Shri Srinivasan Chandira Kumar V. The Additional Commissioner of Income Tax Range-4

ITA/134/2014

AI Insights

The case involves Shri Srinivasan Chandira Kumar, the appellant, contesting an order from the Income Tax Appellate Tribunal which confirmed the decisions of the First Appellate Authority and the Assessing Officer regarding the disallowance of a deduction claim of Rs.20,97,600. The appellant argued that the Tribunal incorrectly applied Section 37 of the Income Tax Act, 1961, when it should have considered Section 48(i), which pertains to deductions for expenditures wholly and exclusively incurred in connection with the transfer of a long-term capital asset. The respondent, the Additional Commissioner of Income Tax, supported the Tribunal's original decision. The High Court, after hearing both parties, decided to remand the case back to the Tribunal for a fresh examination under the correct legal provision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 671267 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-04-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: B S N PRASAD
• Keywords: Business expenditure; Deduction; Income Tax; Long Term Capital Asset; Transfer of shares
• Section: 37; 48(i); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 4th DAY OF APRIL 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B BHOSALE AND THE HON’BLE MR. JUSTICE B MANOHAR ITA.NO.134/2014 BETWEEN SHRI SRINIVASAN CHANDIRA KUMAR 596,10TH CROSS,7TH BLOCK JAYANAGAR,BENGALURU-560 082 S/O SHRI D SRINIVASAN AGED 64 YEARS ... APPELLANT (BY SRI B S N PRASAD, ADV.,) AND THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-4 UNITY BUILDING ANNEXE, MISSION ROAD BENGALURU-560 027 ... RESPONDENT (BY SRI K V ARAVIND, ADV.,) THIS ITA FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 20/09/2013 PASSED IN ITA NO. 1061/BANG/2012, FOR THE ASSESSMENT YEAR 2009-10 PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, IN ITA NO.1061/BANG/2012, DATED: 20/09/2013 TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. THIS ITA COMING ON FOR ADMISSION, THIS DAY, Dilip B. Bhosale J., DELIVERED THE FOLLOWING: 2 PC: We have heard learned counsel for the parties. By consent, the appeal is heard for final disposal at the stage of admission. 2. This appeal is directed against the order dated 20.09.2013 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, whereby ITA No.1061/Bang/2012, pertaining to Assessment Year 2009-10, has been disposed of confirming the orders passed by the First Appellate Authority and the Assessing Officer. The substantial questions of law formulated by the appellant, in the present appeal, read thus: “i. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disallowing the appellant’s claim for deduction of an amount of Rs.20,97,600/- by incorrectly applying the provision of Section 37 of the Income Tax Act, 1961? ii. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disallowing the appellant’s claim for deduction under Section 48(i) of the Act when the requirement of law that the expenditure must be incurred wholly and exclusively in connection with the transfer of a long term capital asset has been met and the 3 expenditure claimed is intrinsically linked with and therefore incidental to the transfer of shares?” 3. Mr.B.S.N. Prasad, learned counsel for the appellant, at the outset, submitted that the Tribunal while considering the appeal on merits proceeded on the wrong assumption that the appellant had claimed deduction of `20,97,600/- as business expenditure under Section 37 of the Income Tax Act, 1961 (for short ‘Act’) when it was the case of the appellant that he was entitled for deduction under Section 48(i) of the Act. In support, he invited our attention to paragraph-9 of the order, which reads thus: “As regards the disallowance of Rs.20,97,600/- is concerned, the brief facts of the case are that, when the company in which the assessee is a shareholder was sold to M/s EMR Ltd., there was a stipulation in the sale deed that the promoters shall credit certain amount to a trust for the welfare of the ex- employees. The assessee had claimed that a sum of Rs.20,97,000/- has been deposited into the bank account towards contribution for the trust and, therefore, it is a business expenditure u/s 37 of the Income-tax Act and has to be allowed as such. However, the Assessing Officer observed that no trust has been set up by the seller but only has deposited the amount into a separate bank account. He held that as the condition of the 4 agreement is not fulfilled, the purpose and utilization of the contribution remained doubtful and hence, cannot be allowed as an expenditure in the hands of the assessee. He accordingly brought it to tax.” 4. He also invited our attention to the grounds of appeal and the written submissions filed before the Tribunal in support of his contention. He, therefore, prayed for setting aside the order passed by the Tribunal and for remand of the case for its fresh consideration. 5. Mr.K.V.Aravind, learned counsel appearing for the respondent, on the other hand, submitted that if the appellant-assessee is ready to give up his claim of deduction under Section 37, the matter may be remanded to the Tribunal to consider his claim of deduction under Section 48 of the Act. 6. Having considered the submissions of learned counsel for the parties, we are satisfied that this appeal can be conveniently disposed of by the following order: 5 ORDER i. The order dated 20.09.2013 is set aside and the ITA No.1061/Bang/2012 is restored to file. The Tribunal shall consider the appeal afresh on merits in accordance with law. ii. It is made clear that it would not be open to the appellant-assessee to claim deduction under Section 37 of the Act before the Tribunal. In other words, the Tribunal shall examine the appeal afresh in the light of the claim of the appellant that he is entitled for deduction under the provisions of Section 48 of the Act. 7. In the circumstances, the appeal is disposed of. It is made clear that we have not addressed the substantial questions of law raised in the instant appeal. No costs. Sd/- JUDGE Sd/- JUDGE TL "