Ita/102/2012 Of M/S Karnataka State Beverages Corporation Ltd v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21 DAY OF SEPTEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.102 OF 2012 BETWEEN: M/S. KARNATAKA STATE BEVERAGES CORPORATION LTD.,.REP. BY ITS MANAGING DIRECTOR|DR. SANDEEP DAVE, IAS|NO.78, SEETHALAKSHMI TOWERS|MISSION ROAD, BANGALORE-560027. — ADPELLANT. (BY SRI. A. SHANKAR, SR. COUNSEL FORSRI. M. LAVA, ADV.,) | AND: THE ASSISTANT COMMISSIONER OF INCOME TAXCIRCLE-11(5), R.P. BHAVANOPP. RBI, NO.14/3, 5 FLOORNRUPATHUNGA ROAD, BANGALORE-560001. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,196L ARISING OUT OF ORDER DATED 18.01.2012 PASSED IN ITA]NO.186/BANG/2011 FOR THE ASSESSMENT YEAR 2004-05,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (1) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO.THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY|THE TRIBUNAL IN ITA NO.186/BANG/2011 DATED 18-01-2012. THISLIACOMINGONFOR.HEARING,THISALOK ARADHE J.,DELIVERED THE FOLLOWING:JUDGMENT DAY, This appeal under Section 260A of the Income Tax| Act, 1961 (hereinafter referred to as the Act for short)Nas been preferred by the assessee. Tne subject matter of the appeal pertains to the Assessment year 2004-05.The appeal was admitted by a bench of this Court videorder dated 22.09.2012 on the following substantialquestion of law: (I)Whether the authorities below arejustified in law in holding that theoriginal order passed under Section143(3) of the Act dated 30.10.2006 isnon-estandtheappealISnotmaintainableOf)thefactsand|circumstance of the case?justified in law in holding that theoriginal order passed under Section143(3) of the Act dated 30.10.2006 isnon-estandtheappealISnotmaintainableOf)thefactsand|circumstance of the case? (iI)Whether the authorities below arejustified in law in not adjudicating theground of disaliowance of privilege feejustified in law in not adjudicating theground of disaliowance of privilege fee under Section 43B of the Act, when thedisallowance of privilege fee was notsubject matter of either the issue in thenotice or order passed under Section263 of the Act on the facts andcircumstances of the case? (iI)Whether the provisions of Section 43Bare applicable in respect of payment ofprivilege fee to the State Governmentfor parting with its right to privilege onthe facts and circumstances of theCase?|are applicable in respect of payment ofprivilege fee to the State Governmentfor parting with its right to privilege onthe facts and circumstances of theCase?| (iv)Whether the learned Assessing Officeris justified in law in disallowing theprivilege fee of Rs.3,50,00,000/- on theground that the amount Is paid on08.11.2004 by invoking the provisionsof Section 43B of the Act on the factand circumstances of the case?is justified in law in disallowing theprivilege fee of Rs.3,50,00,000/- on theground that the amount Is paid on08.11.2004 by invoking the provisionsof Section 43B of the Act on the factand circumstances of the case? 2.Facts leading to filing of the appeal briefly| stated are that the assessee is a Government oT Karnataka undertaking incorporated on 02.06.2003| to canalize sale of Indian Made Liquor and Beer in.the State. The assessee filed its return of Income for|the Assessment Year 2004-05 on O1.11.27200declaring an income of Rs.28,46,907/-. Tne case of the assessee was selected for scrutiny and noticeunder Section 143(2) of the Act was served on the.assessee. The Assessing Officer by an order dated|31.10.7006disallowedtheprivilegefee.Of|Rs.3,50,00,000/- under Section 43B of the Act and.also disallowed a sum of Rs.55,000/- on account ofexpenditure incurred in respect of donation madeand determined the total income of the assessee at.Rs.3,/9,01,907/-. The assessee filed an appeal.before the Commissioner of Income Tax (Appeals). stated are that the assessee is a Government oT Karnataka undertaking incorporated on 02.06.2003| to canalize sale of Indian Made Liquor and Beer in.the State. The assessee filed its return of Income for|the Assessment Year 2004-05 on O1.11.27200declaring an income of Rs.28,46,907/-. Tne case of the assessee was selected for scrutiny and noticeunder Section 143(2) of the Act was served on the.assessee. The Assessing Officer by an order dated|31.10.7006disallowedtheprivilegefee.Of|Rs.3,50,00,000/- under