Karnataka High Court
The Pr Commissioner Of Income Tax vs M/S Agnus Holdings Pvt Ltd on 7 July, 2021
Author: Alok Aradhe Chandangoudar
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF JULY 2021
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE HEMANT CHANDANGOUDAR
I.T.A. NO.379 OF 2017
BETWEEN:
1. THE PR. COMMISSIONER OF INCOME-TAX
5TH FLOOR, BMTC BUILDING
80 FEET ROAD, KORMANGALA
BENGALURU-560095.
2. THE DY. COMMISSIONER OF INCOME-TAX
CIRCLE-11(1), PRESENT ADDRESS
CIRCLE-1(1)(1), 2ND FLOOR
BMTC BUILDING, 80 FEET ROAD
KORAMANGALA, BENGALURU-560095.
... APPELLANTS
(BY SRI. K.V. ARAVIND, ADV.,)
AND:
M/S. AGNUS HOLDINGS PVT. LTD.,
STAR-2, OPP. IIMB BILEKAHALL
BANNERGHATTA ROAD, BENGALURU-560076
PAN: AAHCS 6660A.
... RESPONDENT
(BY SMT. PRATHIBHA R, ADV., FOR
SRI. S. PARTHASARATHI, ADV.,)
---
2
THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX
ACT 1961, ARISING OUT OF ORDER DATED 13.10.2016 PASSED
IN ITA NO.668/BANG/2014 FOR THE ASSESSMENT YEAR 2009-10,
PRAYING TO:
(i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED THEREIN.
(ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER
PASSED B Y THE ITAT, BENGALURU IN ITA NO.668/BANG/2014
DATED 13.10.2016 CONFIRMING THE ORDER OF THE PASSED BY
THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),
BENGALURU & ETC.
THIS I.T.A. 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 2009-10.
The appeal was admitted by a bench of this Court on the
following substantial questions of law:
"(1) Whether on the facts and in
the circumstances of the case, the Tribunal
is right in law in setting aside the
disallowance made under Section 14A of
the Act by following its earlier order in case
of assessee itself which has not reached
finality and even when the assessing
authority rightly made said disallowance in
compliance with Rule 8D of I.T. Rules read
with section 14A of the Act?
(2) Whether on the facts and in the
circumstances of the case, the Tribunal is
right in law in setting aside the disallowance
of short term capital loss made by
assessing authority by following its earlier
order which has not reached finality and
when assessing authority rightly rejected
the said claim as the assessee had failed to
explain correctness of said claim and failed
to substantiate with any materials?"
2. Facts leading to filing of this appeal briefly
stated are that the assessee is a private limited
company engaged in the investment, finance and
trading in shares. The assessee filed the return of
income for the Assessment Year 2009-10 and declared a
loss of Rs.26,67,78,608/-. The assessee also filed a
revised return on 05.03.2010 and declared loss of
Rs.26,67,78,608/-. A survey under Section 133A of the
Act was conducted in the business premises of the
assessee on 18.01.2010. Thereafter, assessment was
concluded on 21.12.2011 under Section 143(3) of the
Act wherein the loss was reduced to Rs.65,51,060/- and
additions to the extent of Rs.18,98,65,500/- were made.
3. The assessee thereupon filed an appeal
before the Commissioner of Income Tax (Appeals) who
by an order dated 31.01.2014 inter alia directed the
Assessing Officer to allow Rs.84,31,093/- out of the total
disallowance made by the Assessing Officer under
Section 14 of the Act and balance was directed to be
added to the total income of the assessee. The
Commissioner of Income Tax (Appeals) followed the
judgment of this court in the case of 'DEPUTY
COMMISSIONER INCOME TAX VS. M/s BPL SANYO
FINANCE LTD.', (2009) 312 ITR 63 and the order
passed in respect of Assessment Year 2007-08 in the
case of assessee itself. The appeal preferred by the
assessee was partly allowed. The revenue as well as the
assessee filed an appeal before the Income Tax
Appellate Tribunal (hereinafter referred to as 'the
tribunal' for short). The tribunal by common order dated
13.10.2016 partly allowed the appeal preferred by the
assessee as well as revenue. In the aforesaid factual
background, this appeal has been filed.
4. Learned counsel for the revenue at the outset
submitted that he does not intend to press substantial
question of law No.1. With reference to substantial
question of law No.2, it is submitted that the tribunal
ought to have appreciated that in case of M/s BPL Sanyo
supra, the shares were already allotted, whereas, in the
instant case, no right accrued to the assessee merely by
making payment of the amount in advance in share
warrants. It is also urged that if a share is allotted, then
only it is a capital asset as defined under Section 2(47)
of the Act and mere payment of advance amount for
purchasing a share warrant cannot be treated to be
acquisition of capital asset. However, the tribunal has
failed to notice the aforesaid distinction.
5. On the other hand, learned counsel for the
assessee submitted that the tribunal has rightly placed
reliance on the decision of M/s BPL Sanyo supra and on
the order passed in the case of the assessee for the
Assessment Year 2007-08.
6. We have considered the submissions made
by learned counsel for the parties and have perused the
record. The Commissioner of Income Tax (Appeals) by
placing reliance on the decision of the tribunal for the
Assessment Year 2007-08 held as follows:
Similar issue case came up for
adjudication before the Hon'ble ITAT,
Bangalore, in the appellant own case for the
A.Y. 2007-08 and the Hon'ble ITAT decided
the issue in favour of the appellant by
observing thus:
It can be seen that in the case M/s
BPL Sanyo, the issue was forfeiture of share
application money, whereas in the case
before us, the issue is of forfeiture of share
warrant money. In both cases, the
assessee's defaulted in making full payment
for issue of shares or share warrants. It is
the condition precedent for allotment of
shares or share warrants, that the full
amount should be made and on account of
default the amount already paid is forfeited.
Therefore, we are of the opinion, that the
facts and circumstances of the case before
us are similar to the facts of the case before
the Hon'ble Karnataka High Court, in the
case of M/s BPL Sanyo and therefore, we do
not find any reason to interfere with the
order of the CIT(A). The grounds relating to
disallowance of short term capital loss are
accordingly, rejected.
7. The aforesaid order has been upheld by the
tribunal. It is not in dispute that if against the order
passed in the case of the assessee for the Assessment
Year 2007-08 an appeal was preferred before this court,
which was dismissed in view of the bar contained in the
Circular dated 08.08.2019 pertaining to monitory limit.
Thus, the order passed by the tribunal has attained
finality. Therefore, in the fact situation of the case, the
tribunal rightly affirmed the order of the Commissioner
of Income Tax (Appeals) in setting aside the
disallowance of short term capital loss. Therefore, the
substantial question of law No.2 is answered in
affirmative and against the revenue.
In the result, we do not find any merit in this
appeal, the same fails and is hereby dismissed.
Sd/-
JUDGE
Sd/-
JUDGE
ss
