HERBALIFE INTERNATIONAL INDIA PRIVATE LIMITED V. THE DEPUTY COMMISSIONER OF INCOME-TAX

ITA/630/2017

AI Insights

Herbalife International India Private Limited appealed against the order of the ITAT dated April 17, 2017, concerning the assessment year 2007-2008. The appeal was primarily focused on the Tribunal's presumption based on the Indian Evidence Act and the consideration of transactions approved by the FIPB and RBI as arm's length. The appellant also contested the ITAT's stance on the treatment of doubtful advances written off. During the proceedings, the appellant decided not to press certain questions related to the treatment of excise duty and the compliance with principles of natural justice. The High Court of Karnataka, after hearing the arguments, decided to remit the matter back to the ITAT for a detailed reconsideration of the contested issues.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 726487 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 11-07-2023
• Assessment Year: misc
• Other Referred Cases: ITA No.629/2017
• Laws Referred To: Income Tax Act 1961, Indian Evidence Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP; K V ARAVIND
• Assessee Lawyers: PERCY PARDIWALLA; TANMAYEE RAJKUMAR
• Keywords: Arm's Length; Business loss; Doubtful Advances; Income tax appeal; Natural Justice; Technical know-how
• Section: 28; 260-A

Judgement Text

" - 1 - NC: 2023:KHC:24015-DB ITA No. 630 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF JULY, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 630 OF 2017 BETWEEN : HERBALIFE INTERNATIONAL INDIA PRIVATE LIMITED RMZ PINNACLE, NO.15 COMMISSARIAT ROAD BENGALURU-560 025 REPRESENTED HEREIN BY ITS HEAD OF TAXATION MR. SHANKAR M.S PAN NO.AAACH 8025R …APPELLANT (BY SHRI. PERCY PARDIWALLA, SENIOR ADVOCATE FOR MS. TANMAYEE RAJKUMAR, ADVOCATE) AND : 1. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11 (4) BANGALORE BMTC BUILDING 80 FT ROAD KORAMANGALA BANGALORE-560 095 2. THE COMMISSIONER OF INCOME-TAX BANGALORE BMTC BUILDING, 80 FT ROAD Digitally signed by ANUSHA V Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:24015-DB ITA No. 630 of 2017 KORAMANGALA BANGALORE-560 095 …RESPONDENTS (BY SHRI. M. DILIP, STANDING COUNSEL FOR SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL) . . . . THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.04.2017 PASSED IN IT(TP)A NO.924/BANG/2012, FOR THE ASSESSMENT YEAR 2007-2008, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET-ASIDE THE ORDER DATED 17.04.2017 (ANNEXURE-K) PASSED BY THE TRIBUNAL IN IT(TP)A NO.924/BANG/2012 TO THE EXTENT QUESTIONED HEREIN AND ETC. THIS ITA, COMING ON FOR HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT This appeal by the assessee challenging the order dated April 17, 2017 in IT(TP)A Nos.924/Bang/2012 has been admitted to consider following questions: 1. Whether in the facts and circumstances of the case and in law, the Tribunal erred in drawing a presumption based on provisions of the Indian Evidence Act, without taking cognizance of the fact that evidence to prove the receipt of Technical know-how were filed and relied by the appellant? 2. Whether the Tribunal erred in not appreciating that transaction approved by the FIPB and RBI can be considered to be at arm’s length as per the requirement of the Income-Tax Act? 3. Whether the ITAT is wrong in stating that the amount of doubtful advances written off is not forming part of total income in the earlier years? - 3 - NC: 2023:KHC:24015-DB ITA No. 630 of 2017 4. Whether the ITAT erred in not appreciating that it is not necessary for the assessee to establish that the debt, in fact, has become irrevocable and it is enough if the bad debt is written off as irrevocable in the accounts of the assessee? 5. Whether the ITAT erred in not appreciating that doubtful advances written off is a loss which has been incurred in the normal course of business and is allowable as business loss under Section 28 of the Act? 6. Whether on the facts and in the circumstances of the case, the Tribunal’s order in so far it is passed without adjudicating all the grounds raised by the Appellant, is not in compliance with principles of natural justice and liable to be set-aside? 2. Heard Shri. Percy Pardiwalla, learned Senior Advocate for the assessee and Shri. M. Dilip, learned Standing Counsel for the Revenue. 3. At the outset, Shri. Pardiwalla submitted that questions No. 1 and 2 are covered by the order of even date in ITA No.629/2017 considered simultaneously with this appeal. With regard to questions No.3, 4 and 5, he submitted that for the year relevant to A.Y. 2002-03, assessee had incurred excise duty of Rs.1,25,20,839/-. The goods manufactured were subsequently exported and assessee became eligible to claim rebate on the excise duty as duty - 4 - NC: 2023:KHC:24015-DB ITA No. 630 of 2017 draw back, as assessee accounted the same as ‘receivables’ under the head ‘Loans and Advances’ in the Balance Sheet dated 31.03.2002. It had also voluntarily disallowed the provision so created. In substance, assessee had not claimed deduction of excise duty payment. Subsequently, vide order dated 08.02.2023, the JCIT1 has passed an order holding that the assessee had subsequently written-off a sum of Rs.1,20,16,395/- out of the aforementioned amount during the financial year relevant to A.Y.2007-08 and claimed the same as deduction in the computation of income of the said assessment year. In view of JCIT’s order dated 08.02.2023, Shri. Pardiwalla does not press questions No.3, 4 and 5. He does not press question No.6 as well. 4. We may record that for the reasons recorded therein, we have held in ITA No.629/2017 that questions No. 1 and 2 require reconsideration by the ITAT and remitted the matter to the file of the ITAT. 1 Joint Commissioner of Income Tax - 5 - NC: 2023:KHC:24015-DB ITA No. 630 of 2017 5. Hence, the following: ORDER (a) Appeal is allowed. (b) Order dated April 17, 2017 in IT(TP)A No. 924/Bang/2012 passed by the ITAT is set-aside. (c) Matter is remitted to the file of ITAT, ‘A’ Bench for reconsideration with regard to questions No.1 and 2, in accordance with law. All contentions of parties are kept open. No costs. Sd/- JUDGE Sd/- JUDGE SPS List No.: 1 Sl No.: 36 "