Commissioner of Income Tax vs. BGR Energy Systems Limited

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TCA/279/2023HC Madras12 November 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on a Circular dated 17.09.2024 (Circular No. 9/2024) concerning the 'Low Tax Effect' policy. The Court stated that the appeal stands dismissed as covered under this policy. Consequently, the substantial questions of law raised in the appeal were kept open to be decided at a later point in time. No order was made as to costs. The judgment does not provide any findings or reasoning on the merits of the substantial questions of law raised, as the appeal was disposed of on procedural grounds related to the 'Low Tax Effect' policy.

What were the facts?

The Revenue, Commissioner of Income Tax, Chennai, filed an appeal before the High Court of Judicature at Madras against an order of the Income Tax Appellate Tribunal (ITAT), Madras 'A' Bench. The ITAT's order was dated 21.09.2022 and pertained to ITA No. 28/CHNY/2021. The assessee is M/s. BGR Energy System Limited. The appeal was admitted on 08.06.2023, raising substantial questions of law concerning the disallowance of expenditure under Section 14A read with Rule 8D, the retrospective application of amendments to Section 14A, and the computation of book profit under Section 115JB.

What were the issues?

The Tribunal had to decide three substantial questions of law: 1. Whether the Tribunal was correct in restricting the disallowance of expenditure under Section 14A read with Rule 8D to the extent of exempt income earned, despite no express provision in the said sections limiting the disallowance to the exempt income. 2. Whether the Tribunal erred in law by observing that the amendment to Section 14A by the Finance Act, 2022, was effective from 1st April 2022, ignoring its retrospective application for the removal of doubts. 3. Whether the Tribunal was justified in holding that book profit under Section 115JB shall not be increased by the sum attributable to Section 14A disallowance, contrary to Explanation 1(f) to Section 115JB(2). The Revenue contended that the Tribunal erred in restricting the disallowance under Section 14A to the exempt income and that the amendment to Section 14A was retrospective. The Revenue also argued that book profit should be increased by the Section 14A disallowance as per Section 115JB(2). The judgment records no specific arguments from the assessee on these points.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

T.C.A.No.279 of 2023 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 12.11.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.No.279 of 2023 Commissioner of Income Tax Chennai. .. Appellant Vs. M/s. BGR Energy System Limited Guna Building, Anna Salai, 433 Teynampet, Chennai 600 018. [PAN AABCG2202J] .. Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal Madras “A” Bench dated 21.09.2022 passed in I.T.A.No.28/CHNY/2021. For the Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For the Respondent : Mr.R.Sivaraman JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeal was admitted on 08.06.2023 on the following substantial questions of law:- "1.Whether in the facts and circumstnace of the Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.279 of 2023 case, the Tribunal is right in restricting the disallowance of expenditure u/s. 14A read with Rule 8D to the extent of exempt income earned even though there is no express provision in Section 14A and Rule 8D, restricting the disallowance u/s. 14A to the extent of exempt income earned by the assessee? 2. Whether in the facts and circumstance of the case, the Tribunal erred in law in observing that the amendment made to Section 14A by the Finance Act, 2022 will take effects from 1st April, 2022, ignoring the express provision that the amendment was inserted "for the removal of doubts" and hence have retrospecitve application? 3. Whether in the facts and circumstance of the case, the Tribunal was justified in law, in holding that the book profit computed under the provision of Section 115jb of the IT Act shall not be increased by the sum attributable to 14A disallowance, whereas clause (f) of explanation 1 to Section 115JB(2) of the Act clearly states that "book profit the purposeof Section 115JB of the IT Act shall be increased by the amount or amount of expenditure relatable to any income to which Section 12 apply?" Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.279 of 2023 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that this matter is covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. 3. Hence, this appeal stands dismissed, as covered under the low tax effect and the substantial questions of law raised in this appeal are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 12.11.2024 Neutral Citation:Yes/No drm Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.279 of 2023 R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.No.279 of 2023 12.11.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

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