2023 (2) TMI 1324 - HC - Income Tax

Disallowance u/s 14A - disallowance made voluntarily by the assessee - HELD THAT - the issue involved in this appeal is covered by the decision of this court in the Principal Commissioner of Income Tax and another vs. M/s.Coffee Day Enterprises Ltd. 2023 (1) TMI 1395 - KARNATAKA HIGH COURT wherein this Court has dismissed the appeal filed by the Revenue holding questions of law in favour of the assessee. The same is not refuted by Appellants. Decided in favour of the assessee and against the Revenue.

Summary

Issues:
1. Disallowance under section 14A of the Act
2. Interpretation of CBDT Circular No.5 of 2014
3. Consideration of CBDT Circular and Supreme Court precedent

Analysis:

Issue 1: Disallowance under section 14A of the Act
The appeal was filed by the Revenue challenging the ITAT's order regarding disallowance made by the assessing authority under section 14A of the Act for the A.Y. 2014-2015. The Tribunal set aside the disallowance, holding that the voluntary disallowance made by the assessee met the requirements of section 14A, even though the conditions for invoking the section were satisfied. The court heard arguments from both sides, and the counsel for the assessee referred to a previous decision where similar questions of law were decided in favor of the assessee. Consequently, the court dismissed the appeal and ruled in favor of the assessee on this issue.

Issue 2: Interpretation of CBDT Circular No.5 of 2014
The second question raised in the appeal concerned the Tribunal's decision being perceived as perverse for allowing relief to the assessee under section 14A while allegedly ignoring CBDT Circular No.5 of 2014. The court considered the arguments presented and the relevance of the circular in question. However, the court did not find merit in the Revenue's contentions and upheld the Tribunal's decision to grant relief to the assessee, indicating that the circular did not impact the outcome of the case.

Issue 3: Consideration of CBDT Circular and Supreme Court precedent
The final issue involved the Tribunal's alleged failure to appreciate the significance of CBDT Circular No.5/2014 and to consider the law laid down by the Hon'ble Supreme Court in a specific case. The court examined the arguments put forth and the relevant legal principles. Ultimately, the court found in favor of the assessee, dismissing the appeal and affirming that the Tribunal's decision was correct in light of the applicable circular and the Supreme Court precedent cited.

In conclusion, the High Court of Karnataka dismissed the appeal by the Revenue, answering the questions of law in favor of the assessee and against the Revenue, without imposing any costs.