At The Outset, Shri Shakar Submits That Question v. Ita

Digitally signedby YASHODHA NLocation: HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6 DAY OF FEBRUARY, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE RAMACHANDRA D. HUDDARINCOME TAX APPEAL NO. 559 OF 2016 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX CIT (A), 5 FLOOR BMTC BUILDING, 80 FEET ROAD KORMANGALA BENGALURU – 560 095. 2. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-11(5) PRESENT ADRESS CIRCLE-4(1)(1) 2 FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU – 560 095. …APPELLANTS (BY SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL) AND: M/s. KBD SUGARS & DISTILLERIES LTD.NO. 17, SANKEY ROAD BENGALURU – 560 020. PAN: AAACK 5851A …RESPONDENT (BY SHRI. A. SHANKAR, SENIOR ADVOCATE FOR SHRI. M. LAVA, ADVOCATE) THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 29/04/2016 PASSED IN ITA NO. 1062/BANG/2014, FOR THE ASSESSMENT YEAR 2011-2012, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL, SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN ITA NO. 1062/BANG/2014, DATED: 29/04/2016 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(1), BENGALURU AND ETC. THIS ITA, COMING ON FOR HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT This appeal by the Revenue challenging the order dated 29.04.2016 in ITA No.1062/Bang/2014 passed by the ITAT[1], "C" Bench, Bangalore, has been admitted to consider following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition made under section 14A r/w/s 8D(2)(ii) and (iii) holding that there was no fresh investment and the assessing authority has not expressed or recorded any satisfaction by identifying the expenditure which has been incurred in contravention to the provisions in section 14A and also contrary to the Board’s Circular No.14 of the 2001 and 5 of 2001? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition made under section 36(1)(iii) of the Act by 1 Income tax Appellate Tribunal, Bengaluru Bench holding that the assessee is having its own free fund which is sufficient for advance the interest free loan to the sister concern even though the assessee has diverted the funds which has been established by the assessing authority? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the disallowance made under section 36(1)(iii) read with section 37 of the Act towards the advance diverted in respect of borrowed capital without appreciating the facts of the and materials brought out by assessing authority on record and as such the order passed by Tribunal is perverse in nature? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in restricting the disallowance in respect of capitalization of interest to an extent of 11% as against 15% held by the assessing authority in respect of work in progress (WIP) by following its earlier order which has been challenged before this Hon’ble Court in ITA No.552 to 5556/2016 and the assessing authority has restricted the same at 15% considering the material on record? 2. Heard Shri K.V. Aravind, learned Senior Standing Counsel for the appellants-Revenue and Shri A.Shankar, learned Senior Advocate for the respondent-Assessee. 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in restricting the disallowance in respect of capitalization of interest to an extent of 11% as against 15% held by the assessing authority in respect of work in progress (WIP) by following its earlier order which has been challenged before this Hon’ble Court in ITA No.552 to 5556/2016 and the assessing authority has restricted the same at 15% considering the material on record? 2. Heard Shri K.V. Aravind, learned Senior Standing Counsel for the appellants-Revenue and Shri A.Shankar, learned Senior Advocate for the respondent-Assessee. 3. At the outset, Shri Shakar submits that question No.1 raised in this appeal is covered by the decision of this Court in The Principal Commissioner of Income Tax and another Vs. M/s KBD Sugar & Distilleries Ltd.,[2] holding the question of law in assessee’s favour. He further submits that questions No.2 & 3 have been considered in The Principal Commissioner of Income Tax and another Vs. M/s KBD Sugar & Distilleries Ltd.[3]and therefore, they do not survive for consideration in this appeal. He further submits that question No.4 is a question of fact and the matter has been remanded by the ITAT for fresh consideration. Hence, the said question also does not require any consideration. His submission is placed on record. 2 ITA Nos.309/2019 c./w 310/2019 DD 06.12.2022 3ITA No.560/2016 DD 05.12.2022 4. The said submission is not disputed by Shri Aravind. 5. In view of the above, the following: (i) Appeal is dismissed; (ii) The first substantial question of law is answered in favour of the Assessee and against the Revenue. favour of the Assessee and against the Revenue. No costs. Sd/- JUDGE Sd/- JUDGE YN