THE COMMISSIONER OF INCOME TAX vs. M/S. GOKALDAS IMAGES PVT.LTD

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.78 OF 2015 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX

C.R. BUILDING, QUEENS ROAD

BANGALORE. 2. THE ADDL. COMMISSIONER OF INCOME-TAX

RANGE-11, RASHTROTHANA BHAVAN

NRUPATHUNGA ROAD

BANGALORE.

... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. GOKALDAS IMAGES PVT. LTD., 7 & 12, INDUSTRIAL SUBURB TUMKUR ROAD, YESHWANTHPURA BANGALORE-560022 PAN: AAACG 6637Q. ... RESPONDENT (BY SRI. ASHOK A. KULKARNI, ADV.) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 26.09.2014 PASSED IN ITA NO.667/BANG/2013 & CO NO.97/BANG/2013 FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO:

2 (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.667/BANG/2013 & CO No.97/BANG/2013 DATED 26-09-2014 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-11, BANGALORE. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2008-09. The appeal was admitted by a bench of this Court vide order dated 05.10.2015 on the following substantial question of law: (i) Whether on the facts and in circumstances of the case, the Tribunal is right in law in holding that the amount of Rs.62,84,681/- advanced by the assessee to M/s. Hinduja Realtors Pvt. Ltd, which is a sister concern of the assessee, for payment of Municipal Taxes, without charging any interest on the same is to be treated as business expenditure, without appreciating that the assessee does not have the liability of payment of Municipal Taxes and the

3 interest should have been charged on the money advanced as held by the assessing authority? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the amount of Rs.7,00,00,000 advanced by the assessee to M/s. Hinduja Investments Pvt. Ltd, which is a sister concern of the assessee, towards acquisition/identifying and liaison of a textile Apparel Park, without appreciating that the loan given was to help the sister concern which is separate legal entity and assessee had not benefit from it and as such assessee had diverted the borrowed fund to this extent? (iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the disallowance made under section 14A should not be added to the Book Profits of the assessee under section 115JB despite the explicit provisions of Clause (i) of Explanation (1) to section 115JB? (iv) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deletion of portion of common expenses allocated even when assessing authority has rightly observed the expenses incurred are to be apportioned among all the units in the ratio of their respective turnovers? (v) Whether on the facts and in the circumstances of the case, the Tribunal erred

4 in giving relief to assessee in respect of set of EOU profits against non EOU losses and brought forward depreciation by following the decision of this Hon'ble Court in the case of M/s. Yokogawa without appreciating that the fact that deduction has to be allowed from the total income of the assessee and as per section 2(45) of the I.T. Act the total income should be computed from various sources after set off of losses from one source against income from other sources under the same head of income in terms of section 709(1) and the order of the Hon'ble Court has been challenged before Apex Court by Revenue? 2. For the reasons assigned by us today in I.T.A.No.77/2015, the substantial questions of law framed by this court are answered against the revenue and in favour of the assessee. In view of preceding analysis, the order passed by the tribunal insofar as it pertains to finding recorded by it that an amount of Rs.7 Crores advanced by the assessee to M/s Hinduja Investments Pvt. Ltd., for business purposes and commercial expediency is hereby quashed and the matter is remitted to the tribunal to

5 decide the aforesaid issue afresh in accordance with law. In the result, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss