THE COMMISSIONER OF INCOME T vs. M/S.RANE (MADRAS) LTD.

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TCA/102/2021HC Madras02 February 2021Bench: Hon`ble Mr Justice T. S. SIVAGNANAM6 pages
AI SummaryDismissed

What did the High Court hold?

The appeals were dismissed by the High Court due to low tax effect, in accordance with CBDT Circular No. 17/2019, which increased the monetary limit for filing appeals before the High Court to Rs. 1 Crore. The Revenue submitted that the tax effect in these cases was below this threshold. Consequently, the substantial questions of law framed by the Revenue were left open. The Court granted liberty to the Revenue to file a petition to restore the appeals if the tax effect is found to be above the threshold limit fixed in the circular. No decision was made on the merits of the substantial questions of law. The operative direction was to dismiss the appeals and close the connected miscellaneous petition.

What were the facts?

These appeals were filed by the Revenue against orders of the Income Tax Appellate Tribunal (ITAT) for assessment years 2011-12 and 2009-10. The ITAT had deleted additions made by the Assessing Officer under Section 40(a)(i) of the Income Tax Act, 1961. The assessee is M/s. Rane (Madras) Ltd. The appeals were filed under Section 260A of the Income Tax Act, 1961. The Revenue sought to challenge the ITAT's decision on specific questions of law related to the taxability of payments for logistics services rendered outside India.

What were the issues?

1. Whether the Tribunal was right in deleting additions made under Section 40(a)(i), especially considering the retrospective introduction of Explanation to Section 9(2) which deems income to accrue or arise in India even without a business connection or service rendered in India? (Question of law) 2. Whether the disallowance made under Section 40(a)(i) on payments for logistics services rendered outside India is not taxable, even if such payments fall under the ambit of fees for technical services as per Section 9(1)(vii)? (Question of law) Assessee's arguments: Not recorded. Revenue's arguments: The Revenue argued that the ITAT erred in deleting the additions. They contended that the retrospective amendment to Section 9(2) and the provisions of Section 9(1)(vii) made the payments taxable, leading to disallowance under Section 40(a)(i) if tax was not deducted at source. The Revenue relied on the Explanation to Section 9(2) and Section 9(1)(vii) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 9(2),Section 9(1)(vii),Section 260A

AI-generated summary — verify with the full judgment below

TCA.Nos.102 & 105 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.02.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Ms.Justice R.N.MANJULA Tax Case Appeal Nos.102 & 105 of 2021 and C.M.P.No.1785 of 2021 in T.C.A.No.102 of 2021 The Commissioner of Income Tax, Chennai. ...Appellant in both cases Vs M/s.Rane (Madras) Ltd., 'Maithri', 132, Cathedral Road, Chennai - 600 086. PAN: AACCR9772M ...Respondent in both cases COMMON PRAYER: Appeals under Section 260A of the Income Tax Act, 1961 against the order dated 27.04.2018 made in ITA.No.2789/Mds/2017 for the assessment year 2011-12 and ITA.No.2788/Chny/2017 for the assessment year 2009-10 on the file of the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. 1/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.102 & 105 of 2021 (in both cases) For Appellant: Mr.T.Ravikumar Senior Standing Counsel For Respondent: Mr.Vikram Vijayaraghavan COMMON JUDGMENT (Delivered by

T.S.Sivagnanam,J

) These appeals, filed by the Revenue, are directed against the order dated 27.04.2018 made in ITA.No.2789/Mds/2017 for the assessment year 2011-12 and ITA.No.2788/Chny/2017 for the assessment year 2009-10 on the file of the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. ('The Tribunal' for brevity). 2. The appellant-Revenue in both the appeals has raised the following substantial questions of law for consideration: "1. Whether the Tribunal was right in deleting the additions made u/s.40(a)(i) especially when explanation to Section 9(2) was introduced with retrospective effect from 01.06.1976 which clearly holds that even if the non resident has no business connection in India and has not rendered any service in India, still the income would be 2/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.102 & 105 of 2021 deemed to have accrued or arisen in India and therefore taxable? 2. Whether the disallowance made u/s.40(a)(i) of the Income Tax Act on payments made for logistics services rendered outside India is not taxable even though the same falls under the ambit of fees for technical services as per Section 9(1)(vii) of the I.T Act?' 3. We have heard Mr.T.Ravikumar, learned Senior Standing Counsel for the appellant-Revenue and Mr.Vikram Vijayaraghavan, learned counsel for the respondent. 4. The learned Senior Standing Counsel appearing for the appellant submits that the above appeals are not pursued by the Revenue on account of the low tax effect in terms of Circular No.17/2019 dated 08.08.2019 issued by the Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to Rs.1 Crore. It is further submitted that the tax effect in this case is less than the threshold limit. 5. In the light of the said submissions, the above tax case appeals 3/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.102 & 105 of 2021 are dismissed on account of the low tax effect. The substantial question of law framed is left open. In the event the tax effect is above the threshold limit fixed in the said circular, liberty is granted to the Revenue to file a petition before this Court to restore the appeals to be heard and decided on merits. No costs. Consequently, connected miscellaneous petition is closed. (T.S.S.,J.) (R.N.M.,J.) 02.02.2021 Index: Yes/No Internet:Yes/No Speaking Judgment/Non speaking Judgment hvk 4/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.102 & 105 of 2021 To 1. The Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. 2. The Commissioner of Income Tax, Chennai. 5/6 https://www.mhc.tn.gov.in/judis/ TCA.Nos.102 & 105 of 2021 T.S.SIVAGNANAM,J AND R.N.MANJULA,J hvk T.C.A.Nos.102 & 105 of 2021 and C.M.P.No.1785 of 2021 in T.C.A.No.102 of 2021 02.02.2021 6/6 https://www.mhc.tn.gov.in/judis/

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