What did the High Court hold?

The High Court allowed the review petition, recalling its previous order that dismissed the appeal. The Court found that the substantial question of law in the current appeal was different from earlier years, and its prior dismissal was based on a misunderstanding.

The assessee purchased a business and claimed depreciation on commercial rights. The Assessing Officer disallowed the claim, viewing it as a tax avoidance scheme. The Appellate Commissioner and Tribunal allowed the claim, relying on previous orders for the same assessee.

What were the issues?

Whether the substantial question of law in the current appeal was the same as in previous years, and if the prior dismissal was based on a correct understanding of the law.

CIT vs M/S Manipal Universal Learning… | Karnataka High Court 2016

- 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 22ND DAY OF JANUARY 2016

PRESENT

THE HON’BLE MR.JUSTICE N.KUMAR

AND

THE HON’BLE MRS.JUSTICE RATHNAKALA

REVIEW PETITION NO.1375/2014 IN ITA NO.1063/2008

BETWEEN:

THE COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE C.R.BUILDING QUEENS ROAD BANGALORE

THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE - 2(3) C.R.BUILDING QUEENS ROAD BANGALORE.

…PETITIONERS

(BY SRI K.V.ARAVIND, ADV.)

AND:

M/S MANIPAL UNIVERSAL LEARNING PVT. LTD., NO.14, MANIPAL TOWERS, AIRPORT ROAD, BANGALORE.

..RESPONDENT

(BY SRI V.K.GURUNATHAN FOR SRI S.PARTHASARATHI, ADV.)

- 2 - THIS REVIEW PETITION IS FILED UNDER ORDER 47 RULE 1 OF CPC, PRAYING TO REVIEW THE ORDER DATED 23/09/2014 PASSED IN ITA NO.1063/2008, ON THE FILE OF THE HON’BLE HIGH COURT OF KARNATAKA, BANGALORE.

THIS REVIEW PETITION COMING ON FOR HEARING THIS DAY, N.KUMAR J., MADE THE FOLLOWING:

O R D E R

This Review Petition is filed to review the order dated 23.9.2014 passed in I.T.A.No.1063/2008 where the appeal came to be dismissed on the ground that the Tribunal has answered the substantial question of law involved in this appeal in its earlier judgment in the case of same assessee.

The brief facts of the case are as under:

The assessee is carrying on the business of imparting education. It manages call centres and distant education. During the assessment year 2003-04, assessee purchased a business from ICDS Limited for a consideration of Rs.10,444.63 lakhs. Out of this amount, Rs.98,73,25,000/- is paid towards commercial rights and depreciation at 25% is claimed. For the

- 3 - assessment year 2003-04, the assessee’s claim was allowed in part. However, the entire matter was pending adjudication before this Court. The assessee filed returns of income declaring a loss of Rs.23,07,09,930/-. Out of the total amount of Rs.10,444.63 lakhs, an amount of Rs.9,873.25 lakhs was shown towards commercial rights and depreciation was claimed. The Assessing Officer on examination of the entire record held that under the same transaction between the assessee and ICDS Limited, there was no transfer of any asset or rights. Even if it is transferred, it is only for a period of one year. The entire scheme was only to claim depreciation illegally and unlawfully. It is also held that M/s.Manipal Universal Learning Pvt.Ltd. and ICDS Limited had the same management and control and the Directors were also the same. He felt it is to avoid tax, such a scheme is formulated. He proceeded to pass order of assessment on 7.12.2006 and foisted the tax liability.

- 4 -

In appeal by the assessee, the Appellate Commissioner by placing reliance on the judgment of the Tribunal passed in the earlier year in the case of the assessee, allowed the depreciation claim by his order dated 13.7.2007. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. The appeal came to be rejected by order dated 26.6.2008. It is against the said order, the Revenue preferred I.T.A.No.1063/2008.

The said appeal also came to be dismissed by this Court on the ground that, for the earlier years in the case of the same assessee itself, the said depreciation was allowed on a submission made by the learned Counsel for the Revenue. Now it transpires that the substantial question of law, which arose for consideration in this appeal, did not arise for consideration in the earlier years. It was on wrong

- 5 - understanding, the said submission was made. Based on the said submission, the appeal came to be dismissed.

We have heard the learned Counsel for both parties. Now we are convinced that the substantial question of law, which is framed in the said appeal, was not the same as that was framed in the earlier years in the assessee’s case. Therefore, the order passed by us is incorrect. Accordingly, we pass the following order:

The Review Petition is allowed. The order dated 23.9.2014 is recalled. I.T.A.No.1063/2008 is restored to file. The said appeal shall be heard on merits and in accordance with law.

Ordered accordingly.

Sd/-

JUDGE

Sd/-

JUDGE

KNM/-

THE COMMISSIONER OF INCOME TAX vs. M/S MANIPAL UNIVERSAL LEARNING PVT., LTD.,

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