DIRECTOR OF INCOME TAX vs. M/S HCL LTD.

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ITA/267/2005HC DelhiDLHC01059238200501 March 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal was not maintainable. This decision was based on CBDT Circular No. 21 of 2015, which mandates that appeals with a tax effect below ₹20 lacs should not be pursued. Since the tax effect in this particular case was below the stipulated limit, the court found no reason to continue the litigation. The Standing Counsel for the Revenue informed the court that despite repeated attempts, no instructions were forthcoming regarding the recurring tax effect, further reinforcing the decision to dismiss the appeal. The court did not delve into the merits of the interpretation of the agreement between M/s Tolerant Systems Inc. and HCL Ltd. or the taxability of the disputed amount. The operative direction was to dismiss the appeal.

What were the facts?

The appeal concerns Assessment Year 1989-90 and relates to the interpretation of an agreement between M/s Tolerant Systems Inc. and HCL Ltd. The dispute involves an amount of ₹48,38,314/- and whether it should be included in the taxable income of Tolerant Systems Inc. The appeal was filed by the Director of Income Tax (Revenue) against an order that is not specified in the judgment. During the pendency of the appeal, the Central Board of Direct Taxes (CBDT) issued Circular No. 21 of 2015. This circular directed that appeals with a tax effect below ₹20 lacs should not be contested. The tax effect in the present case was below this threshold.

What were the issues?

1. Whether the amount of ₹48,38,314/- paid under an agreement between M/s Tolerant Systems Inc. and HCL Ltd. for AY 1989-90 could be included in the taxable income of Tolerant Systems Inc. (a question of law). The Revenue's contention, as implied by the appeal, was that the amount was taxable in the hands of Tolerant Systems Inc. The Assessee's (HCL Ltd.) position is not explicitly detailed in terms of arguments presented before the court, but the appeal itself suggests a disagreement with a prior ruling that likely favored the assessee. The judgment does not record specific arguments from either side regarding the interpretation of the agreement or the taxability of the amount. The primary focus of the court's decision was the applicability of the CBDT circular.

AI-generated summary — verify with the full judgment below

$~1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 267/2005

DIRECTOR OF INCOME TAX

..... Appellant

Through Mr. Rahul Chaudhary, and Ms.Vibhuti Malhotra, Advs.

versus

M/S HCL LTD.

..... Respondent Through Mr. Ajay Vohra, Sr. Advocate with Ms. Kavita Jha and Ms. Devika Jain, Advs.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

01.03.2018

For this appeal, the question was framed on 31.10.2007; pertaining to the correct interpretation of agreement between M/s Tolerant Systems Inc. and HCL to the tune of `48,38,314/- for AY 1989-90 and whether the said amount could be included in the taxable income of Tolerant Systems Inc.

During the pendency of this appeal, Central Board of Direct Taxation (CBDT) issued Circular no. 21 of 2015 directing that all appeals where the tax effect was below `20 lacs – are pending and matters yet to be filed were not to be contested. Since the tax effect in this case is lower than `20 lacs, the present appeal is not maintainable. Ld. Standing Counsel informs that despite repeated

attempts, no instructions are forthcoming as to the recurring tax effect. In the circumstances, the ITA 267/2005 is accordingly dismissed as not maintainable.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J MARCH 01, 2018 rc

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