PCIT Vs United Spirits Ltd. (Karnataka High Court)
Section 260A Appeal Lies Where Assessing Officer Is Located, Not ITAT: Karnataka High Court
Summary: The Karnataka High Court has dismissed the Revenue’s appeal against United Spirits Ltd., holding that territorial jurisdiction over an income-tax appeal depends on the location of the Assessing Officer who passed the assessment order, rather than the location of the Tribunal that decided the appeal. The Division Bench of Justice S.G. Pandit and Justice Dr. Chillakur Sumalatha delivered the judgment on 15 October 2026 in ITA No. 84 of 2021, bearing neutral citation 2026:KHC:58416-DB. The Court granted the Revenue liberty to approach the jurisdictional High Court in accordance with law. It did not decide the substantive tax questions raised in the appeal.
Background of the Dispute
The Revenue filed the appeal under Section 260A of the Income-tax Act, 1961, challenging the Tribunal’s order dated 28 August 2019 in ITA No. 210/KOL/2008, concerning Assessment Year 2004-05. United Spirits Ltd. appeared as the respondent in the matter concerning Shaw Wallace Financial Services Ltd.
The appeal had been admitted on 27 January 2022 to examine two substantial questions of law. However, before those questions could be considered on merits, the assessee raised a preliminary objection concerning the territorial jurisdiction of the Karnataka High Court.
Tax Questions Raised by the Revenue
The first question concerned the treatment of income from the sale of shares of RITPL.
The Revenue challenged the Tribunal’s decision treating the shares as a strategic investment held to control the brewery business carried on by Shaw Wallace Breweries Ltd. The dispute involved whether the resulting income was assessable as long-term capital gains or business income, alongside the Revenue’s objection concerning Section 54EC.
The second question concerned the deduction of ₹6,94,29,123 paid to M/s Kinsley & Co. as professional charges.
The Revenue contended that evidence had not been furnished establishing that the services related to the transfer of RITPL shares. These questions remained undecided by the High Court, because the jurisdictional objection was accepted.
Assessee’s Objection to Maintainability
The assessee submitted that the relevant assessment order had been passed by the Assistant Commissioner of Income Tax, Circle-5, Kolkata.
Relying on Principal Commissioner of Income-tax v. ABC Papers Ltd., [2022] 141 taxmann.com 332 (SC), counsel argued that an appeal against a Tribunal decision must be filed before the High Court having territorial jurisdiction over the Assessing Officer who made the assessment.
Since the assessment originated in Kolkata, the assessee maintained that the appeal could not be entertained by the Karnataka High Court merely because the Tribunal’s order came from Bengaluru.
Revenue Relied on Tribunal and Registered Office Locations
The Revenue argued that the ITAT, Bengaluru, had passed the appellate order and that this gave the Karnataka High Court jurisdiction.
It also submitted that United Spirits Ltd. had taken over Shaw Wallace Financial Services Ltd. and maintained its registered office in Bengaluru.
The Court rejected this reasoning. It noted that, at the time of assessment, Shaw Wallace Financial Services Ltd. had not yet been taken over by United Spirits Ltd., and its registered office was situated in Kolkata.
United Spirits’ Bengaluru registered office therefore did not establish jurisdiction in the circumstances.
Supreme Court’s Rule in ABC Papers Applied
The High Court applied the Supreme Court’s decision in ABC Papers Ltd., which identifies the location of the Assessing Officer passing the assessment order as the basis for determining the appropriate High Court.
The Supreme Court had also explained that a subsequent transfer of an assessee’s case under Section 127 does not shift appellate jurisdiction away from the High Court connected with the original assessment order, even where the transfer concerns the same assessment year.
The judgment further clarified that the location of the ITAT is not determinative, since a Tribunal Bench may exercise jurisdiction over more than one State.
Applying that rule, the Karnataka High Court held that the Kolkata assessment could not support the present appeal before it.
Incorrect Assessment Order Attached
The Court additionally recorded that the relevant assessment order concerning Shaw Wallace Financial Services Ltd. had been passed on 27 December 2006 by the Kolkata Assessing Officer.
However, the Revenue had enclosed an assessment order relating to Shaw Wallace Breweries Ltd., rather than the company concerned in the appeal.
Although this discrepancy was noted, the dismissal rested on the Court’s conclusion that it lacked territorial jurisdiction under the governing Supreme Court decision.
