The Karnataka High Court while dismissing the appeal of the Department held that plea challenging genuineness of transaction cannot be raised in appeal before high court if not raised before Income Tax Appellate Tribunal (ITAT).
The bench of Justice S.G.Pandit and Justice C.M. Poonacha has observed that the question raised by the department is not a substantial question of law and it is a question of fact. Moreover, the department had not filed an appeal before the Tribunal with regard to colorable devices or the genuineness of transaction or on allowance of loss in a sum of Rs.11,27,00,000. But, the department’s appeal was in respect of other disallowances allowed by the Assessing Authority.
Table of Contents
Background – Genuineness Of Transaction
The appellant/department challenged the correctness and legality of order passed by the Income Tax Appellate Tribunal, in the income tax appeal for the assessment year 2009-10.
A assessment order under Section 143(3) of the Income Tax Act was passed in respect of respondent/assessee for the assessment year 2009-10. The Assessing Authority disallowed a sum of Rs.11,27,00,000, which the assessee claimed as business loss.
The Assessing Authority had also disallowed certain other claims of the assessee. The assessee preferred appeal before the Commissioner of Income Tax (Appeals) and the appeal was partly allowed.
The Commissioner of Income Tax (Appeals) while partly allowing the appeal, rejected asessee’s contention and held that a sum of Rs.11,27,00,000 disallowed by the Assessing Authority was not a business loss for claiming deduction and allowed the appeal in respect of other disallowances.
Aggrieved by the order of Commissioner of Income Tax (Appeals), assessee as well as Revenue preferred the appeals before the Appellate Tribunal.
The assessee preferred appeal among others against disallowance of Rs.11,27,00,000 contending that it is business loss and the Revenue preferred appeal in respect of allowing other disallowance made by the Assessing Authority.
The Appellate Tribunal allowed the appeal of the assessee holding that loss in question is a business loss and not a capital loss and dismissed the appeal of Revenue.
Arguments
The department contended that as held by the Tribunal, a sum of Rs.11,27,00,000 shown as loss is not a business loss and it is not a genuine transaction and the same is colorable one, which the Tribunal failed to appreciate. M/s.Asianet TV Holdings (P) Ltd., paid Rs.6 Crores to M/s.Fedex Securities Ltd. Further, on 03.11.2006, it paid a sum of Rs.6.5 Crores to M/s.Fedex Securities Ltd.
On 03.09.2007, M/s.Asianet TV Holdings (P) Ltd., requested M/s.Fedex Securities Ltd., to treat the amounts paid to it as share application money and to allot the shares to assessee company.
Accordingly, M/s.Fedex Securities Ltd., allotted 2.30 Lakh shares of face value of Rs.10/- each at a premium of Rs.490/- per share. Thereafter, the assessee on 16.09.2008 sold the shares at Rs.10/- per share to M/s.Trinity Fintech Pvt. Ltd., which is a group company of the assessee.
Therefore, the department submitted that it is a colorable claim to show the loss and hence, it cannot be allowed as business loss. The Tribunal failed to give a finding as to whether it is colorable one or genuine transaction to mean that whether the loss is genuine loss or not.
Thus, the department prayed for allowing the appeal by holding that the transaction of buying and selling shares in the facts and circumstances is colorable device and it is not a genuine loss.
The assessee contended that the department has not made out any ground or placed on record any material to establish that it is a colorable device and to establish that it is not a genuine loss. The department has not preferred any appeal against the finding of the Tribunal and in not considering the contention of colorable device or not a genuine loss before the Tribunal.
Relevant Provisions
It is settled position of law that under Section 260-A of the Income Tax Act, the High Court could entertain the appeal or appeals only if it involves substantial question/s of law.
Conclusion
The court while dismissing the appeal held that the department had not raised the genuineness of transaction or colorable device before the Tribunal. The substantial question of law raised by the Revenue is answered against them and in favour of the assessee.
Case Details
Case Title: PR. COMMISSIONER OF INCOME TAX v/s M/S JUPITER ENTERAINMENT VENTURES (P)LTD.
Case No.: INCOME TAX APPEAL NO. 298 OF 2017
Date: 02/09/2024
Counsel For Appellant: SRI.E.I.SANMATHI.
Counsel For Respondent: SRI.NARENDRAKUMAR J. JAIN.
