M/S GOPALAN ENTERPRISES (INDIA) PVT LTD V. THE ASSISTANT COMMISSIONER OF INCOME TAX

ITA/226/2024

AI Insights

The case involves M/s Gopalan Enterprises (India) Pvt Ltd, which appealed against an order of the ITAT that remanded the matter to the Assessing Officer for verification of power and water charges based on sub-meters. The appellant argued that the ITAT erred in law by remanding the matter when the units in their industrial park were independent and met the conditions for deduction under section 80-IA(4)(iii) of the Income Tax Act, 1961. The High Court found that the ITAT should reconsider the matter afresh, focusing on the legal and factual aspects without being influenced by previous observations.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 763480 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-12-2024
• Assessment Year: misc
• Other Referred Cases: CIT v. Primal Projects (P.) Ltd. [2021] 123 taxmann.com 314
• Laws Referred To: Income Tax Act 1961, Bangalore Water Supply and Sewerage Act, 1964, Bangalore Water Supply Regulation, 1965
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVI RAJ
• Assessee Lawyers: VIKRAM HUILGOL; KRUTIKA RAGHAVAN
• Keywords: Income tax appeal; Independent units; Remand to Assessing Officer; Sub-meters; Power and Water Connection
• Section: 260-A; 80-IA(4)(iii)

