PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-1, KOLKATA vs. EXIDE INDUSTRIES LTD.

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ITA/77/2018HC CalcuttaWBCHCO000168201812 September 2022Bench: HON'BLE JUSTICE T. S. SIVAGNANAM,HON'BLE JUSTICE SUPRATIM BHATTACHARYA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the revenue for both assessment years. The primary reason for dismissal was that the tax effect involved in both appeals was below the threshold limit prescribed by the Central Board of Direct Taxes (CBDT). The Court noted that the revenue had not presented any evidence to demonstrate that the case qualified for any of the exceptional clauses mentioned in the relevant CBDT Circulars. Consequently, the substantial question of law raised by the revenue regarding the disallowance of royalty and technical fees under Section 40(a)(i) in light of the Indo-Japan treaty was left undecided. The operative direction was the dismissal of the appeals.

What were the facts?

The Principal Commissioner of Income Tax, Kolkata-1 (the revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against a common order dated January 20, 2016, passed by the Income Tax Appellate Tribunal, "C" Bench, Kolkata. This order pertained to two assessment years, 2003-04 and 2004-05, and was in relation to appeals numbered ITA No.189/Kol/2007 and ITA No.1414/Kol/2007. The assessee in this case is Exide Industries Ltd. The dispute revolves around the disallowance of provision for royalty and technical fees payable by the assessee, a resident of Japan, under Section 40(a)(i) of the Act, considering the Indo-Japan double taxation avoidance treaty.

What were the issues?

1. Whether the provision for royalty and technical fees payable by the assessee, as a resident of Japan, could be disallowed under Section 40(a)(i) of the Income Tax Act, 1961, in view of the Indo-Japan treaty for avoidance of double taxation? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee. Revenue's Contentions: The revenue contended that the provision for royalty and technical fees payable by the assessee should be disallowed under Section 40(a)(i) of the Act, and this disallowance should be considered despite the Indo-Japan treaty for avoidance of double taxation. The revenue has not brought on record any material to show that the case falls under any exceptional clauses in the CBDT Circulars.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40(a)(i)

AI-generated summary — verify with the full judgment below

O-130 ITA/77/2018 IN THE HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-1, KOLKATA -Versus- EXIDE INDUSTRIES LTD. Appearance: Mr. J. P. Khaitan, Sr. Adv. Ms. Nilanjana Banerjee Pal, Adv. ...for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE SUPRATIM BHATTACHARYA Date : 12th September, 2022. The Court: This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity) is directed against the common order dated 20th January, 2016 passed by the Income Tax Appellate Tribunal, “C” Bench, Kolkata (the Tribunal) for two assessment years namely, 2003-04 and 2004-05 in ITA No.189/Kol/2007 and ITA No.1414/Kol/2007. The revenue has raised the following substantial question of law for consideration:

2 “Whether the provision for royalty and technical fees payable by the assessee as a resident of Japan could be disallowed under Section 40(a)(i) of the Income Tax Act, 1961 in view of the Indo-Japan treaty for avoidance of double taxation ?” We have heard Mr. J.P. Khaitan, learned senior counsel assisted by Ms. Nilanjana Banerjee Pal, learned Advocate for the respondent. On hearing the submission of the learned counsel appearing for the respondent, we are of the view that these appeals cannot be pursued by the revenue for both the assessment years as the tax effect involved in both the appeals are below the threshold limit. Nothing has been brought on record by the revenue to show that the case would be covered under any of the exceptional clauses in the Circular issued by the Central Board of Direct Taxes (CBDT). Therefore, the appeals stand dismissed on low tax effect and the substantial question of law is left open. (T.S. SIVAGNANAM, J.) (SUPRATIM BHATTACHARYA, J.) As//S.Das

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