PRINCIPAL COMMISSIONER OF IN vs. M/S.EXPRESS NEWSPAPER PVT. L

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TCA/360/2021HC Madras15 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The High Court dismissed the appeals as withdrawn on account of low tax effect, as submitted by the Revenue. 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 these cases was below this limit. Consequently, the appeals were dismissed without a decision on the merits of the substantial questions of law framed. The Court explicitly stated that the substantial questions of law were left open. Liberty was granted to the Revenue to seek restoration of the appeals if the tax effect was found to be above the threshold limit. No costs were imposed.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax (Revenue) against the orders of the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2010-11 and 2012-13. The Revenue challenged the ITAT's decision to delete disallowances made under Section 14A read with Rule 8D of the Income Tax Act, 1961. The assessee is M/s. Express Newspaper Pvt. Ltd. The appeals were filed under Section 260A of the Income Tax Act, 1961. The Revenue sought to appeal against the ITAT's orders dated 05.01.2018.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was correct in directing an inquiry into whether the assessee made investments in sister/associate companies for strategic purposes and out of interest-free funds for computing disallowance under Section 14A read with Rule 8D. 2. Whether the ITAT was correct in holding that investments in subsidiary companies are not liable for disallowance under Section 14A, despite the absence of specific exceptions in the section or Rule 8D. 3. Whether the ITAT was correct in holding that the assessee's intention for investing in subsidiary companies was commercial expediency rather than earning exempt income. 4. Whether the ITAT erred in not appreciating that investments in subsidiary companies yield dividend income, which is exempt, making Section 14A applicable. 5. Whether the ITAT erred in deleting the disallowance under Rule 8D read with Section 14A when the assessee had mixed funds and significant investments in assets yielding exempt income. 6. Whether the ITAT was correct in not appreciating CBDT Circular No. 5/2014, which clarifies that disallowance under Section 14A read with Rule 8D applies even if no exempt income is earned in a particular year. Assessee's contentions: Not recorded. Revenue's contentions: The Revenue argued 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 Rs. 1 crore. The tax effect in these cases was below this threshold.

Which sections of the Income-tax Act were involved?

Section 14A,Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.Nos.360 and 361 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.07.2021 CORAM THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE R. HEMALATHA T.C.A.Nos.360 and 361 of 2021 Principal Commissioner of Income Tax, Corporate Circle – 2(2), Room No.512, 5th Floor, Wanarpathy Block, No.121, Mahatma Gandhi Road, Chennai – 600 034. ... Appellant in all appeals Vs. M/s.Express Newspaper Pvt. Ltd., Express Estates, No.2, Club House Road, Mount Road, Chennai – 600 002. ... Respondent in all appeals Tax Case Appeals in T.C.A.Nos.360 and 361 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 05.01.2018 in I.T.A.Nos.687/Mds/2017 and 688/Mds/2017, respectively for the Assessment Years 2010-11 and 2012-13 respectively. Page 1/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021 For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel in all appeals For Respondent : Ms.Sri Niranjani Srinivasan for M/s.G.Baskar 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 Ms.Sri Niranjani Srinivasan, 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 05.01.2018 made in I.T.A.Nos.687/Mds/2017 and 688/Mds/2017, on the file of the Income Tax Appellate Tribunal, Madras, “C” Bench (for brevity, the Tribunal) for the Assessment Years 2010-11 and 2012-13 respectively. Page 2/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021 3.The appellant/Revenue has raised the following substantial questions of law in the above appeals : “1.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in directing to ensure whether the assessee had made investments in its sister/associate company for strategic purpose and out of its interest free funds for the purpose of computing disallowance u/s 14A r.w.r8D of the Act?

2.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct and justified in holding that the investment made in subsidiary companies is not liable for disallowances u/s 14A when the provisions of the said section as well as Rule 8D does not provide for any such exception?

3.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in holding that when the assessee made investment in the subsidiary companies, the intention of the assessee is not for earning exempt income but because of commercial expediency? Page 3/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021

4.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in not appreciating the fact that investment in shares of subsidiary companies will also yield only dividend income which is exempt from income tax and hence provisions of sec. 14A are applicable?

5.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in deleting the disallowance made u/r.8D r.w.s 14A when assessee had mixed bag of funds and huge investments was made in assets yielding exempt income?

6.Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in not appreciating the CBDT circular No. 5/2014 wherein it is clarified that, disallowance u/s. 14A r.w.r.8D has to be made even if the taxpayer in a particular year not earned any exempt income?” 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 Page 4/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021 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.] 15.07.2021 (2/2)

Index : Yes/No Internet : Yes

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To Page 5/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021 1.The Income Tax Appellate Tribunal, Madras, “C” Bench. 2.The Principal Commissioner of Income Tax, Corporate Circle – 2(2), Room No.512, 5th Floor, Wanarpathy Block, No.121, Mahatma Gandhi Road, Chennai – 600 034. Page 6/7 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos.360 and 361 of 2021 M.DURAISWAMY, J. and R. HEMALATHA, J. mkn T.C.A.Nos.360 and 361 of 2021 15.07.2021 (2/2) Page 7/7 https://www.mhc.tn.gov.in/judis/

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