PRINCIPAL COMMISSIONER OF vs. M/S.CHIRANJEEVI WIND ENERGY

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TCA/23/2018HC Madras26 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 tax effect. The Revenue's counsel submitted that the tax effect was less than Rs. 1 crore, which was the enhanced monetary limit for filing appeals before the High Court as per Circular No. 17/2019 dated 08.08.2019. The Court perused the circular and agreed with the submission. Consequently, the appeals were dismissed. However, 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, for a decision on merits. No costs were awarded.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax (Revenue) against the orders of the Income Tax Appellate Tribunal (ITAT) for assessment years 2010-11 and 2011-12. The ITAT had dismissed the appeals filed by the Revenue and partly allowed the appeals filed by the assessee, M/s. Chiranjeevi Wind Energy Ltd. The dispute pertained to the allowability of advance money paid by the assessee for the purchase of cranes, which were neither delivered nor recovered from the purchaser, as a business loss. The High Court heard arguments from both sides.

What were the issues?

1. Whether the Appellate Tribunal was right in holding that the advance money paid by the assessee for the purchase of cranes, which was neither delivered nor recovered, is a business loss allowable as a deduction (Section 37 of the Income Tax Act, 1961). The assessee contended that the ITAT's decision was correct. The revenue argued that the ITAT erred in allowing the deduction. 2. Whether the Appellate Tribunal was right in relying on the judgment of CIT Vs. Indian Biselers [181 ITR 69], when it was distinguishable from the present case. The revenue argued that the cited case was not applicable. 3. Whether the Appellate Tribunal was right in not considering the judgment in Kwality Fun Foods and Restaurants (P) Ltd. Vs. DCIT, which held that amounts advanced towards acquiring profit-earning apparatus are not allowable as revenue loss. The revenue argued that the ITAT failed to consider this precedent.

Which sections of the Income-tax Act were involved?

Section 260A,Section 37

AI-generated summary — verify with the full judgment below

T.C.A.Nos.23 & 24 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.Nos.23 & 24 of 2018 Principal Commissioner of Income Tax 1, No.63, Race Course Road, Coimbatore. ... Appellant in both the appeals Vs M/s.Chiranjeevi Wind Energy Ltd., No.45/3A, Arts College road Lane, Opp. Bala Lodge, Coimbatore - 641 018. PAN: AAACC 8761H ...Respondent in both the appeals COMMON PRAYER: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 against the order dated 10.07.2017 in ITA No.319/Mds/2015 & 2324/Mds/2016 and ITA No.442/Mds/2015 & 2468/Mds/2016 on the file of the Income Tax Appellate Tribunal Chennai 'C' Bench for the assessment years 2010-11 & 2011-12. For Appellant : Mr.T.R.Senthil Kumar

For Respondent : Mr.Venkata Narayanan for M/s.Subbaraya Aiyar padmanaban 1/6 http://www.judis.nic.in T.C.A.Nos.23 & 24 of 2018 C O M M O N J U D G M E N T (Order 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 10.07.2017 in ITA No.319/Mds/2015 & 2324/Mds/2016 and ITA No.442/Mds/2015 & 2468/Mds/2016 in dismissing the appeals filed by the Department of revenue and partly allowing the appeals filed by the assessee. 2.Heard Mr.T.R.Senthil Kumar, learned Counsel for the appelant and Mr.Venkata Narayanan, learned Counsel for the respondent. 3.These appeals are admitted on the following substantial questions of law; “(i)Whether the Appellate Tribunal was right in holding that the advance money paid by the assessee to purchase of Cranes, which was neither delivered to the assessee nor recovered from the purchaser is business loss allowable as a deduction in the course of the business to the assessee? 2/6 http://www.judis.nic.in T.C.A.Nos.23 & 24 of 2018 (ii)Whether the Appellate Tribunal was right in relying upon the judgement of the Hon'ble High Court in the case of CIT Vs.Indian Biselers [181 ITR 69], when the cited case is clearly distinguishable from the instant case on all merits? (iii)Whether the Appellate Tribunal was right in not considering the Judgment of the Hon'ble Jurisdictional high Court in the case of Kwality Fun foods and Restaurants (P) Ltd., Vs. DCIT wherein it was held that, 'if the amount advanced was incurred towards cost of acquiring profit earning apparatus, it is not allowable as revenue loss?"

4.Mr.T.R.Senthil Kumar, learned Senior Standing Counsel appearing on behalf of the appellant would submit that the tax effect in this case is less than Rs.1 crore and is covered by Circular No.17/2019 dated 08.08.2019 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.1 crore. In this case, tax effect is less than Rs.1 crore and therefore, the appeals have to be dismissed. 3/6 http://www.judis.nic.in T.C.A.Nos.23 & 24 of 2018 5.This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the Circular, which prescribes monetary limit for filing appeal. Paragraph No.2 is usefully extracted as follows: "2.As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: S.No. Appeals / SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 3. Before Supreme Court 2,00,00,000" 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.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, these Tax Case Appeals are dismissed on account 4/6 http://www.judis.nic.in T.C.A.Nos.23 & 24 of 2018 of tax effect. However, the substantial question of laws 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 appeals to be heard and decided on merits. No costs. (N.K.K.,J.) (P.V.,J.) 26.11.2019 ay To Principal Commissioner of Income Tax 1, No.63, Race Course Road, Coimbatore. 5/6 http://www.judis.nic.in T.C.A.Nos.23 & 24 of 2018 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. ay T.C.A.Nos.23 & 24 of 2018 Dated:26.11.2019 6/6 http://www.judis.nic.in

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