PRINCIPAL COMMISSIONER OF I vs. HINDUJA FOUNDRIES LTD

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TCA/340/2021HC Madras06 July 2021Bench: Hon`ble Mr Justice M.DURAISWAMY7 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeals as withdrawn. The Revenue's learned Senior Standing Counsel submitted that the appeals were not being pursued due to low tax effect, citing CBDT Circular No. 17/2019, which increased the monetary limit for appeals to the High Court to Rs. 1 crore. The Court noted that the tax effect in these cases was below this threshold. Consequently, the appeals were dismissed as withdrawn on account of low tax effect. The substantial questions of law framed were expressly left open. The Revenue was granted liberty to seek restoration of the appeals if the tax effect was found to be above the threshold limit. No costs were awarded.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax, Corporate Circle – 2(2), Chennai (Revenue) against the orders of the Income Tax Appellate Tribunal (ITAT), Madras, “C” Bench, dated 02.05.2018. These orders pertained to the Assessment Years 2008-09 and 2012-13, concerning M/s.Hinduja Foundries Ltd. (assessee), which has since merged with M/s.Ashok Leyland Ltd. The appeals were preferred under Section 260A of the Income Tax Act, 1961. The Revenue sought to challenge several findings of the ITAT regarding the allowance of additional depreciation, disallowance under Section 14A, and the computation of book profits under Section 115JB.

What were the issues?

The Tribunal had to decide seven substantial questions of law. The primary issues were: 1. Whether additional depreciation, if not allowed in an earlier year, could be allowed in the subsequent year, and if the second proviso to Section 32(1) was correctly interpreted by the ITAT. 2. Whether the ITAT was correct in deleting the addition made under Section 14A of the Act, particularly when no exempted income was earned, and if CBDT Circular No. 5/2014, clarifying that disallowance under Section 14A read with Rule 8D is mandatory even without exempt income, was correctly considered. 3. Whether the ITAT erred in deleting the disallowance made under Section 14A read with Rule 8D for the Assessment Year 2012-13 for the purpose of computing book profits under Section 115JB, and if Explanation 1(f) to Section 115JB(2) was correctly applied. 4. Whether the ITAT was justified in holding that belated remittance of employees' contribution to PF & ESI, made before the due date of filing the IT return but after the statutory due date under the relevant Act, was permissible under Section 36(1)(va) of the IT Act. The Revenue argued that the ITAT erred in its findings on these points. The judgment does not record specific arguments from the assessee on each issue, but implies their position was in line with the ITAT's order.

Which sections of the Income-tax Act were involved?

Section 260A,Section 32(1),Section 14A,Section 8D,Section 115JB,Section 36(1)(va)

AI-generated summary — verify with the full judgment below

T.C.A.Nos.340 and 341 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.07.2021 CORAM THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE R. HEMALATHA T.C.A.Nos.340 and 341 of 2021 Principal Commissioner of Income Tax, Corporate Circle – 2(2), Chennai - 34 ... Appellant in all appeals Vs. M/s.Hinduja Foundries Ltd., (Merged with M/s.Ashok Leyland Ltd.,) Kathivakkam High Road, Ennore, Chennai – 600 057. ... Respondent in all appeals Tax Case Appeals in T.C.A.Nos.340 and 341 of 2021 preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, “C” Bench, dated 02.05.2018 in I.T.A.Nos.2690/Mds/2017 and 2692/Mds/2017, respectively for the Assessment Years 2008-09 and 2012-13 respectively. Page 1/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel in all appeals For Respondent : Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan in all appeals C O M M O N J U D G M E N T (Judgment was delivered by M.DURAISWAMY, J.) We have heard Mr.Karthik Ranganathan, learned Senior Standing Counsel for the appellant/Revenue and Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan, learned counsel for the respondent/assessee. 2.The above appeals, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act), are directed against the order dated 02.05.2018 made in I.T.A.Nos.2690/Mds/2017 and 2692/Mds/2017, on the file of the Income Tax Appellate Tribunal, Madras, “C” Bench (for brevity, the Tribunal) for the Assessment Years 2008-09 and 2012-13 respectively. Page 2/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 3.The appellant/Revenue has raised the following common substantial questions of law in the above appeals : “1.Whether on the facts and circumstances of the case and in law the ITAT was right in holding additional depreciation can be allowed in the next year in case the same cannot be allowed in the earlier year?

2.Whether on the facts and circumstances of the case and in law the ITAT was right in ignoring the second provision of section 32(1) when there are no provisions in the statute to carry forward the balance additional depreciation to the following years?

3.Whether on the facts and circumstances of the case and in law the ITAT was right in deleting the addition made u/s 14A of the Act by holding that there cannot be any disallowance u/s 14A when there is no exempted income, when the provisions of the said section as well as Rule 8D does not provide for any such exception? 4.Whether on the facts and circumstances of the case and in law the ITAT was correct in not appreciating the CBDT circular No. 5/2014 wherein it is clarified that, Page 3/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 disallowance u/s. 14A r.w.r. 8D has to be made even if the tax payer in a particular year not earned any exempt income?

5.Whether on the facts and circumstances of the case and in law the ITAT was right in law in deleting the disallowance made u/s 14A r.w.r. 8D of the Act for the A.Y. 2012-13 for the purpose of computing book profits u/s 115JB of the Act?

6.Whether on the facts and circumstances of the case and in law the ITAT was right in ignoring the Explanation 1(f) to Section 115JB(2) of the Act where such disallowances made are to be increased for the purpose of computing book profit?

7.Whether on the facts and circumstances of the case and in law the ITAT was correct and justified in holding that the belated remittance of employees contribution to PF&ESI as per relevant Act, but before the due date of filing of the IT return in accordance with IT Act, which is in contravention of provisions of Sec.36(1)(va) of the IT Act.” Page 4/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 4.The learned Senior Standing Counsel for the appellant submits that the above appeals are 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 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 these cases is less than the threshold limit. 5.In the light of the said submissions, the above Tax Case Appeals are dismissed as withdrawn on account of the Low Tax Effect. The substantial questions of law framed are left open. In the event the tax effect in these cases 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 above appeals to be heard and decided on merits. No costs. [M.D., J.] [R.H., J.] 06.07.2021 mkn

(2/2) Page 5/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 Index : Yes/No Internet : Yes

To The Income Tax Appellate Tribunal, Madras, “C” Bench. Page 6/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.340 and 341 of 2021 M.DURAISWAMY, J. and R. HEMALATHA, J. mkn T.C.A.Nos.340 and 341 of 2021 06.07.2021 (2/2) Page 7/7 https://www.mhc.tn.gov.in/judis/

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