THE PR COMMISSIONER OF INCOME TAX-3 V. M/S GMR HIGHWYS LTD,

ITA/620/2023

AI Insights

The case involves an appeal by the Income Tax Department against GMR Highways Ltd concerning the disallowance under Section 14A read with Rule 8D of the Income Tax Act, 1961, for the Assessment Year 2016-2017. The primary legal question was whether the disallowance of expenditure under these provisions could exceed the exempt income earned by the assessee during the year. The Income Tax Appellate Tribunal had partly allowed the assessee's appeal, which the department challenged in the High Court. The High Court, referencing a similar case (ITA No.613/2023), dismissed the appeal, affirming the Tribunal's decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 728236 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-12-2024
• Assessment Year: misc
• Other Referred Cases: PRAGATHI KRISHNA GRAMIN BANK VS. JOINT COMMISSIONER OF INCOME-TAX [2018] 95 TAXMANN.COM 41 (KARNATAKA)
• Laws Referred To: Income Tax Act 1961, Rule 8D of the Income Tax Rules
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: BALARAM RAO
• Assessee Lawyers: SUSHAL TIWARI; E I SANMATHI
• Keywords: Disallowance; Exempt income; Income tax appeal; Rule 8D; Section 14A
• Section: 14A; 260-A

Judgement Text

" - 1 - NC: 2024:KHC:50688-DB ITA No. 620 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH 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. 620 OF 2023 BETWEEN: 1. THE PR.COMMISSIONER OF INCOME TAX-3, KORMANGALA, BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)(2), BMTC COMPLEX, KORMANGALA, BANGALORE. …APPELLANTS (BY SRI. SUSHAL TIWARI .N, ADVOCATE FOR SRI. E.I.SANMATHI., ADVOCATE) AND: M/S GMR HIGHWYS LTD, NO 25/1, SKIP HOUSE, MUSEUM ROAD, BANAGALORE-25 …RESPONDENT (BY SRI. BALARAM .R RAO, ADVOCATE) THIS ITA IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, PRAYING TO (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS Digitally signed by K G RENUKAMBA Location: High Court of Karnataka - 2 - NC: 2024:KHC:50688-DB ITA No. 620 of 2023 DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 25/05/2022 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS IN ITA NO. 495/BANG/2020 FOR A.Y 2016-2017 (ANNEXURE-A). THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE S RACHAIAH ORAL JUDGMENT (PER: HON'BLE MR JUSTICE V KAMESWAR RAO) This appeal has been filed challenging the order passed by the Income Tax Appellate Tribunal (in short ‘ITAT’) dated 25.05.2022 in ITA No.495/Bang/2020, whereby the ITAT has partly allowed the appeal in favour of the assessee pertaining to the Assessment Year 2016-2017. 2. The memorandum of appeal raises the following substantial question of law for consideration: “Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in holding that disallowance under section 14A read with Rule 8D, cannot exceed the exempt income earned by the assessee during the year under consideration ignoring that Section 14A do not stipulate such restriction and - 3 - NC: 2024:KHC:50688-DB ITA No. 620 of 2023 The Central Board of Direct Taxes (CBDT) vide Circular No.5/2014, dated 11 February 2014 has clarified that Rule 8D of the Rules read with Section 14A of the Act provides for disallowance of expenditure even where taxpayer has not earned any exempt income in a particular year?” 3. Mr.Balaram R Rao, learned counsel appearing for the respondent/assessee states that, the present appeal is covered in favour of the assessee and against the revenue, most particularly, in view of the order passed by this Court in ITA No.613/2023, decided on 23.09.2024, in the case of the assessee, it self. 4. Mr.Sanmathi and Mr.Tiwari, learned counsel appearing for the appellants-revenue are not in a position to dispute the aforesaid submission of Mr.Balaram R Rao. 5. The order passed by this Court in ITA No.613/2023 dated 23.09.2024, paragraphs Nos.3 to 5 reads as under: “ 3. Learned counsel for the respondent submits that the substantial question of law raised by the Revenue is answered against the Revenue in PRAGATHI KRISHNA GRAMIN BANK VS. JOINT COMMISSIONER OF INCOME-TAX [2018] 95 TAXMANN.COM 41 (KARNATAKA). Therefore, - 4 - NC: 2024:KHC:50688-DB ITA No. 620 of 2023 he submits that the appeal needs to be rejected at the stage of admission itself. 4. Learned Sri.E.I.Sanmathi., appearing for the appellants/Revenue is not a position to dispute the same. 5. In view of the above, appeal is dismissed at the stage of admission answering the substantial question of law against the appellants/Revenue and in favour of the respondent/assessee.” 6. For parity of reasons, the appeal is dismissed at the stage of admission answering substantial questions of law against the appellants-revenue and in favour of the respondent-assessee. 7. The appeal is dismissed. Sd/- (V KAMESWAR RAO) JUDGE Sd/- (S RACHAIAH) JUDGE SMC/List No.: 1 Sl No.: 16 "