Section 43B of the Act and.also disallowed a sum of Rs.55,000/- on account ofexpenditure incurred in respect of donation madeand determined the total income of the assessee at.Rs.3,/9,01,907/-. The assessee filed an appeal.before the Commissioner of Income Tax (Appeals). ‘3.During the pendency of the appeal, the.assessee was served witn a notice under Section|263A of the Act for the Assessment Year 2004-05. The Commissioner of Income Tax passed an orderdated 26.08.7008 and held that the order ofassessment passed by the Assessing Officer is'erroneous and prejudicial to the interest of the|revenue and it is necessary for the Assessing Officerto examine the matter in detail with reference to thefacts of the case of the assessee. It was further)neld that leave salary contribution and electricity|charges to the tune of Rs.10,17,840/- have been|allowed as deduction by the Assessing Officer|without examining|theDasis,ON)Whichthedeductions had been claimed. The Assessing Officer|thereafter, passed an order on 24.12.2009 andapart from adding the privilege fee also added an/amount towards salary contribution and electricitycharges to the extent of Rs.10,17,840/-. The!assessee preferred an appeal. The Commissioner of Income Tax (Appeals) however, by an order dated 03.09.2010 without examining the appeal preferred|by the assessee on merits dismissed the same as.infructuous. The aforesaid order was affirmed by theIncome Tax Appellate Tribunal (nereinafter referredto as the Tribunal for short) vide order dated18.01.2012. In the aforesaid factual background,|this appeal has been filed. 4.Learned Senior counsel for the assessee|submitted that.CommissionerOT Income|Tax!(Appeals)and|theTribunaloughttonave.appreciated that the appeal is maintainable inrespect of the issues which were not subject matterof notice issued under Section 263 of the Act andsought to have adjudicated the matter in respect of privilege fee in respect of Rs.,3,50,00,000/-. It isalso urged that the authorities failed to appreciate|the fact that scope of revision under Section 263 of the Act is limited to the grounds in respect of whichnotice under Section 263 of the Act Is issued. It {s/stherefore, argued that the order passed by the!Commissioner of Income Tax (Appeals) as well as|the Tribunal De quashed and the matter be remittedto Commissioner of Income Tax (Appeals) foradjudication in respect of the matter which are not!the subject matter of notice under Section 263 of the Act. The aforesaid position could not be|disputed by learned counsel for the revenue. 5.We have considered the submissions|made by learned counsel for the parties and haveperused the record. Taking into account the factthat appeal is maintainable in respect of the subject|matter, whicn does not pertain to grounds underSection 263 of the Act. The Commissioner of Income| Tax (Appeals) therefore, ought to nave adjudicated|the appeal on merits to the aforesaid extent. In view of preceding analysis, first substantialquestion of law is answered in favour of the|assessee and against the revenue. It is not!NEeECeSSaAforUS|COanSWETtheremainingsubstantial questions of law in view’ of ourconclusion to first question of law. In the result, the orders passed by theCommissioner of Income Tax (Appeals) and tneTribunal are nereby quashed and the matter isremitted to the Commissioner of Income Tax!(Appeals) to adjudicate the appeal afresh on meritsand in respect of the grounds, wnhicn were not theSubject matter of notice under Section 263 of the!Act. //� �88:76.5C3? �9-2�011203�./�6./1:/26�:;�� Tax (Appeals) therefore, ought to nave adjudicated|the appeal on merits to the aforesaid extent. In view of preceding analysis, first substantialquestion of law is answered in favour of the|assessee and against the revenue. It is not!NEeECeSSaAforUS|COanSWETtheremainingsubstantial questions of law in view’ of ourconclusion to first question of law. In the result, the orders passed by theCommissioner of Income Tax (Appeals) and tneTribunal are nereby quashed and the matter isremitted to the Commissioner of Income Tax!(Appeals) to adjudicate the appeal afresh on meritsand in respect of the grounds, wnhicn were not theSubject matter of notice under Section 263 of the!Act. //� �88:76.5C3? �9-2�011203�./�6./1:/26�:;�� ����������������������