2013 (11) TMI 562 - HC - Income Tax

Deductibility u/s 37 of the Income Tax Act of privilege fee paid by the assessee to the State Government who was holding 100% share in the assessee company Deduction in the light of amendment to the provisions of section 24 of the Karnataka Excise Act, 1965 - Appellate Tribunal noticed that there was an amendment to provisions of section 24 of the Karnataka Excise Act, 1965 and subsequent to the Commissioner passing revisional order under section 263 of the Act and the effect of amendment was required to be examined as the section had been amended with retrospective effect and therefore the privilege fee paid by the assessee to the State Government who was holding 100% share in the assessee company was again to be allowed as a deductible expenditure etc Held that - All aspects of the matter being left open by the Tribunal and the matter having gone back to the Commissioner who has to re-examine the whole thing and pass orders afresh, there is no need for interference at this stage to examine the questions of law.

Summary

Issues:
1. Revision of order under section 263 of the Income Tax Act regarding deduction of privilege fee as revenue expenditure.
2. Legitimacy of privilege fee payment in relation to the Karnataka Excise Act.

Analysis:
1. The appeal before the Karnataka High Court involved a dispute regarding the deduction of privilege fee paid by the assessee company to the State Government as revenue expenditure under section 37 of the Income Tax Act, 1961. The Commissioner, exercising revisional powers under section 263 of the Act, had revised the order disallowing the deduction. The Tribunal, on appeal, considered the amendment to section 24 of the Karnataka Excise Act, 1965, which was made retrospectively after the Commissioner's order. The Tribunal remanded the matter to the Commissioner for re-examination in light of this amendment.

2. The Tribunal's decision to remand the matter was challenged in the present appeal by the Revenue. However, the High Court declined to interfere at that stage, noting that all aspects of the matter were left open by the Tribunal for the Commissioner to re-examine and pass fresh orders. The Court emphasized that the Revenue could raise legal questions at a later stage if necessary. As a result, the High Court dismissed the appeal, allowing the Commissioner to re-evaluate the issue in accordance with the amended provisions of the Karnataka Excise Act, 1965.