PRINCIPAL COMMISSIONER OF IN vs. KRISHNAN SIVAGAMI PVT TRUST

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TCA/31/2022HC Madras27 January 2022Bench: Hon`ble Mr Justice R. MAHADEVAN5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court of Judicature at Madras dismissed the appeals filed by the Revenue as withdrawn. The Court noted that the learned counsel for the Revenue brought to its notice Circular No.17/2019 dated 08.08.2019 issued by the Central Board of Direct Taxes (CBDT). This circular stipulates that appeals shall not be filed or pursued by the Department before the High Court if the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). The Revenue submitted that the tax effect in these appeals was less than this threshold limit. Consequently, in light of the submission regarding the tax effect being below the monetary limit, the appeals were dismissed as withdrawn. The Court explicitly stated that the substantial questions of law were kept open for determination in appropriate cases. No costs were awarded, and the connected miscellaneous petition was closed.

What were the facts?

The Revenue (Principal Commissioner of Income Tax) filed two appeals before the High Court of Judicature at Madras against the common order dated 30.11.2017 passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'C' Bench. These appeals pertained to assessment years 2008-09 and 2009-10 and challenged the ITAT's decision regarding the eligibility of referral charges received by the assessee, M/s. Krishnan Sivagami Private Trust, for deduction under Section 10A of the Income Tax Act, 1961. The Revenue argued that the ITAT erred in holding that the assessee's activity of identifying candidates for its foreign customer constituted export of articles or things or computer software.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the ITAT was right in holding that the referral charges received by the assessee from identifying candidates for its foreign customer amounted to export of articles or things or computer software, making it eligible for deduction under Section 10A of the Income Tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case and in law, the ITAT was right in holding that the assessee was engaged in the export of computer software/IT Enabled Products or Services – Human Resources Services, despite the STPI's letter indicating activities such as System Software development, MIS design, project feasibility studies, CAD/CAM/CIM/FEA, and Back Office/Remote Data Entry, whereas the assessee's actual activity was identifying and short-listing candidates for its associate enterprise? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue contended that the ITAT erred in its findings regarding the nature of the assessee's activities and their eligibility for deduction under Section 10A. The Revenue highlighted a discrepancy between the STPI's listed activities and the assessee's actual business of candidate identification for its foreign associate enterprise.

Which sections of the Income-tax Act were involved?

Section 10A,Section 260A

AI-generated summary — verify with the full judgment below

Tax Case Appeal Nos.31 and 32 of 2022 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.01.2022 CORAM : THE HON'BLE MR. JUSTICE R. MAHADEVAN AND THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ Tax Case Appeal Nos.31 and 32 of 2022 and CMP.No.698 of 2022 Principal Commissioner of Income Tax, Non Corporate Circle – 22, Tambaram, Chennai 600 031. ...Appellant in both Cases -vs- M/s. Krishnan Sivagami Private Trust, KRISP IT PARK, 942 Vandalur Kelambakkam Road, Kizhakottayur, Chennai 600 048. PAN : AAATK 8074C ...Respondent in both Cases Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the common order dated 30.11.2017 passed by the Income Tax Appellate Tribunal, Chennai “C” Bench, in I.T.A.No.889/MDs/2017 and 888/Mds/2017. For Appellant : Mr.Karthik Ranganathan (in both cases) 1/5 https://www.mhc.tn.gov.in/judis Tax Case Appeal Nos.31 and 32 of 2022

COMMON JUDGMENT (Judgment of the Court was delivered by R. MAHADEVAN, J.) These tax case appeals have been filed by the appellant / Revenue, challenging the order dated 30.11.2017 passed by the Income Tax Appellate Tribunal, 'D' Bench, Chennai, in I.T.A.Nos.888/MDs/2017 and 889/Mds/2017, relating to the assessment years 2008-09 and 2009-10, by raising the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in law holding that the referral charges received from the activity of the assessee of identifying the candidates for its foreign customer, amount to export of articles or things or computer software for being eligible for deduction under section 10A of the IT Act? (ii) Whether on the facts and in the circumstances of the case and in law, the ITAT was right in law in holding that the assessee was engaged in export of computer software/IT Enabled 2/5 https://www.mhc.tn.gov.in/judis Tax Case Appeal Nos.31 and 32 of 2022 products or Services – Human Resources Services in the light of the STPI's letter stating that the assessee reported to have carried out the following activities: - Computer Software & ITES like (a) System Software development, (b) Design and Implementation of MIS and design support system, (c) Project Feasibility studies and project monitoring system, (d) CAD/CAM/CIM/FEA and (e) Back Office / Remote Data Entry. Whereas in fact, the assessee identified & short listed suitable candidates for its associate enterprise. 2. When the matters were taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in these appeals is less than the threshold limit.

3.

In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeals, wherein, the tax effect is said to 3/5 https://www.mhc.tn.gov.in/judis Tax Case Appeal Nos.31 and 32 of 2022 be less than the monetary limit imposed, are dismissed as withdrawn, keeping open the substantial questions of law for determination in appropriate cases. No costs. Consequently, connected miscellaneous petition is closed. [R.M.D,J.] [M.S.Q, J.] 27.01.2022

Internet : Yes

Index : Yes / No av To 1. The Income Tax Appellate Tribunal, Chennai 'C' Bench. 2. Principal Commissioner of Income Tax, Non Corporate Circle – 22, Tambaram, Chennai 600 031. 4/5 https://www.mhc.tn.gov.in/judis Tax Case Appeal Nos.31 and 32 of 2022 R. MAHADEVAN, J. AND MOHAMMED SHAFFIQ, J. av Tax Case Appeal Nos.31 and 32 of 2022 and CMP.No.698 of 2022 27.01.2022 5/5 https://www.mhc.tn.gov.in/judis

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