COMMISSIONER OF INCOME TAX vs. THE VIRUDHUNAGAR DISTRICT CENTRAL CO-OPERATIVE BAN

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TCA/243/2024HC Madras05 November 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not adjudicate the substantial questions of law on merits. The Revenue's counsel submitted that as per CBDT's Circular No.9 of 2024, the tax effect in this case was below the monetary limit for filing appeals. Consequently, the Court accepted this submission and dismissed the Tax Case Appeal. The Court explicitly stated that the substantial questions of law were kept open for adjudication at an appropriate stage. Therefore, there was no finding on the deductibility of provisions for standard assets under Section 36(1)(viia) or the validity of the Section 263 revision order. The operative direction was to dismiss the appeal due to low tax effect, with no costs. The connected miscellaneous petition was also closed.

What were the facts?

The Revenue has filed a Tax Case Appeal under Section 260A of the Income Tax Act, 1961, challenging an order passed by the Income Tax Appellate Tribunal (ITAT), Chennai. The ITAT's order was made in I.T.A.No.541/Chny/2022. The appeal concerns the assessment year(s) not explicitly stated in the provided text. The core dispute revolves around the deductibility of provisions created for standard assets under Section 36(1)(viia) of the Income Tax Act, 1961, and the validity of a revision order passed under Section 263. The Revenue's appeal is based on substantial questions of law. However, the Revenue's counsel submitted that due to a low tax effect, as per CBDT's Circular No.9 of 2024 dated 17.09.2024, the appeal could be disposed of without adjudicating the substantial questions of law.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was right in holding that a revision order under Section 263 is liable to be set aside because the issue is debatable, even though standard assets are recoverable. 2. Whether the provision created for standard assets is deductible under Section 36(1)(viia) of the Income Tax Act, 1961. 3. Whether the Tribunal was right in not appreciating that standard assets are performing and recoverable, not bad debts, and thus the provision is not allowable under Section 36(1)(viia). 4. Whether the Tribunal was right in allowing deduction under Section 36(1)(viia) on provisions against standard assets, on the ground that the assessee created a valid provision anticipating future bad debts. Assessee's Contentions: The judgment does not record specific contentions made by the assessee. The questions themselves imply the assessee likely argued for the deductibility of the provision for standard assets under Section 36(1)(viia) and that the issue was debatable, justifying the setting aside of the Section 263 order. Revenue's Contentions: The Revenue argued that standard assets are recoverable and not bad debts, therefore, provisions created for them should not be allowed as a deduction under Section 36(1)(viia). They also contended that the issue was not debatable, questioning the Tribunal's basis for setting aside the Section 263 order. The Revenue relied on CBDT's Circular No.9 of 2024.

Which sections of the Income-tax Act were involved?

Section 260A,Section 36(1)(viia),Section 263

AI-generated summary — verify with the full judgment below

T.C.A.No.243 of 2024 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.11.2024 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.243 of 2024 and C.M.P.No. 23021 of 2024 Commissioner of Income Tax Chennai. .... Appellant Vs. The Virudhunagar District Central Co-operative Bank Limited 104/1, Madurai Road, Post Box No.8 Virudhunagar 626 001. .... Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'A' Bench Chennai, dated 12.05.2023 made in I.T.A.No.541/Chny/2022. For Appellant : Mr.J.Narayanaswamy Senior Standing Counsel ----- J U D G M E N T (Delivered by R.SURESH KUMAR, J.) This Tax Case Appeal has been filed by the Revenue calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, Chennai by raising the following substantial questions of law: https://www.mhc.tn.gov.in/judis T.C.A.No.243 of 2024 1. Whether on the facts and in the circumstances of the case, the appellate Tribunal was right in holding that the order of revision u/s.263 is liable to be set aside on the ground that the issue is debatable even though it is admitted that the standard assets are recoverable in nature. 2. Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in holding that provision created for standard assets is liable for deduction under Section 36(1)(viia) of the Income Tax Act, 1961? 3. Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in not appreciating that standard assets are considered as performing and recoverable assets and are not in the nature of bad debts and hence the provision created for standard assets is not allowable as deduction under Section 36(I)(viia) of the Income Tax Act, 1961? 4. Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in allowing deduction u/s.36(1)(viia) on the provisions created against the standard assets on the ground that assessee has actually created a valid provision on the expectation that the assets may become bad in future? 2. It is brought to our notice by the learned Standing Counsel for the appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of https://www.mhc.tn.gov.in/judis T.C.A.No.243 of 2024 2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit imposed and therefore, the appeal can be disposed of, keeping the substantial questions of law raised in this appeal open for adjudication at a later point of time. 3. Recording the aforesaid submission made by the learned Standing Counsel for the appellant Revenue, this Tax Case Appeal is dismissed for low tax effect, keeping open the substantial questions of law for adjudication at appropriate stage. No costs. Consequently, connected miscellaneous petition is closed. (R.S.K.,J.) (C.S.N.,J.) 05.11.2024 NCS : Yes/No 1/4 KST To The Income Tax Appellate Tribunal 'A' Bench, Chennai. https://www.mhc.tn.gov.in/judis T.C.A.No.243 of 2024 R.SURESH KUMAR, J. AND C.SARAVANAN, J. KST T.C.A.No.243 of 2024 05.11.2024 https://www.mhc.tn.gov.in/judis

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