PRINCIPAL COMMISSIONER OF IN vs. M/S.NORTHERN ARC CAPTIAL LTD

TCA/328/2021HC Madras23 June 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeal as withdrawn on account of low tax effect, as submitted by the Revenue. The Court noted that the Revenue cited CBDT Circular No. 17/2019, which raised the monetary threshold for filing appeals before the High Court to Rs. 1 crore, and stated that the tax effect in this case was below that limit. Consequently, the appeal was not pursued on merits. 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. 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 of the Income Tax Appellate Tribunal (ITAT), Chennai, dated March 20, 2019. The appeal pertained to Assessment Year 2012-2013 and concerned M/s. Northern ARC Capital Ltd. (formerly IFMR Capital Finance Ltd.) as the respondent assessee. The appeal was admitted on substantial questions of law. However, the Revenue later submitted that it did not wish to pursue the appeal due to low tax effect, citing CBDT Circular No. 17/2019 which increased the monetary limit for High Court appeals to Rs. 1 crore. The tax effect in this case was stated to be below this threshold.

What were the issues?

The Tribunal had to decide three substantial questions of law: 1. Whether the Tribunal was correct in holding that the processing fee for a loan is allowable as revenue expenditure in the year of payment, even if written off over time? 2. Whether the Tribunal was correct in not following the Supreme Court's decision in M/s. Madras Industrial Investment Corporation Ltd. Vs. CIT, which held that the entire expenditure could not be deducted in the year of issue? 3. Whether the Tribunal was correct in not following the Supreme Court's decision in M/s. Indian Molases Co. Ltd. Vs. CIT, which held that setting aside money for a potential future expenditure is not allowable? The Revenue argued that the Tribunal erred in its findings on these issues, particularly by not adhering to the Apex Court's precedents. The assessee's contentions 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.328 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.328 of 2021 Principal Commissioner of Income Tax, Corporate Circle – 2(2), Nungambakkam, Chennai – 600 034. ... Appellant v. M/s. Northern ARC Capital Ltd., (Formerly known as IFMR Capital Finance Ltd.) 10th Floor, Phase – I, IIT – Madras Research Park. Kanga Village, Taramani, Chennai – 600 113. PAN AACC10979B. ... Respondent

Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, "A" Bench, dated 20.03.2019 in ITA.No.2569/Chny/2018 for the Assessment Year 2012-2013.

Page 1/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.328 of 2021 For Appellant : Mr. Karthik Ranganathan Senior Standing Counsel

For Respondent : S.P. Chidambaram JUDGMENT (Judgment was delivered by M. DURAISWAMY, J.) We have heard Mr. Mr. Karthik Ranganathan, learned Senior Standing Counsel for the appellant/Revenue and Mr. S.P. Chidambaram, 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 20.03.2019 made in I.T.A.No.2569/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai, "A" Bench (for brevity, the Tribunal) for the Assessment Year 2012-2013. Page 2/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.328 of 2021 3. The above appeal was admitted on the following substantial questions of law: “(i) Whether on the facts and circumstances of the case and in law, the Tribunal is right in holding that the payment of processing fee for availing the loan is allowable as revenue expenditure in the year in which it was paid, even if, the assessee had written off this amount in its books over a period of time? (ii) Whether on the facts and circumstances of the case and in law, the Tribunal is right in not following the Apex Court decision in the case of M/s. Madras Industrial Investment Corporation Ltd. Vs. CIT [1997] 225 ITR 802(SC) wherein it was held that the assessee was not entitled to claim the deduction of entire amount of expenditure in accounting year related to year of issue itself? (iii) Whether on the facts and circumstances of the case and in law, the Tribunal is right not in following the holding Apex Court decision in the case of M/s. Indian Molases Co. Ltd. Vs. CIT [1959] 37 ITR 66(SC) wherein it was held that putting aside of money which may become expenditure in happening of an event is not allowable as expenditure?"

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 08.08.2019 issued by the Central Board of Direct Taxes. By the said Page 3/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.328 of 2021 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,"A" Bench Page 4/5 https://www.mhc.tn.gov.in/judis/ T.C.A.No.328 of 2021 M. DURAISWAMY, J. and R.HEMALATHA,J Rj T.C.A.No.328 of 2021 23.06.2021

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