PRINCIPAL COMMISSIONER OF vs. M/S INDIA POULTRY FARM

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TCA/194/2018HC Madras21 November 2019Bench: Hon`ble Mr Justice N. KIRUBAKARAN6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the Revenue on the ground of low tax effect, citing Circular No. 3/2018 dated July 11, 2018. The circular stipulates that appeals shall not be filed before the High Court where the tax effect does not exceed Rs. 50,00,000/-. The Court noted that the tax effect in these appeals was less than this limit. However, the Court explicitly stated that the substantial questions of law framed were left open. Liberty was granted to the Revenue to seek restoration of the appeals if the tax effect was found to be above the prescribed limit, to be heard and decided on merits. No costs were awarded.

What were the facts?

These appeals by the Principal Commissioner of Income Tax (Revenue) challenge the Income Tax Appellate Tribunal's (ITAT) order dated January 25, 2017. The ITAT had dismissed the Revenue's appeals against the Commissioner of Income Tax (Appeals) order, which had allowed the assessee's (M/s. India Poultry Farm) appeal. The assessment years under consideration are 2001-02 and 2002-03. The dispute pertains to the transfer of assets, specifically building and development work, and whether it constituted a transfer under Section 2(47) and Section 45(4) of the Income Tax Act, 1961. The Revenue contended that the building and development work belonged to a partner, Shri T. Manavalan, despite being constructed and developed by the partnership firm and depreciation claimed by the firm.

What were the issues?

1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in holding that there is no 'transfer' of asset within the meaning of Section 2(47) of the Income Tax Act and in terms of Section 45(4) in respect of building and development work? (Question of law) 2. Whether the Appellate Tribunal is correct in law in holding that the building and development work belongs to the partner Shri T. Manavalan, by ignoring the fact that the same were constructed and developed by the partnership firm and depreciation was claimed by the assessee-firm against such assets? (Question of mixed law and fact) Assessee's arguments: The judgment does not record any specific arguments made by the assessee. The assessee's appeal was allowed by the CIT(A) and the ITAT dismissed the Revenue's appeal against that order. Revenue's arguments: The Revenue argued that the tax effect in these appeals is less than Rs. 50,00,000/- and therefore, the appeals are covered by Circular No. 3/2018 dated July 11, 2018, issued by the CBDT, which prescribes this monetary limit for filing appeals before the High Court. Consequently, the appeals should be dismissed on this ground.

Which sections of the Income-tax Act were involved?

Section 2(47),Section 45(4),Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.Nos.194 & 195 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.Nos.194 & 195 of 2018 Principal Commissioner of Income Tax Central I, No.108, Mahatma Gandhi road, Chennai.

... Appellant in both the appeals Vs M/s.India Poultry Farm, No.45, NSB Road, Trichy - 2. PAN: AAA FT 9753 D ...Respondent in both the appeals COMMON PRAYER: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 against the order dated 25.01.2017 in I.T.A.No.1633 & 1634/Mds/2013 on the file of the Income Tax Appellate Tribunal Chennai 'D' Bench for the assessment year 2001-02 & 2002- 03. For Appellant : Mr.T.R.Senthil Kumar For Respondent : Mr.M.Kaushik for Mr.S.Sridhar

1/6 http://www.judis.nic.in T.C.A.Nos.194 & 195 of 2018 C O M M O N J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J)

These tax case appeals have been filed against the order of the Income Tax Appellate Tribunal dated 25.01.2017 in I.T.A.No.1633 & 1634/Mds/2013 in dismissing the appeals filed by the Department of Revenue against the order of the Commissioner of Income Tax (Appeals) by which the appeal filed by the assessee was allowed. 2.Heard Mr.T.R.Senthil Kumar, learned Counsel for the appellant and Mr.M.Koushik, learned Counsel for the respondent. 3.These Tax Case Appeals are admitted on the following substantial questions of law; “1.Whether on the facts and circumstances of the case, the AppellateTribunal was correct in holding that there is no 'transfer' of asset within the meaning of Section 2(47) of Income Tax Act and in terms of Section 45 (4) in respect of building and development work? 2/6 http://www.judis.nic.in T.C.A.Nos.194 & 195 of 2018 2.Whether the Appellate Tribunal is correct in law in holding that the building and development work belongs to the partner Shri.T.Manavalan, by ignoring the fact the same were constructed and developed by the partnership firms and depreciation was claimed by the assessee-firm against such assets?"

4.Mr.T.R.Senthil Kumar, learned Counsel for the appellant would submit that the tax effect in this case is less than Rs.50,00,000/- and is covered by Circular No.3/2018 dated 11.07.2018 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.50,00,000/-. In this case, tax effect is less than Rs.50,00,000/- and therefore, these appeals have to be dismissed. 5.This Court perused the circular dated 11.07.2018 and Paragraph Nos.2 & 3 of the Circular, which prescribes monetary limit for filing appeal. Paragraph Nos.2 & 3 is usefully extracted as follows: 3/6 http://www.judis.nic.in T.C.A.Nos.194 & 195 of 2018 "2.In supersession of the above circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs / appeals before Supreme Court keeping in view the monetary limits and conditions specified below 3.Henceforth, appeals / SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given under: S.No. Appeals / SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 20,00,000 2. Before High Court 50,00,000 3. Before Supreme Court 1,00,00,000" 6.In view of the submissions made by the learned counsel appearing on behalf of the appellant and also in view of the Circular No.3/2018 dated 11.07.2018 issued by the Director, Central Board of 4/6 http://www.judis.nic.in T.C.A.Nos.194 & 195 of 2018 Direct Taxes, Delhi, these Tax Case Appeals are dismissed on account of tax effect. However, the substantial questions of law framed are left open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (N.K.K.,J.) (P.V.,J.) 21.11.2019 ay To Principal Commissioner of Income Tax Central I, No.108, Mahatma Gandhi road, Chennai.

5/6 http://www.judis.nic.in T.C.A.Nos.194 & 195 of 2018 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. ay T.C.A.Nos.194 & 195 of 2018 Dated:21.11.2019 6/6 http://www.judis.nic.in

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