Decision and Significance
The High Court dismissed the appeal as not maintainable, while preserving the Revenue’s liberty to file before the jurisdictional High Court.
The decision leaves the disputes over share-sale income, Section 54EC and professional charges unresolved on merits. It neither affirms nor reverses the Tribunal’s substantive reasoning on those issues.
The ruling reinforces that the correct forum for a Section 260A appeal must be identified through the assessment order and the location of the officer who passed it. The Tribunal’s location and the successor company’s registered office did not alter that result.
Cases Discussed
1. Principal Commissioner of Income-tax Vs ABC Papers Ltd. (Supreme Court) — [2022] 141 taxmann.com 332 (SC). The Karnataka High Court expressly relied upon this decision to hold that an appeal against an ITAT order must be filed before the High Court having territorial jurisdiction over the Assessing Officer who passed the assessment order. The Supreme Court also clarified that subsequent transfer under Section 127 does not change the competent appellate High Court, and the geographical location of the ITAT is not decisive.
2. Parke Davis (India) Ltd. — Mentioned in the quoted Supreme Court extract concerning High Court jurisdiction based on the location of the ITAT.
3. CIT v. A.B.C. India Ltd. — [2003] 126 Taxman 18 (Cal.).
4. CIT v. J.L. Marrison (India) Ltd. — [2005] 272 ITR 321 (Cal.).
5. CIT v. Akzo Nobel India Ltd. — [2014] 47 taxmann.com 332 (Cal.).
6. Pr. CIT v. Sungard Solutions (I) (P.) Ltd. — [2019] 105 taxmann.com 67/263 Taxman 277/415 ITR 294 (Bom.).
7. CIT v. Shree Ganapati Rolling Mills (P.) Ltd. — [2013] 39 taxmann.com 12/219 Taxman 36 (Mag.)/356 ITR 586.
FULL TEXT OF THE JUDGMENT OF KARNATAKA HIGH COURT
The above appeal filed under Section 260A of the Income Tax Act, 1961 is directed against the order dated 28.08.2019 in ITA No.210/KOL/2008 for the assessment year 2004-05 by the Income Tax Appellate Tribunal, ‘B’ Bench, Bangalore.
2. The above appeal was admitted for hearing by order dated 27.01.2022 to examine the following two Substantial Questions of Law:
1. Whether on the facts and circumstances of the case and in law the Tribunal was justified in setting aside the addition in the hands of the assessee made in respect of sale of shares of RITPL on protective basis by holding the shares of RITPL were acquired by the assessee as a strategic holding to have control of the brewery business carried on by Shaw Wallace Breweries Ltd and thus income from the sale of same was taxable as Long Term Capital Gains as against income from business ignoring that even when the conditions for granting benefit of section 54EC are not satisfied and without appreciating that transaction in question was purely a business transaction considering the intention of assessee in making profit alone?
2. Whether on the facts and circumstances of the case and in law the Tribunal was justified in allowing deduction of fee of Rs.6,94,29,123/- paid to M/s. Kinsley & Co., claimed by the assessee as deduction towards professional charges simply relying on the fact that the payment was made to M/s. Kinsley & Co., and services were rendered by them while ignoring the findings of the assessing officer as well as the Commissioner of Income Tax (Appeals) that no evidence was furnished by the assessee to show that the services were rendered in connection with the transactions of transfer of shares of RITPL?”
3. Heard learned counsel Sri.Sanmathi.E.I for appellants-Revenue and learned Senior Counsel Sri.Mistri Jehangir for learned counsel Ms.Tanmayee Rajkumar for respondent-Assessee.
4. At the outset, learned Senior Counsel for the respondent-Assessee points out that the appeal before this Court questioning the order of the ITAT dated 28.08.2019 in ITA No.210/KOL/2008 is not maintainable in view of the fact that the assessment order was passed by the Assistant Commissioner of Income Tax, Circle-5, Kolkata. Learned Senior Counsel placing reliance on the decision of the Hon’ble Apex Court in PRINCIPAL COMMISSIONER OF INCOME-TAX V. ABC PAPERS LTD reported in [2022] 141 TAXMANN.COM 332 (SC) submits that appeal against the decision of the ITAT would lie before the High Court within the jurisdiction in which the Assessing Officer passed the assessment order. It is submitted that since the assessment order in the instant case is passed by the Assessing Officer at Kolkata, the present appeal would not be maintainable before this Court.
