Karnataka High Court
Fibres And Fabrics International Pvt ... vs The Deputy Director Of Income -Tax on 20 August, 2013
Bench: Dilip B.Bhosale, B.Manohar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 20th DAY OF AUGUST 2013
PRESENT
THE HON'BLE MR. JUSTICE DILIP B BHOSALE
AND
THE HON'BLE MR. JUSTICE B MANOHAR
ITA.NO.173/2013 C/W ITA.NO.182/2013
IN ITA.NO.173/2013
BETWEEN
FIBRES & FABRICS INTERNATIONAL PVT LTD.
A PRIVATE COMPANY LIMITED BY SHARES
INCORPORATED UNDER THE COMPANIES ACT, 1956
HAVING ITS OFFICES AT
NO.21, E-1, II PHASE
PEENYA INDUSTRIAL AREA
BANGALORE 560058 ... APPELLANT
(BY SRI NAGESWAR RAO, ADV., FOR PDS LEGAL)
AND
THE DEPUTY DIRECTOR OF INCOME -TAX
(INTERNATINAL TAXATION)
CIRCLE 1(1), 6TH FLOOR
R.P. BHAWAN
NRUPATHUNGA ROAD
BANGALORE 560001 ... RESPONDENT
(BY SRI K V ARAVIND, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT, 1961,
ARISING OUT OF ORDER DATED 30/11/2012 PASSED IN ITA
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NO.141/BANG/2011, FOR THE ASSESSMENT YEAR 2006-07,
PRAYING TO:
I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED
THEREIN,
II. SET ASIDE THE ORDER AT ANNEXURE-A DATED 30/11/2012
PASSED BY THE ITAT IN ITA NO.141/BANG/2011, AND QUASH
ANY PROCEEDINGS INSTITUTED PURSUANT TO THE
DIRECTIONS ISSUED THEREUNDER ETC.
IN ITA.NO.182/2013
BETWEEN
FIBRES & FABRICS INTERNATIONAL PVT LTD
(A PRIVATE COMPANY LIMITED
BY SHARES, INCORPORATED UNDER
THE COMPANIES ACT,D 1956)
HAVING ITS OFFICE AT
NO. 21, E-1, II PHASE
PEENYA INDUSTRIAL AREA
BANGALORE-560058
REPRESENTED BY ITS DIRECTOR
MR LAXMINARAYAN GAUR ... APPELLANT
(BY SRI NAGESWAR RAO, ADV., FOR PDS LEGAL)
AND
ASSISTANT COMMISSIONER OF INCOME TAX
CIRCLE-11(3)
BANGALORE-560001 ... RESPONDENT
(BY SRI K V ARAVIND, ADV.,)
THIS ITA FILED UNDER SEC.260-A OF I.T. ACT, 1961,
ARISING OUT OF ORDER DATED 30/11/2012 PASSED IN ITA
NO.1242/BANG/2010, FOR THE ASSESSMENT YEAR 2006-07,
PRAYING TO:
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I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED
THEREIN,
II. SET ASIDE THE ORDER AT ANNEXURE-A DATED 30/11/2012
PASSED BY THE ITAT IN ITA NO.1242/BANG/2010, AND QUASH
ANY PROCEEDINGS INSTITUTED PURSUANT TO THE
DIRECTIONS ISSUED THEREUNDER ETC.,
THESE ITA's COMING ON FOR ADMISSION, THIS DAY,
DILIP B. BHOSALE J. DELIVERED THE FOLLOWING:
PC:
ITA No.182/13
This appeal is arising from the order dated 30.11.12
passed by the Income Tax Appellate Tribunal (for short
'Appellate Tribunal'), Bangalore Bench 'B' in ITA
No.1242/Ban/2010, whereby the Appellate Tribunal has
partly allowed the appeal filed by the appellant-assessee
and remanded the matter to the Assessing Officer for
deciding it afresh on the issues/questions framed in
paragraphs 11.5 and 12.5.3 in the impugned order. The
issues framed in paragraph 11.5 read thus:
"i. disallowance of Rs.10.68 crores being the
'Info & tracking of delivery schedules paid to
SEL, Hong Kong and Gruyters BV;and
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ii. disallowance of 'termination charges of
Rs.18.35 crores paid to SEL'.
The issues framed in paragraph-12.5.3 read thus:
i. staff welfare expenditure; and
ii. administrative expenses
2. While remanding the matter for deciding the
aforementioned issues afresh, the Appellate Tribunal has
allowed the assessee to lead additional evidence as
referred to in paragraph-10.6 of the order in respect of the
first two issues, as reflected in paragraph-11.5 and further
directed the Assessing Officer to consider the entire
evidence as referred to in paragraphs 12.5.1, 12.5.2 and
12.5.3 afresh for deciding the other two issues, as
reflected in paragraph-12.5.3.