Judgement Text

" - 1 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF DECEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE S RACHAIAH INCOME TAX APPEAL NO. 226 OF 2024 BETWEEN: M/S GOPALAN ENTERPRISES (INDIA) PVT LTD (REPRESENTED BY ITS MANAGING DIRECTOR, CHERIYADTH GOPALAN AGED ABOUT 84 YEARS S/O P K PANICKER) NO. 5, RICHMOND ROAD 48 MUSEUM ROAD BANGALORE - 560 025. (A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956) …APPELLANT (BY SRI. VIKRAM HUILGOL, SR. ADVOCATE FOR; SMT. KRUTIKA RAGHAVAN, ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -11(3) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK KORAMANGALA, BENGALURU - 560 095. Digitally signed by NARAYANA UMA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -11(3) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU - 560 095. 3. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCEL -2(3) CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU - 560 001. …RESPONDENTS (BY SRI. RAVI RAJ Y V, ADVOCATE) THIS ITA IS FILED UNDER SEC.260 A OF INCOME TAX ACT 1961, PRAYING TO SET ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘B’ BENCH BEARING IN ITA NOS. 922 TO 924/BANG/2013, DATED 31.07.2023 FOR THE AYs 2006-07, 2008-09 AND 2009-10 TO THE EXTENT IT IS PREJUDICIAL TO THE ASSESSEE, AS ENCLOSED IN ANNEXURE A. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE S RACHAIAH - 3 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 ORAL JUDGMENT (PER: HON'BLE MR JUSTICE V KAMESWAR RAO) 1. The challenge in this appeal is to an order passed by the Income Tax Appellate Tribunal (for short ‘ITAT’) dated 31.07.2023, whereby the Tribunal has disposed of the appeal filed by the respondent – revenue by stating in paragraphs No.7.5 and 7.6 as under: “7.5 It was submitted before us that assessee has constructed functionally independent unit with separate entry, exit with independent instrumentation, power backup, etc. Further, it was submitted that that power connection has been obtained by building owner and consequently, power consumption bill has been received in the name of the building owner and later the building owner appropriated the same among different units on the basis of utilization of power which is evidenced by sub-meters provided to each tenant and the charges collected from each unit accordingly. With regard to water consumption, it was submitted that water connection has been obtained from BWSSB in the name of building owner and bill has been received for the consumption in the name of the building owner and the same has been appropriated to among different tenants on the basis of actual consumption, which is evidenced by separate sub- - 4 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 meters. With regard to independent door number, it was submitted that building has been constructed as per the building plan sanctioned by the BBMP and same has been furnished to Investment Promotion & Infrastructure Development Cell, Ministry of Commerce & Industries, Department of Industrial Policy & Promotion and to Central Board of Direct Taxes, so as to obtain approval for Industrial Park for construction of 4 independent units and the approval has been granted on the basis of same building plan furnished to them. As such, there was no dispute on this regard for having 4 independent units. Further, it was submitted that each unit is having independent entry and independent facilities. We are of the opinion that the judgment relied by the assessee's counsel in the case of Primal Project Pvt. Ltd. cited (supra) to be applied, if the following conditions are fulfilled: a) Every unit should be independent with independent facilities b) Independent power connection c) Independent door number d) Independent water connection 7.6 However, in the present case, the condition laid down as above in respect of sl.nos.(a) & (c) is fulfilled, however, (b) & (d) are required to be verified as to whether the submission of the assessee with regard to securing the power connection and water connection in the name of building owner, thereafter, appropriation of the charges to each unit on the basis of sub-meters. - 5 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 Accordingly, we remit this issue for limited purpose of verification of charges of power charges and water charges on the basis of sub-meters installed in the independent unit for consumption of power and water. Accordingly, for this limited purpose, we remit this issue to the file of AO for fresh consideration. The appeals of the revenue are partly allowed.” 2. The following substantial questions of law have been raised by the appellant: “I. Whether on the facts and circumstances of the case, the Tribunal having recorded a finding that the units in the Appellant's industrial park are independent, erred in law in remanding the matter to the Assessing Officer for further enquiry as to existence of unit-wise sub-meters for power and water connections when no such condition exists under law for deduction under section 80-IA(4) (iii)? II. Whether on the facts and circumstances of the case, the Tribunal erred in law in remanding the matter to the Assessing Officer by failing to follow the binding decision of this Honourable Court in CIT v. Primal Projects (P.) Ltd. [2021] 123 taxmann.com 314 rendered in similar set of facts? - 6 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 III. Without prejudice, whether on the facts and circumstances of the case, the Tribunal erred in law in remanding the matter to the Assessing Officer in contravention and violation of the directions issued by this Honourable Court vide its' earlier orders?” 3. A reading of the said paragraphs, it is noted that the Tribunal has remanded the matter back to the Assessing Officer by stating that the Assessing Officer shall verify the power charges and water charges on the basis of sub- meters installed in the independent unit for consumption of power and water. 4. According to Mr. Vikram Huilgol, learned Senior counsel for the appellant that insofar as power consumption is concerned, the appellant can satisfy the Assessing Officer as there is an independent meter recording the consumption of electricity in the unit occupied by the appellant. But insofar as the water charges are concerned, as there are no sub-meters in the whole of the premises though units are independent, he cannot satisfy the Assessing Officer. According to him, the provisions of Bangalore Water Supply and Sewerage Act, 1964 and - 7 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 even as per the circulars issued by the said Board, they do not contemplate the installation of the sub-metres in a premises, having different units. 5. He also refers to Regulation 43-A and 43-B of the Bangalore Water Supply Regulation, 1965, which reads as under:- “1. Insertion of new Regulation 43-A and 43-B:- In the Bangalore Water Supply Regulation, 1965, after regulation 43, the following shall be inserted, namely:- “43-A. Obligation to provide internal-meters:- Every owner or occupier of a building having sital area of not less than 2400 square feet and building having three or more houses or every owner proposes to construct a building on a sital area of not less than 1200 square feet and building having three or more houses shall install their own internal meters for judicious consumption of water, within such date as may be notified by the State Government. However, the readings of such internal-meters shall not be used for billing or any case to dispute the readings of the meter provided by the Board, in any legal proceedings. 43-B. Obligation to provide Automatic water level control system:- Every owner or occupier of a building shall install Automatic water level control - 8 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 system or any other suitable devices to prevent the overflow of water, automatically from the over head tanks. The punishment for breaching this regulation shall be imposed under regulation 55. Further, if the breach is continued, action shall be taken under regulation 44.” 6. He states that the matter be remanded back to the ITAT instead of Assessing Officer to consider the issue on the above two aspects on the basis of documents to be filed by the appellant herein. 7. He also states that the ITAT must decide the issue on the above two aspects independently without being influenced by any observations made by the ITAT in paragraph No.6 of the impugned order. 8. The learned counsel for the respondent/revenue do not contest the submission made by Mr. Vikram Huilgol 9. Accordingly, we modify the order passed by the ITAT to the extent that the matter shall be considered by the ITAT afresh on the above two aspects and not by the Assessing Officer. It shall decide the issue in accordance with law. Liberty is granted to the appellant to file such - 9 - NC: 2024:KHC:49856-DB ITA No. 226 of 2024 documents as deem appropriate in support of its case on the two aspects. Liberty is also granted to the revenue, if need be, to file documents which they intend to rely upon. 10. On filing of the documents by both the parties, the Tribunal shall decide the issue to the extent on which remand was made by the Tribunal without being influenced by any observation made in the impugned order. Appeal is disposed of. Sd/- (V KAMESWAR RAO) JUDGE Sd/- (S RACHAIAH) JUDGE UN List No.: 1 Sl No.: 14 "