Karnataka HC Dismisses Revenue’s Shaw Wallace Tax Appeal: Assessing Officer’s Kolkata Location, Not Bengaluru ITAT, Determines Forum

The Revenue appealed under Section 260A of the Income Tax Act, 1961, against the ITAT’s order dated 28 August 2019 concerning assessment year 2004–05.

The appeal had been admitted on two substantial questions concerning the tax treatment of proceeds from the sale of RITPL shares and the deduction of professional fees paid to Kinsley & Co.

The respondent submitted that the Karnataka High Court lacked territorial jurisdiction because the assessment order had been passed by the Assistant Commissioner of Income Tax, Circle-5, Kolkata.

The Court noted that the relevant assessee was Shaw Wallace Financial Services Ltd., whose registered office was in Kolkata at the time, and that the assessment order was passed there on 27 December 2006. The assessment order attached to the appeal instead related to Shaw Wallace Breweries Ltd.

Section 260A of the Income Tax Act provides for appeals to the High Court on substantial questions of law.

In Principal Commissioner of Income-tax v. ABC Papers Ltd., [2022] 141 Taxmann.com 332 (SC), the Supreme Court held that an appeal from an ITAT decision lies before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated; the location of the ITAT does not determine jurisdiction.

That rule applies even where an assessee’s cases are transferred under Section 127 of the Act.

Applying ABC Papers, the Court treated the location of the Assessing Officer who passed the relevant assessment order—not the ITAT Bench or the successor company’s registered office—as determinative of territorial jurisdiction.

The relevant assessment order was passed in Kolkata in respect of Shaw Wallace Financial Services Ltd.; the fact that United Spirits Ltd. was later based in Bengaluru did not confer jurisdiction on the Karnataka High Court.

The Court also rejected the Revenue’s reliance on the Bengaluru location of the ITAT, noting that the Supreme Court had expressly held that the ITAT’s location is not the jurisdictional test.

As the Court lacked jurisdiction, it did not decide the admitted questions on the tax treatment of the share-sale proceeds or the professional-fee deduction.

It dismissed the appeal, granting the Revenue liberty to file it before the jurisdictional High Court in accordance with law.