3. We have perused the reasons recorded by the
Appellate Tribunal and having regard thereto learned
Advocates appearing for the parties fairly stated that the
appeal may be disposed of without recording reasons and
they have agreed for the following order:
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ORDER
i. The Assessing Officer, shall decide the matter afresh/the aforementioned issues/questions, in the light of the observations made by the Appellate Tribunal after giving an opportunity to the appellant not only to furnish the evidence, as indicated in the impugned order, but shall also allow the appellant to lead further evidence, if any, in support of their case.
ii. Insofar as legal issues/questions of law such as the evidentiary value of "a plain paper agreement"
are kept open to be considered afresh in the light of the submissions that will be advanced on behalf of the parties and the Assessing Officer shall decide the same on merits and without being influenced by the observations made in these proceeding. We hope and trust that the Assessing Officer shall record his findings on all the aforesaid issues including the legal issues that will be raised in the course of hearing and dispose of the matter as 6 expeditiously as possible and preferably within a period of six months from the date of receipt of this order.
All contentions of the parties are kept open. ITA No.173/2013
4. This appeal is arising from the order dated 30.11.12 passed by the Income Tax Appellate Tribunal (for short 'Appellate Tribunal'), Bangalore Bench 'B' in ITA No.141/Ban/2011, whereby the Appellate Tribunal remanded the matter to the Assessing Officer for statistical purpose. The relevant observations find place in para 22.7, which read thus:
"At the outset, we would like to reiterate that the claim of deduction under Section 37 of termination charges amounting to Rs.18.35 lakhs as genuine business expenditure was restored to the file of the AO for fresh consideration (Para 11.5.2 supra). Therefore, the question of disallowance of the same amount by invoking the provision of S.40(a)(i) need to be decided only after the decision is taken by the AO as regard to the allowability or otherwise of the amount u/s 37. Therefore, the adjudication of the issue that is raised by the Revenue in this appeal is premature and hence, need to be considered along with the claim of deduction u/s 37 of the Act. Hence, the plea of the Revenue is restored to the file 7 of the AO with a direction to take appropriate action in accordance with law after examining the genuineness of payment u/s 37 of the Act. In other words, the issue of disallowance of the same amount by invoking the provision of s.40(a)(i) of the Act is other side of the same coin. The question of disallowance by invoking the provision of s.40(a)(i) will arise only in the event the payment is found to be allowable u/s 37 of the Act. It is ordered accordingly. In essence, the appeal of the Revenue is allowed for statistical purpose".
5. We have disposed of ITA 182/13 today for the reasons recorded therein. It is clear from the said order and so also the observations made by the Appellate Tribunal in the impugned order that the issue/question as to genuineness of the Info tracking agreement, it being an agreement on plain paper, is kept open and the Assessing Officer is obliged to consider it afresh and record his findings in respect thereof.
6. Learned counsel appearing for the parties state that the finding recorded by the Assessing Officer on this question will have a bearing on the question that falls for consideration in the present appeal arising from ITA 141/Bang/2011. In other words, they state that ITA No.141/Bang/2011 can be decided finally by the 8 Appellate Tribunal itself after disposal of the matter by the Assessing Officer after remand in ITA 1242/10. In view thereof, learned counsel appearing for the parties have jointly requested to remand the matter to the Appellate Tribunal and keep it pending till the Assessing Officer decides the matter afresh as per the order of remand and on the basis of the findings recorded by the Assessing Officer on the question of plain paper agreement, may proceed to decide the appeal (ITA 141/11) afresh. In the circumstances, we dispose of this appeal also by the following order:
ORDER i. The order of the Appellate Tribunal remanding the appeal (ITA No.141/Bang/2011) is set aside and the appeal is restored to file of the Income Tax Appellate Tribunal, Bangalore Bench 'B', Bangalore.
ii. The Appellate Tribunal, shall keep the appeal pending till the Assessing Officer decides the 9 matter afresh as per the order of remand in ITA 1242/Bang/2010.
iii. It is open to the Appellate Tribunal to consider ITA 141/11 afresh after the matter is decided by the Assessing Officer taking into consideration the findings recorded on the issue of plain paper agreement, subject to the right of parties to challenge those findings in further proceedings. With these observations, the appeal is allowed setting aside the order passed by the Appellate Tribunal in ITA No.141/11.
All contentions on merits and on the questions of law are kept open.
Sd/-
JUDGE Sd/-
JUDGE TL