5. However, learned counsel Sri.Sanmathi.E.I. for the appellants would submit that since the appellate order is passed by the ITAT, Bangalore, this Hon’ble Court has jurisdiction. Further, learned counsel would submit that the respondent-Assessee has taken over the company i.e., M/s.Shaw Wallace Financial Services Ltd and the respondent-Assessee Company Registered Office is situated at Bangalore, this Court would get jurisdiction. Thus, he would submit that the above appeal is properly filed before this Court and prayed for hearing the appeal on merits.
6. On hearing learned counsel for the parties and on perusal of the entire material on record, we are of the opinion that there is substance in the submission of the learned Senior Counsel for respondent-Assessee Company. The above appeal relates to the Assessment Year 2004-2005. As on the date of assessment, the Assessee-company was not taken over by the respondent-M/s.United Spirits Limited. The registered office of the Assessee-company i.e., M/s.Shaw Wallace Financial Services Ltd was at Kolkata. Therefore, the contention of the appellants-Revenue that the registered office of the respondent i.e, M/s.United Spirits Limited is at Bangalore, hence, the appeal would be maintainable at Bangalore in the facts and circumstances, is liable to be rejected.
7. Admittedly, the assessment order in respect of M/s.Shaw Wallace Financial Services Limited is passed by Assistant Commissioner of Income Tax Circle-5, Kolkata on 27.12.2006. The appellants-Revenue has enclosed a wrong assessment order to the present appeal. The assessment order enclosed to the present appeal relates to the Assesse-Shaw Wallace Breweries Limited.
8. Be that as it may, the Hon’ble Apex Court in ABC Papers Ltd., supra was considering the question as to the jurisdiction of the High Court to challenge the decisions of the ITAT where the assessment orders are passed by different jurisdictional Assessing Officers and the Hon’ble Apex Court at paragraphs 33 and 34, has held as follows:
“33. In conclusion, we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under section 127 for the same assessment year(s).
34. We will now deal with the decisions of certain High Court which have taken a view that the jurisdiction of the High Court must be based on the location of the ITAT. These judgments are Parke Davis (India) Ltd. (supra), CIT v. A.B.C. India Ltd. [2003] 126 Taxman 18 (Cal.), CIT v. J.L. Marrison (India) Ltd. [2005] 272 ITR 321 (Cal.), CIT v. Akzo Nobel India Ltd. [2014] 47 taxmann.com 332 (Cal.), Pr. CIT v. Sungard Solutions (I) (P.) Ltd. [2019] 105 taxmann.com 67/263 Taxman 277/415 ITR 294 (Bom.) and CIT v. Shree Ganapati Rolling Mills (P.) Ltd. [2013] 39 taxmann.com 12/219 Taxman 36 (Mag.)/356 ITR 586. We have examined these cases in detail and found that the Assessing Officers in each of these cases were in fact not located within the territorial jurisdiction of these High Courts. For this reason, the aforesaid decisions are correct to the extent of these High Courts not exercising jurisdiction. However, while returning the files to be represented in the appropriate court, certain observations were made stating that the appeals could be filed in the High Court which exercises territorial jurisdiction over the concerned ITAT. These observations are only obiter. In any event they did not preclude the party from filing the appeal before the appropriate High Court where the Assessing Officers exercised jurisdiction. However, we are reiterating for clarity and certainty that the jurisdiction of a High Court is not dependent on the location of the ITAT, as sometimes a Bench of the ITAT exercises jurisdiction over plurality of states.”
9. The above decision of the Hon’ble Apex Court makes it abundantly clear that the jurisdiction to challenge the decision of the ITAT shall be decided based on the assessment order. To file an appeal before the High Court under Section 260A of the Act, assessment order would become relevant and not the decision of the ITAT. Since the assessment order in the present case is passed by the Assistant Commissioner of Income Tax Circle-5, Kolkata in terms of the above decision, the present appeal would not be maintainable before this Court. However, learned counsel Sri.Sanmathi.E.I tried to submit that based on the location of the ITAT, the jurisdiction to file an appeal before the High Court shall be decided. The said contention is also answered by the Hon’ble Apex Court in the above decision at paragraph 34.
10. Thus, we are of the considered opinion that the above appeal would not be maintainable before this Court. Accordingly, the appeal stands dismissed with liberty to file an appeal before the Jurisdictional High Court, in accordance with law.
