PCIT Vs Infosys Ltd. (Karnataka High Court)
Summary: The Karnataka High Court, in Principal Commissioner of Income Tax-3 Vs Infosys Ltd., ITA No. 254 of 2024, decided on 24 September 2026, dismissed the Revenue’s appeal challenging an Income Tax Appellate Tribunal order concerning disallowance under Section 14A of the Income-tax Act, 1961. The Revenue had questioned the Tribunal’s decision to remand the disallowance issue to the Assessing Authority for recomputation. However, the appeal was accompanied by an application under Section 5 of the Limitation Act seeking condonation of a delay of 447 days. The High Court examined both the explanation for the delay and whether any substantial question of law arose from the Tribunal’s remand order.
On limitation, the Department submitted that the Tribunal had passed its order on 30 November 2022, that a copy was received on 13 November 2023 and that the appeal was presented on 20 September 2024. The Department filed an additional affidavit after its initial explanation was found insufficient. The Court observed that the affidavits principally described internal file movement and failed to explain the substantial interval after the file was forwarded to the Standing Counsel’s office. Although approval to appeal had been granted on 12 June 2023 and the file was sent to counsel on 19 June 2023, the appeal was filed more than one year and three months thereafter. Finding no cogent and acceptable explanation, the Court declined to condone the delay.
On the substantive issue, the Court noted that the Tribunal had not finally deleted the Section 14A disallowance but had remanded the matter to the Assessing Authority for computation in accordance with Rule 8D of the Income-tax Rules, 1962. The Tribunal had followed its earlier order dated 28 November 2022 in the assessee’s own case for assessment year 2012-13. Counsel for Infosys also relied on Principal Commissioner of Income Tax v. Novell Software Development India (P) Ltd., (2021) 126 taxmann.com 29 (Karnataka), against which the Supreme Court had declined interference in SLP (Civil) Diary No. 17974/2023 on 21 August 2023.
The High Court concluded that, since the matter had merely been remanded for recomputation of disallowance under Rule 8D, no substantial question of law arose for consideration at that stage. Accordingly, the Revenue’s appeal was dismissed both on merits and on the ground of delay. The judgment does not determine the final quantum of disallowance or hold that no disallowance under Section 14A can be made; the Assessing Authority’s recomputation remains the operative consequence of the Tribunal’s order.
List of Cases Discussed / Relied Upon:
1. Principal Commissioner of Income Tax v. Novell Software Development India (P) Ltd., (2021) 126 taxmann.com 29 (Karnataka) — Relied upon by the respondent in relation to disallowance under Section 14A. The judgment records that the Supreme Court confirmed the decision in SLP (Civil) Diary No. 17974/2023 dated 21 August 2023.
2. Infosys Ltd. — IT(TP)A No. 718/Bang/2017, order dated 28 November 2022, Assessment Year 2012-13 (ITAT Bangalore) — Earlier order in the same assessee’s case followed by the Tribunal while remanding the Section 14A issue for recomputation.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The above appeal by the Revenue under Section 260-A of the Income Tax Act, 1961 (for short “the Act”) is directed against the order dated 30.11.2022 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bangalore (for short “Tribunal”) in IT(TP)A No.509/Bang/2015 for the assessment year 2010-11 (Annexure-A) insofar as disallowance under Section 14-A of the Act.
2. The appellant-Revenue has raised the following Substantial question of law:
“Whether on the facts and circumstances of the case, the Tribunal’s order is perverse in nature in setting aside addition made under Section 14A to the file of Assessing Authority ignoring that said disallowance has been made in accordance with parameters of Section 14A and conditions for invoking said provision is satisfied in present case”?
3. Along with the appeal, I.A.No.2/2026 is filed under Section 5 of the Limitation Act praying to condone the delay of 447 days in preferring the appeal. As the affidavit filed along with I.A.No.2/2026 was lacking sufficient cause, the Department has filed additional affidavit dated 11.09.2026. In the additional affidavit filed in support of the application for condonation of delay, it is stated that the Tribunal passed the order on 30.11.2022 and the Department received copy of the order of the Tribunal on 13.11.2023. The present appeal was presented before this Court on 20.09.2024. There is almost 2 years delay in preferring the appeal. Except the file movement, the affidavit would not give any other details. It is seen from the additional affidavit that the approval to file the appeal was given on 12.06.2023 and the file was sent to the Standing Counsel’s Office on 19.06.2023. More than one year three months thereafter, the present appeal is filed. No explanation for that period is forthcoming from the affidavit. In the absence of cogent acceptable reasons, this Court would not exercise its discretion to condone the delay.
4. Be that as it may, the order of the Tribunal on the issue of disallowance under Section 14A of the Act is remanded to the Assessing Authority to compute the disallowance. As such, disallowance shall be computed in terms of Rule 8D of Income Tax Rules, 1962. The Tribunal, while remanding the matter followed its earlier order dated 28.11.2022 in IT(TP)A No.718/Bang/2017 in respect of the same assessee for the assessment year 2012-13.
5. Learned counsel for the respondent placed reliance on the decision of a co-ordinate Bench in PRINCIPAL COMMISSIONER OF INCOME TAX v/s NOVELL SOFTWARE DEVELOPMENT INDIA (P) LTD., reported in (2021) 126 taxmann.com 29 (Karnataka) in respect of disallowance under Section 14A of the Act which was confirmed by Hon’ble Apex Court in SLP (Civil) Diary No(s). 17974/2023 dated 21.08.2023. Since the matter is remanded to re-compute disallowance in terms of Rule 8D of Income Tax Rules, 1962, we are of the considered view that no Substantial question of law would arise for consideration at this stage and accordingly, the appeal stands dismissed on merits as well as on delay.
