Calcutta HC dismisses Appeal against ITAT Ruling after Approval of Resolution Plan by NCLT [Read Order]

In the recent case, the Calcutta High Court dismissed the appeal filed by the Income Tax Department challenging a ruling by the Income Tax Appellate Tribunal ( ITAT ). The court deemed the appeal infructuous due to the respondent company’s liquidation and the approval of its resolution plan by the National Company Law Tribunal ( NCLT ).

Srei Infrastructure Finance Limited, the respondent-assessee, the revenue appellant filed an appeal under Section 260A of the act. The appeal was filed against the order dated May 22, 2023 passed by the bench of  Kolkata Tribunal concerning two cases for the assessment year (AY) 2013-14.

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The revenue appellant raised the following questions for review, which included issues regarding the cost of acquisition of voting rights and rights to subscribe to equity shares, short-term capital gains, and disallowances under Section 14A and Section 36(1)(iii) of the Act.

The appeal also questioned the reliance on a Supreme Court case and the applicability of certain binding decisions to the assessment.

The appeal challenged how to calculate the cost of obtaining voting rights and rights to buy equity shares. The revenue department argued that the cost should not be considered zero, as the ITAT had previously ruled, and should instead be based on different accounting or tax rules.

The appeal included questions about whether certain receipts should be classified as short-term capital gains. Short-term capital gains typically arise from the sale of assets held for a short period, and the revenue wanted to challenge how these were treated.

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The revenue appellant challenged the ITAT's decision to disallow certain expenses related to investments that generated tax-exempt income under Section 14A and interest expenses under Section 36(1)(iii) and disputed how these disallowances were calculated and applied.

The appeal questioned the ITAT’s reliance on a specific Supreme Court case for its rulings. The revenue department argued that the ITAT's interpretation of this case might not be applicable or correct in the context of the current assessment.

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Mr.Somak Basu, the counsel for the respondent-assessee informed that the respondent company, which was the subject of the appeal, had entered into liquidation proceedings. The NCLT had approved a resolution plan for the respondent  company on August 11,2023.

The division bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya  deemed the appeal infructuous and dismissed it without any order as to costs in light of the NCLT’s approval of the resolution plan.

To Read the full text of the Order CLICK HERE

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