THE COMMISSIONER OF INCOME T vs. M/S SUTHERLAND GLOBAL SERVIC

TCA/305/2018HC Madras07 July 2020Bench: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM5 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court found that the Revenue could not sustain the appeal for multiple reasons. Firstly, the Commissioner of Income Tax (Appeals) had allowed the assessee's appeal by following the Tribunal's decisions in the assessee's own case for Assessment Years 2006-07 and 2007-08, where identical transactions were involved. Crucially, as of the date the CIT(A) passed its order (17.12.2015), no appeal had been preferred by the Revenue before the High Court against the Tribunal's orders for those earlier assessment years. This implied that the Department had accepted those decisions. Even before the ITAT for the current Assessment Year 2005-06, the Revenue failed to produce any material showing that the earlier Tribunal orders were challenged in appeal. Therefore, the High Court concluded that the Revenue could not maintain the present appeal and answered the substantial questions of law against the Revenue.

What were the facts?

The Revenue (Commissioner of Income Tax, Chennai) filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order of the Income Tax Appellate Tribunal (ITAT) dated 28.12.2016. This order pertained to Assessment Year 2005-06 and concerned an excess amount received by the assessee, M/s. Sutherland Global Services Pvt. Ltd., on reimbursement from M/s. Symantec Corporation, USA, for assets purchased and used for the payee company's work. The Assessing Officer had treated this as 'Income from other Sources', while the assessee contended it was a 'Capital Receipt'. The Commissioner of Income Tax (Appeals) had previously partly allowed the assessee's appeal, following the ITAT's decisions in the assessee's own case for Assessment Years 2006-07 and 2007-08, where identical transactions were involved.

What were the issues?

The High Court had to decide two substantial questions of law: 1. Whether the Tribunal was correct in holding that the excess amount received by the assessee on reimbursement from M/s. Symantec Corporation, USA, on account of assets purchased and used by the assessee for the work towards the payee company, was a 'Capital Receipt' as against the Assessing Officer's view that it was 'Income from other Sources', turning on the nature of the receipt and its taxability under the Income Tax Act, 1961. 2. Whether the Tribunal erred in not considering that the sum was received during the course of business activity and credited by the assessee under 'Other Income', rather than being solely due to the sale of fixed assets, thereby questioning the classification of the receipt. The Revenue argued that the amount was income from other sources. The Assessee argued it was a capital receipt. The judgment does not explicitly detail the arguments for each side beyond the framing of the questions of law and the factual background.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

TCA No.305 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.07.2020 CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.305 of 2018 The Commissioner of Income Tax, Chennai. .. Appellant versus M/s.Sutherland Global Services Pvt. Ltd., 45A, Velacherry Main Road, Velacherry, Chennai – 600 042. .. Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the order made in ITA No.658/Mds/2016 dated 28.12.2016 passed by the Income Tax Appellate Tribunal 'A' Bench, Chennai, for the Assessment Year 2005-06. For Appellant : Mr.J.Narayanasamy Senior Standing Counsel For Respondent : Mr.N.V.Balaji Page 1 of 5 http://www.judis.nic.in TCA No.305 of 2018 JUDGMENT T.S.SIVAGNANAM, J. This appeal by the revenue is filed under Section 260A of the Income Tax Act, 1961 (the 'Act' for brevity), challenging the order passed by the Income Tax Appellate Tribunal 'A' Bench, Madras, in ITA No.658/Mds/2016 dated 28.12.2016 for the Assessment Year 2005-06. 2. The appeal was admitted on 04.12.2019 on the following Substantial Questions of Law: “(i) Whether on the facts and in the circumstances of the case, Tribunal was correct in holding that the excess amount received by the assessee on reimbursement received from M/s.Symantec Corporation, USA on account of assets purchased and used by the assessee for the work towards the payee company as “Capital Receipts” as against the stand of the Assessing Officer that it was “Income from other Sources”? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal has erred in not considering the fact the above sum is not due to any sale of fixed assets exclusively and that it is received only during the course of business activity which the assessee itself credited under the head “Other Income”?” 3. We have heard Mr.J.Narayanasamy, learned Senior Standing Page 2 of 5 http://www.judis.nic.in TCA No.305 of 2018 Counsel for the appellant/Revenue and Mr.N.V.Balaji, learned counsel for the respondent/assessee. 4. After elaborately hearing the learned counsel for the parties, we find that the revenue cannot sustain this appeal for more than one reason. Firstly, the Commissioner of Income Tax (Appeals), while deciding the appeal petition filed by the assessee against the order of assessment dated 31.03.2013, partly allowed the assessee's appeal by following the decision in the assessee's own case in respect of an identical transaction for the Assessment Years 2006-07 and 2007-08. It was pointed out that since the facts of the case are identical to the Assessment Years referred above, the CIT (A) followed the order of the tribunal. 5. It is evident that as on the date when the CIT(A) allowed the assessee's appeal by an order dated 17.12.2015, no appeal was preferred before the Division Bench of this Court, questioning the correctness of the order passed by the tribunal dated 26.07.2012, for the Assessment Year 2006-07 or 08.03.2013, for the Assessment Year 2007-08. Had an appeal been preferred, revenue could have taken a stand before the CIT(A) that the decisions of the Income Tax Appellate Tribunal dated Page 3 of 5 http://www.judis.nic.in TCA No.305 of 2018 26.07.2012 and 08.03.2013, have not been accepted by the Department and not attained finality. Since no such stand was taken, it is clear that the decisions have been accepted by the Department. Nevertheless, for the Assessment Year under consideration, the revenue thought it fit to file an appeal before the tribunal. The tribunal took note of its earlier decisions, referred above and dismissed the appeal. Even before the tribunal, the revenue did not produce any material to show that the orders passed by the tribunal for the Assessment Years 2006-07 and 2007-08 were taken on appeal before the Division Bench of this Court. 6. Therefore, we are of the considered view that the revenue cannot maintain this appeal. For the above reasons the Tax Case Appeal is dismissed. The Substantial Questions of Law are answered against the revenue. No Costs. [T.S.S., J.] [V.B.S., J.] 07.07.2020 Index : Yes/No Internet : Yes Speaking/Non-speaking order. ars/raja T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. Page 4 of 5 http://www.judis.nic.in TCA No.305 of 2018 ars/raja TCA No.305 of 2018 07.07.2020 Page 5 of 5 http://www.judis.nic.in

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