THE PR COMMISSIONER OF INCOME TAX V. M/S AGNUS HOLDINGS PVT LTD

ITA/379/2017

AI Insights

The case involves an appeal by the revenue against the decision of the ITAT, which had partly allowed the appeal of the assessee, M/s. Agnus Holdings Pvt. Ltd., and set aside the disallowance of short term capital loss. The revenue challenged the ITAT's reliance on a previous case (M/s BPL Sanyo Finance Ltd.) and the order passed for the Assessment Year 2007-08 in the case of the assessee itself, arguing that the shares were not allotted in the current case, and thus, no right accrued to the assessee by merely making payment of the amount in advance for share warrants. The court upheld the ITAT's decision, noting that the facts and circumstances were similar to those in the cited case.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 678429 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 07-07-2021
• Assessment Year: misc
• Other Referred Cases: DEPUTY COMMISSIONER INCOME TAX VS. M/s BPL SANYO FINANCE LTD.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PRATHIBHA R
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment Year 2009-10; Disallowance; Income Tax; Rule 8D; Section 14A; Short Term Capital Loss
• Section: 143(3); 14A; 133A; 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF JULY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.379 OF 2017 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560095. 2. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-11(1), PRESENT ADDRESS CIRCLE-1(1)(1), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU-560095. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. AGNUS HOLDINGS PVT. LTD., STAR-2, OPP. IIMB BILEKAHALL BANNERGHATTA ROAD, BENGALURU-560076 PAN: AAHCS 6660A. ... RESPONDENT (BY SMT. PRATHIBHA R, ADV., FOR SRI. S. PARTHASARATHI, ADV.,) - - - 2 THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.10.2016 PASSED IN ITA NO.668/BANG/2014 FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED B Y THE ITAT, BENGALURU IN ITA NO.668/BANG/2014 DATED 13.10.2016 CONFIRMING THE ORDER OF THE PASSED BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU & ETC. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2009-10. The appeal was admitted by a bench of this Court on the following substantial questions of law: \"(1) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance made under Section 14A of the Act by following its earlier order in case of assessee itself which has not reached finality and even when the assessing 3 authority rightly made said disallowance in compliance with Rule 8D of I.T. Rules read with section 14A of the Act? (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of short term capital loss made by assessing authority by following its earlier order which has not reached finality and when assessing authority rightly rejected the said claim as the assessee had failed to explain correctness of said claim and failed to substantiate with any materials?\" 2. Facts leading to filing of this appeal briefly stated are that the assessee is a private limited company engaged in the investment, finance and trading in shares. The assessee filed the return of income for the Assessment Year 2009-10 and declared a loss of Rs.26,67,78,608/-. The assessee also filed a revised return on 05.03.2010 and declared loss of Rs.26,67,78,608/-. A survey under Section 133A of the 4 Act was conducted in the business premises of the assessee on 18.01.2010. Thereafter, assessment was concluded on 21.12.2011 under Section 143(3) of the Act wherein the loss was reduced to Rs.65,51,060/- and additions to the extent of Rs.18,98,65,500/- were made. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 31.01.2014 inter alia directed the Assessing Officer to allow Rs.84,31,093/- out of the total disallowance made by the Assessing Officer under Section 14 of the Act and balance was directed to be added to the total income of the assessee. The Commissioner of Income Tax (Appeals) followed the judgment of this court in the case of 'DEPUTY COMMISSIONER INCOME TAX VS. M/s BPL SANYO FINANCE LTD.', (2009) 312 ITR 63 and the order passed in respect of Assessment Year 2007-08 in the case of assessee itself. The appeal preferred by the assessee was partly allowed. The revenue as well as the 5 assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by common order dated 13.10.2016 partly allowed the appeal preferred by the assessee as well as revenue. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the revenue at the outset submitted that he does not intend to press substantial question of law No.1. With reference to substantial question of law No.2, it is submitted that the tribunal ought to have appreciated that in case of M/s BPL Sanyo supra, the shares were already allotted, whereas, in the instant case, no right accrued to the assessee merely by making payment of the amount in advance in share warrants. It is also urged that if a share is allotted, then only it is a capital asset as defined under Section 2(47) of the Act and mere payment of advance amount for purchasing a share warrant cannot be treated to be acquisition of capital asset. However, the tribunal has 6 failed to notice the aforesaid distinction. 5. On the other hand, learned counsel for the assessee submitted that the tribunal has rightly placed reliance on the decision of M/s BPL Sanyo supra and on the order passed in the case of the assessee for the Assessment Year 2007-08. 6. We have considered the submissions made by learned counsel for the parties and have perused the record. The Commissioner of Income Tax (Appeals) by placing reliance on the decision of the tribunal for the Assessment Year 2007-08 held as follows: Similar issue case came up for adjudication before the Hon'ble ITAT, Bangalore, in the appellant own case for the A.Y. 2007-08 and the Hon'ble ITAT decided the issue in favour of the appellant by observing thus: It can be seen that in the case M/s BPL Sanyo, the issue was forfeiture of share application money, whereas in the case 7 before us, the issue is of forfeiture of share warrant money. In both cases, the assessee's defaulted in making full payment for issue of shares or share warrants. It is the condition precedent for allotment of shares or share warrants, that the full amount should be made and on account of default the amount already paid is forfeited. Therefore, we are of the opinion, that the facts and circumstances of the case before us are similar to the facts of the case before the Hon'ble Karnataka High Court, in the case of M/s BPL Sanyo and therefore, we do not find any reason to interfere with the order of the CIT(A). The grounds relating to disallowance of short term capital loss are accordingly, rejected. 7. The aforesaid order has been upheld by the tribunal. It is not in dispute that if against the order passed in the case of the assessee for the Assessment Year 2007-08 an appeal was preferred before this court, which was dismissed in view of the bar contained in the Circular dated 08.08.2019 pertaining to monitory limit. 8 Thus, the order passed by the tribunal has attained finality. Therefore, in the fact situation of the case, the tribunal rightly affirmed the order of the Commissioner of Income Tax (Appeals) in setting aside the disallowance of short term capital loss. Therefore, the substantial question of law No.2 is answered in affirmative and against the revenue. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss "