“1. Whether In Facts And Circumstances Of The Case, The Hon’ble Itat Is Right In Law In Holding The Section 40 (B) Is An Overriding Section To Section 30 To 38 v. Nc: 2024:Khc:39220-Db

Digitally signedbyMARIGANGAIAHPREMAKUMARILocation: HIGHCOURT OFKARNATAKA NC: 2024:KHC:39220-DBITA No. 70 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23 DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 70 OF 2024 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU- 560 095. 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU- 560 095. 2. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE -2(2), PRESENT ADDRESS ITO, WARD 1(2)(1), 2 FLOOR BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095. …APPELLANTS (BY SRI. SUSHAL TIWARI N., ADV.) AND: CENTURY SHELTORS NO.10/1, LAKSHMINARAYANA COMPLEX, PALACE ROAD, VASANTHNAGAR, BENGALURU- 560 052 PAN: AAFFC 5111R. …RESPONDENT (BY SRI. NAGHARISH G. S., ADV.) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 10.03.2023 PASSED IN ITA NO. 1075/BANG/2022, FOR THE ASSESSMENT YEAR 2015-2016, PRAYING TO 1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. 2) ALLOW THE APPEAL AND SET ASIDE THE - 2 - ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1075/BANG/2022 DATED 10.03.2023 FOR ASSESSMENT YEAR 2015-2016 ANNEXURE-A AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-1(2)(1), BENGALURU AND ETC. THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri.Sushal Tiwari.N., for appellants/Revenue and learned counsel Sri.Nagharish.G.S., learned counsel for the respondent/assessee. 2. The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 10.03.2023 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in - 3 - NC: 2024:KHC:39220-DB ITA.No.1075/Bang/2022 for the assessment year 2015-16, raising the following substantial questions of law: “1. Whether in facts and circumstances of the case, the Hon’ble ITAT is right in law in holding the Section 40 (b) is an overriding Section to Section 30 to 38 without appreciating the Supreme Court decision in the case of Munjal Sales Corporation Vs. CIT (2008) 298 ITR SC which held the Section 40 is not a stand-alone section and puts limitation of the deductions under Section 30 to 38 of Income Tax Act? case, the Hon’ble ITAT is right in law in holding the Section 40 (b) is an overriding Section to Section 30 to 38 without appreciating the Supreme Court decision in the case of Munjal Sales Corporation Vs. CIT (2008) 298 ITR SC which held the Section 40 is not a stand-alone section and puts limitation of the deductions under Section 30 to 38 of Income Tax Act? 2. Whether the circumstances of case, the Hon’ble ITAT has erred in not appreciating that after the enactment of Finance Act, 1992, in case of partnership firm to claim deduction, in respect of interest paid on capital borrowed, in first instance, firm is required established that it is entitled to claim deduction under Section 36(1)(iii) and then further prove that it is not disentitled to claim such deduction on account of applicability of Section 40 (b)(iv)? Hon’ble ITAT has erred in not appreciating that after the enactment of Finance Act, 1992, in case of partnership firm to claim deduction, in respect of interest paid on capital borrowed, in first instance, firm is required established that it is entitled to claim deduction under Section 36(1)(iii) and then further prove that it is not disentitled to claim such deduction on account of applicability of Section 40 (b)(iv)? - 4 - - 4 - 3. Whether in fact and circumstance, the Hon’ble ITAT has misled itself, attributing findings of Hon’ble ITAT Pune Bench in the case of Quality Industries to be those of Hon’ble Supreme Court in the case of R.M.Chidambaram Pillai 106 ITR 292 (SC)?”Hon’ble ITAT has misled itself, attributing findings of Hon’ble ITAT Pune Bench in the case of Quality Industries to be those of Hon’ble Supreme Court in the case of R.M.Chidambaram Pillai 106 ITR 292 (SC)?” 3. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue. 4. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024. 5. In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE NC CT:bms List No.: 1 Sl No.: 17