANT

(CAUSE TITLE AMENDED VIDE

ORDER DATED 04.11.2020) [BY SRI. CHYTHANYA K.K., ADVOCATE (PHYSICAL HEARING)]

AND:

THE INCOME TAX OFFICER WARD-11(1), R.P.BHAVAN

NRUPATHUNGA ROAD BENGALURU-560 001.

… RESPONDENT

[BY SRI. K.V.ARAVIND, ADVOCATE (PHYSICAL HEARING)]

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 04.04.2014 PASSED IN ITA NOs.1507 & 1461 / BANG / 2012, FOR THE ASSESSMENT YEAR 2005-06.

IN I.T.A.No.392/2014:

BETWEEN:

1.

THE COMMISSIONER OF INCOME TAX

C.R.BUILDING, QUEENS ROAD

BANGALORE.

2.

THE INCOME-TAX OFFICER

WARD-11(1), RASHTROTHANA BHAVAN

NRUPATHUNGA ROAD BANGALORE.

… APPELLANTS

[BY SRI. K.V.ARAVIND ADVOCATE (PHYSICAL HEARING)]

AND:

M/s. CROSS TAB MARKETING SERVICES PVT. LTD., NO.468, 80 FT. ROAD 6TH BLOCK, KORAMANGALA BANGALORE-560 034.

… RESPONDENT

[BY SRI. CHYTHANYA K.K., ADVOCATE (PHYSICAL HEARING)]

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 04.04.2014 PASSED IN ITA No.1507 / BANG / 2012, FOR THE ASSESSMENT YEAR 2005-06.

THESE MFAs ARE COMING ON FOR HEARING, THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:

J U D G M E N T

These appeals are filed by the assessee as well as the Revenue under Section 260A of the Income-tax Act, 1961 assailing the order of the Income Tax Appellate Tribunal, “C” Bench, Bengaluru,(‘Tribunal’ for short) dated 04.04.2014 passed in ITA Nos.1507 and 1461/Bang/2012 relating to the assessment year 2005-2006.

2.

In ITA No.392/2014, the matter has been admitted to consider the following substantial questions of law: 1. Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in directing to exclude those amounts which were actually paid and did not remain payable as on the last day of the previous year

while making disallowance under section 40[a][i] by relying on its own decision in the case of Ananda Markala which interalia relied on the decision of the Allahabad High Court in the case of Vectar Shipping Services Pvt. Ltd., without appreciating that as against one decision in favour of the Assessee there were two decision of the Gujarath High Court in the case of CIT V/s. Sikandar Khan Tunvar and others – Tax Appeal No.905 of 2012 dated 02/05/2013 and the decision of Kolkotta High Court in the case of Md. Jakir Hosaai Mandal in favour of the Revenue?

2.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in directing that deduction under Section 10A should be allowed on the income as increased by the disallowance of expenditure made by invoking the provisions of Section 40[a][i] without appreciating that the amount representing the disallowance on account of non deduction of tax under

Section 195 in violation of a specific provisions of the Act and should not be eligible for incentive under Section 10A?

3.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in directing the assessing authority to exclude the leased line expenses both from the export turnover as well as the total turnover without appreciating the fact that there is no provision in section 10A of the Explanation 2 to section 10A provides that such expenses are to be reduced only from export turnover?

4.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in allowing relief in respect of computation under Section 10A by following the decision of this Hon’ble Court in the case of TATA Elxsi [reported in 349 ITR page 98] even though the said order has been challenged before Apex Court?

5.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in allowing relief to the assessee without appreciating that the amounts are income in the hands of the assessee in terms of Section 2[24][x] read with section 36[1][va] of the Act?

6.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in giving relief to assessee in respect of the income charged to tax in terms of Section 2[24][x] read with Section 36[1][va] of the Act on account of belated payments of employees contribution to PF amounting to Rs.18,806/- without appreciating that the provisions of Section 43B are not relevant to the issue and not applicable to the facts of the case?

7.

Whether the Tribunal was justified on the facts and circumstances of the case the Tribunal is right in law in allowing relief to assessee by not appreciating that its

earlier order dated 31.05.2013 in ITA No.785/2012 in the case of DCIT V/s. Essae Teraoka Pvt. Ltd., the decision of Special Bench of the Kolkota Tribunal in the case of Bengal Chemicals and Pharmaceuticals Ltd., [2011] 10 Taxman.com 26 which after considering the decisions of the Apex Court in Sabari Enterprises [reported in 2008 Vol. 298 ITR page 141] and Alom Extrusions which are relied upon by the Tribunal have clarified that the payments of employees contribution to PF/ESI is not governed by Section 43B?

3.

Learned counsel on both sides submitted ad idem as under:

Re: Substantial question of law No.1: It is submitted that the substantial question of law no.1 is covered by the decision of the Hon’ble Apex Court in the case of Palam Gas Service Vs. Commissioner of Income - tax, (2017) 81 taxmann. Com. 43 (SC), wherein the said question of law has been answered by the Hon’ble Apex Court in favour of the revenue and against the assessee.

Re: Substantial question of law No.2: It is submitted that this question of law has been answered by the Hon’ble High Court of Bombay in the case of Commissioner of Income Tax Vs. Gem Plus Jewellary India Ltd. (2011) 330 ITR 175, in favour of the assessee and the same has been accepted by the Board in circular No.36/2017 dated 02.11.2016.

Re: Substantial questions of law No.3 & 4: These questions are answered in favour of the assessee by the Hon’ble Apex Court in the case of Commissioner of Income - tax, Central-III Vs. HCL Technologies Ltd., (2018) 404 ITR 719(SC).

Re: Substantial questions of law No.5 to 7: These questions are answered in favour of the assessee by the Hon’ble High Court of Karnataka in the case of Essae Teraoka (P.) Ltd., V. Deputy Commissioner of Income-tax, Circle-11(3), (2014 366 ITR 408 (Kar).

The said submission is placed on record.

Accordingly, following the said decisions referred to above, we answer the questions of law No.1 in favour of the revenue and 2 to 7 in favour of the assessee.

In view of the aforesaid, substantial questions of law raised by the assessee in ITA No.389/2014 would become academic. Hence, keeping these substantial questions of law open, both appeals stand disposed of, as indicated above.

Sd/- JUDGE

Sd/- JUDGE

Psg*

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