The High Court of Karnataka has ruled that the jurisdiction to challenge an order of the Income Tax Appellate Tribunal (ITAT) rests solely with the High Court that exercises territorial authority over the Assessing Officer who passed the original assessment order. The Division Bench, led by Justice S.G. Pandit and Justice Dr. Chillakur Sumalatha, affirmed that neither the location of the ITAT bench nor the presence of a corporate respondent's registered office within a state provides sufficient grounds to confer jurisdiction in matters of income tax appeals under Section 260A of the Income Tax Act, 1961.

The ruling came in the appeal filed by the Income Tax Department against M/s United Spirits Ltd., in the matter of Shaw Wallace Financial Services Ltd., concerning the assessment year 2004-2005. By dismissing the appeal as not maintainable, the Court highlighted the necessity for strict adherence to jurisdictional precedents set by the Supreme Court, ensuring that tax litigation remains tied to the geographical origin of the assessment proceedings.

The dispute centered on two substantial questions of law: whether income from the sale of shares in RITPL should be classified as long-term capital gains rather than business income, and whether a fee of over ₹6.94 crore paid to M/s Kinsley & Co. was a legitimate, deductible professional charge. While the Revenue argued that the ITAT’s decision rendered in Bengaluru and the respondent’s current registered office in the city established the court's jurisdiction, the Bench rejected this interpretation. The court emphasized that the assessment in question was finalized in Kolkata, and the legal framework for appeals must mirror this territorial reality.

The Court relied heavily on the Supreme Court’s landmark judgment in Principal Commissioner of Income Tax v. ABC Papers Ltd. , which explicitly determined how high courts should interpret their appellate jurisdiction against ITAT orders. The High Court underscored the Supreme Court’s definitive conclusion: “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.”

The Bench further elaborated on the irrelevance of the ITAT’s location in this determination. As noted in the judgment, “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.” By clarifying this distinction, the court shut the door on attempts to forum-shop or convenience-seek based on where the appellate tribunal happens to be seated. The judges underscored that Section 260A of the Income Tax Act is designed to keep the appellate process anchored to the primary assessment records, which remain with the jurisdictional Assessing Officer.

An additional layer of complexity in the appeal involved a clerical error regarding the documentation provided by the Revenue. During the proceedings, it emerged that the Department had inadvertently submitted an incorrect assessment order—referencing Shaw Wallace Breweries Ltd. instead of Shaw Wallace Financial Services Ltd.—which further undermined the Revenue’s standing in the appeal. Although the court acknowledged the potential for clerical oversight, the primary rationale for the dismissal remained the fundamental lack of territorial jurisdiction.

The respondent, United Spirits Ltd., successfully argued that the registered office's current location in Bengaluru was irrelevant to the assessment year 2004-2005, a time when the business operated under the jurisdictional control of the Kolkata-based Assessing Officer. The High Court agreed, finding no legal basis to bypass the requirement for filing in the High Court of the state where the assessment was conducted.

This ruling provides a firm reminder to the Revenue and other litigants regarding the limitations of challenging appellate tribunal decisions. By stripping away the ambiguity surrounding ITAT-seat-based jurisdiction, the court has reinforced a standardized approach to tax appeals. Legal experts note that this decision will likely streamline future procedural motions in tax-related cases, as it eliminates any doubt concerning the correct court for filing appeals, even in complex corporate acquisitions or name changes.

As the appeal was found to be not maintainable, the High Court of Karnataka refrained from adjudicating on the merits of the RITPL share sale or the deductibility of professional fees. Instead, the Bench granted the Revenue the freedom to pursue the matter through the appropriate legal channels in the state with the correct jurisdictional authority.

The court’s final order concludes the matter within the Karnataka jurisdiction, directing the Revenue to move its case before the jurisdictional High Court. The decision reflects the judiciary's commitment to maintaining procedural order in income tax appeals, ensuring that the legislative intent behind Section 260A is upheld by anchoring legal challenges to the specific locale where the tax assessment process originated. For the parties involved, this means the substantive arguments regarding the professional fees and capital gains classifications will remain unsettled until the case is properly initiated in the forum with the requisite geographical competence.