PRINCIPAL COMMISSIONER OF vs. AQUA PUMP INDUSTRIES

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TCA/341/2018HC Madras24 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. Instead, the learned counsel for the appellant/Revenue brought to the court's 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/-. The Revenue submitted that the tax effect in the present appeal was less than this threshold limit. Consequently, the High Court dismissed the appeal as withdrawn, keeping the substantial questions of law open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax-2, Coimbatore, filed an appeal under Section 260A of the Income Tax Act, 1961, against the order dated 03.02.2017 passed by the Income Tax Appellate Tribunal (ITAT), Madras 'A' Bench. The appeal pertains to assessment year 2012-13 and concerns the ITAT's decision regarding the deletion of disallowance of interest and remuneration paid to three partners, and the validity of a partnership formed by a Karta of an HUF. The amount in dispute is not explicitly stated, but the procedural history is that the Revenue is challenging the ITAT's order.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the Appellate Tribunal was right in deleting the claim of expenses on Interest and Remuneration paid to three Partners which was disallowed by the Assessing Officer under Section 40(b) of the Income Tax Act? 2. Whether the Appellate Tribunal was right in holding that a Partnership could be formed by a Karta of an HUF in his individual capacity with other persons, wherein in the present case all the three Partners are not Natural Persons and Partnership Firm cannot be formed between all Artificial Persons as per Indian Partnership Act? The Revenue argued that the ITAT erred in deleting the disallowance under Section 40(b) and in its finding regarding the formation of the partnership. The judgment does not record specific arguments from the Respondent (assessee) on these points, but it notes the Revenue's submissions.

Which sections of the Income-tax Act were involved?

Section 40(b),Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.341 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24.08.2022 CORAM : THE HON'BLE MR. JUSTICE R. MAHADEVAN AND THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.341 of 2018 The Principal Commissioner of Income Tax-2, No.63, Race Course Road, Coimbatore. ... Appellant Versus M/s.Aqua Pump Industries, Thudiyalur Post, Coimbatore 641 034. ... Respondent (PAN No.AAD FA 8027 C) Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras “A” Bench, dated 03.02.2017 in I.TA.No.1958/Mds/2016. For Appellant : M/s.M.Swaminathan &

V. Pushpa Standing Counsel For Respondent : Mr.R.Kumar For M/s.T.N.Seetharaman J U D G M E N T Page 1/4 https://www.mhc.tn.gov.in/judis T.C.A.No.341 of 2018 (Judgment was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant / Revenue, challenging the order dated 03.02.2017 passed by the Income Tax Appellate Tribunal, Madras 'A' Bench in I.T.A.No.1958/Mds/2016, relating to the assessment year 2012-13, by raising the following substantial questions of law: "(i) Whether the Appellate Tribunal was right in deleting the claim of expenses on Interest and Remuneration paid to three Partners which was disallowed by the Assessing Officer under Section 40(b) of the Income Tax Act? (ii) Whether the Appellate Tribunal was right in holding that a Partnership could be formed by a Karta of an HUF in his individual capacity with other persons, wherein in the present case all the three Partners are not Natural Person and Partnership Firm cannot be formed between all Artificial Persons as per Indian Partnership Act?" 2. When the matter was 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 appeal 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 Page 2/4 https://www.mhc.tn.gov.in/judis T.C.A.No.341 of 2018 effect in this appeal 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 appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. (R.M.D., J.) (M.S.Q., J.) 24.08.2022 r n s

Internet : Yes.

Index : Yes / No. Page 3/4 https://www.mhc.tn.gov.in/judis T.C.A.No.341 of 2018 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. r n s To 1. The Income Tax Appellate Tribunal Madras 'A' Bench, Chennai. 2. The Commissioner of Income Tax, (Appeals)-3, Coimbatore. 3. The Joint Commissioner of Income Tax, Non Corporate Range-4, Coimbatore. T.C.A.No.341 of 2018 24.08.2022 Page 4/4 https://www.mhc.tn.gov.in/judis

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