PRINCIPAL COMMISSIONER OF IN vs. M/S. INFAC INDIA PRIVATE LTD

TCA/325/2021HC Madras23 June 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the Revenue's Senior Standing Counsel submitted that the appeal was not being pursued due to low tax effect, as per Circular No. 17/2019 issued by the CBDT, which increased the monetary limit for pursuing appeals before the High Court to Rs. 1 crore. The tax effect in this case was stated to be below this threshold. Consequently, the High Court dismissed the appeal as withdrawn on account of the low tax effect. The substantial questions of law were expressly left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were awarded.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 05.10.2018 passed by the Income Tax Appellate Tribunal (ITAT), Madras, "D" Bench. The appeal pertained to Assessment Year 2014-2015 and concerned M/s Infac India Private Limited. The Revenue's appeal challenged the ITAT's decision regarding the selection of comparable companies and the adoption of segmental margins for transfer pricing analysis. The appeal was listed before the High Court of Judicature at Madras.

What were the issues?

The High Court was to decide three substantial questions of law: 1. Whether Rule 10B(2) of the Income Tax Rules permits adopting different/inconsistent comparability criteria for selecting comparables, specifically regarding the insistence on segmental profits excluding the two-wheeler & three-wheeler segment in the case of Remsons Ltd., which is also engaged in that segment. 2. Whether the Tribunal was right in directing the TPO to adopt segmental margins of Suprajit Engineering for comparability analysis when such segmental details were not available with the comparable company. 3. Whether the Tribunal was right in rendering different decisions for the comparable Suprajit Engineering on the same facts for different assessment years (AY 2012-13 to AY 2014-15), thereby violating the principle of uniformity and consistency, as upheld in Galileo Nederland BV vs ADIT. The Revenue argued on these points. The Respondent/assessee's arguments are not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.325 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 23.06.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE R.HEMALATHA T.C.A.No.325 of 2021 Principal Commissioner of Income Tax, Corporate Ward -2 (2) Nungambakkam, Chennai – 600 034. ... Appellant v. M/s Infac India Private Limited, No.113, Ellaimannan Koil Street, Padappai, Kanchipuram – 601 301 PAN : AADCS 4890C . ... Respondent Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, "D" Bench, dated 05.10.2018 in IT(TP)A No.27/Chny/2018 for the Assessment Year 2014-2015.

For Appellant : Mr. Karthik Ranganathan Senior Standing Counsel For Respondent : Mr. Raghunathan JUDGMENT Page 1/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.325 of 2021 (Judgment was delivered by M. DURAISWAMY, J.) We have heard Mr. Karthik Ranganathan, learned Senior Standing Counsel for the appellant/Revenue and Mr. Raghunathan, learned counsel for the respondent/assessee.

2.The appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 05.10.2018 made in IT(TP)A No.27/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai, "D" Bench (for brevity, the Tribunal) for the Assessment Year 2014-2015. 3. The appellant has raised the following substantial question of law in the above appeal:- “(i). Whether as per Rule 10B(2) of the Income Tax Rules permits the adopting of different/inconsistent comparability criteria for the purpose of selection of different comparables namely insistence on segmental profits excluding the two wheeler & three wheeler segment in the case of Remsons Ltd, a low margin comparable which is also Page 2/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.325 of 2021 engaged in two and three wheeler segment? (ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in directing the TPO to adopt segmental margins of Suprajit Engineering for comparability analysis when the said segmental details are not available with the comparable company ? (iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in rendering different decisions with respect to the comparable Suprajit Engineering on the same set of facts in the case of assessee for year to year (from AY 2012-13 to AY 2014-15) violating the principle of uniformity and consistency as upheld by the Hon’ble Delhi High Court in the case of Galileo Nederland BV vs ADIT [2014] 367 ITR 319/51 taxmann.com 419/[2015] 228 Taxmann 11?”

The learned Senior Standing Counsel appearing for the appellant submits that the above appeal is not pursued by the Revenue on account of the Low Tax Effect in terms of Circular No.17/2019 dated Page 3/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.325 of 2021 08.08.2019 issued by the Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to Rs.1 crore. It is further submitted that the tax effect in this case is less than the threshold limit. 5.In the light of the said submissions, the above Tax Case Appeal is dismissed as withdrawn on account of the Low Tax Effect. The substantial questions of law framed is left open. In the event the tax effect in this case is above the threshold limit fixed in the said Circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. [M.D., J.] [R.H., J.] Index : Yes/No 23.06.2021 Internet : Yes Rj To The Income Tax Appellate Tribunal, Chennai,"D" Bench Page 4/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.325 of 2021 M. DURAISWAMY, J. and R.HEMALATHA,J Rj T.C.A.No.325 of 2021 23.06.2021

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

Recent GST High Court judgments

Search GST case law →