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

ITA/389/2014

AI Insights

The case involves appeals filed by both the assessee, M/s. Course5 Intelligence Pvt. Ltd., and the Revenue against the order of the Income Tax Appellate Tribunal, Bengaluru. The appeals were related to various disallowances and deductions under the Income Tax Act, 1961 for the assessment year 2005-06. The substantial questions of law addressed included the legality of excluding certain amounts from disallowances under Section 40[a][i], the eligibility of income increased by disallowance for deductions under Section 10A, and the treatment of leased line expenses in export turnover calculations. The court's decision referenced several precedents and circulars, leading to a mixed outcome favoring both parties on different issues.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 758514 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 01-09-2021
• Assessment Year: misc
• Other Referred Cases: Palam Gas Service Vs. Commissioner of Income - tax, Commissioner of Income Tax Vs. Gem Plus Jewellary India Ltd., Commissioner of Income - tax, Central-III Vs. HCL Technologies Ltd., Essae Teraoka (P.) Ltd., V. Deputy Commissioner of Income-tax, Circle-11(3)
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: CHYTHANYA
• Keywords: Assessment Year 2005-06; Disallowance; Employees Contribution to PF; Export Turnover; Income tax appeal; Total Turnover; Leased Line Expenses
• Section: 195; 43B; 36(1)(va); 40(a)(i); 2(24)(x); 10A; 260-A

Judgement Text

" 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 2 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)] 3 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 4 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 5 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? 6 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 7 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. 8 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. 9 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* "