PRINCIPAL COMMISSIONER vs. M/S.LIFECELL INTERNATIONAL

TCA/298/2017HC Madras22 April 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court decided not to adjudicate the substantial questions of law framed for consideration due to subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020, to provide for the resolution of disputed tax. The learned counsel for the respondent/assessee submitted that the assessee had availed this scheme and was issued Form-3 on 30.12.2020. Consequently, the Court held that nothing further survived for adjudication in the appeal. The Tax Case Appeal was disposed of on this basis, with no costs awarded. The specific findings of the ITAT on the pro-rata taxation of storage fees and the reasoning behind it were not re-examined by the High Court.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 4, Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 22.07.2016 passed by the Income Tax Appellate Tribunal (ITAT), Chennai "A" Bench. The appeal pertained to Assessment Year 2011-12 and challenged the ITAT's decision regarding the taxability of storage fees collected by the assessee, M/s. Lifecell International Pvt. Ltd. The ITAT had directed that lump sum storage fees collected for multiple years should be taxed on a pro-rata basis, rather than in the year of receipt, despite the assessee following the mercantile system of accounting and the agreement stipulating non-refundable fees. The High Court admitted the appeal on substantial questions of law.

What were the issues?

1. Whether the storage fee collected in a lump sum for several years should be treated as income of the year in which the lump sum fee was received? (Question of law) 2. Whether a lump sum fee collected for 21 years but received in the same financial year can be directed to be taxed on a pro-rata basis, even if the assessee follows the mercantile system of accounting? (Question of mixed law and fact, turning on Section 139 of the Income Tax Act, 1961, and accounting principles) 3. Whether the Tribunal erred in law by directing that storage fees collected by the assessee in lump sum should not be treated as income of the year of receipt but taxed on a pro-rata basis, notwithstanding specific clauses in the agreement stating that all fees paid by clients are non-refundable? (Question of law, concerning contract interpretation and taxability) Assessee's Contentions: The assessee argued that they had availed the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3 on 30.12.2020. Revenue's Contentions: The judgment does not record specific contentions made by the Revenue regarding the substantial questions of law. The appeal was admitted on these questions.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Tax Case Appeal No.298 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.04.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY Tax Case Appeal No.298 of 2017 Principal Commissioner of Income Tax 4, No.121, Mahatma Gandhi Road, Chennai – 600 034. ... Appellant Vs.

M/s.Lifecell International Pvt. Ltd., 26, Vandalur Kelambakkam Main Road, Keelakottaiyur Village, Chennai – 600 048.

... Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai "A" Bench, dated 22.07.2016 passed in I.T.A.No.527/Mds/2016, Assessment year 2011-12. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For Respondent : Mr.N.V.Balaji Page 1/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.298 of 2017 J U D G M E N T (Delivered by M.DURAISWAMY, J.) This appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 22.07.2016 passed by the Income Tax Appellate Tribunal, Chennai "A" Bench, ('the Tribunal' for brevity) in I.T.A.No.527/Mds/2016 for the assessment year 2011-12. The above appeal has been admitted on 05.07.2017 on the following Substantial Questions of Law: "1.Whether the storage fee collected in lump sum for several years would have to be treated as income of the year in which lump sum fee received? 2.Whether the lump sum fee collected for 21 years but received in the same financial year can be directed to be taxed on pro rata basis even though the assessee might be following Mercantile system of accounting? 3.Whether the Tribunal erred in law in directing that the storage fee collected by the assessee in lump sum should not be treated as income of the year of receipt but taxed on pro rata basis, notwithstanding specific clauses of the agreement executed by the assessee to the effect that all fees paid by the clients of the assessee would be non- Page 2/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.298 of 2017 refundable?” 2. We have heard Mr.Karthik Ranganathan, learned Senior Standing Counsel for the appellant/Revenue and Mr.N.V.Balaji, learned counsel for the respondent/assessee. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. 4.Learned counsel for the respondent/assessee submitted that the assessee had availed the Vivad Se Vishwas Scheme and that the respondent/assessee had already been issued with Form–3 on 30.12.2020.

Page 3/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.298 of 2017 5.Since the respondent/assessee had been issued with Form-3, nothing survives for adjudication in the above appeal. Recording the submission made by the learned counsel for the respondent/assessee, the Tax Case Appeal stands disposed of. No costs. [M.D., J.] [K.R., J.] 22.04.2021

Index : Yes/No

Internet : Yes

mkn To 1. Income Tax Appellate Tribunal, Chennai "A" Bench 2.The Principal Commissioner of Income Tax 4, No.121, Mahatma Gandhi Road, Chennai – 600 034. Page 4/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.298 of 2017 M. DURAISWAMY, J. and KRISHNAN RAMASAMY, J. mkn Tax Case Appeal No.298 of 2017

22.04.2021 Page 5/5 https://www.mhc.tn.gov.in/judis/

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