PRINCIPAL COMMISSIONER OF vs. MOHAMAD IDRIS BROS PVT LTD

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TCA/393/2017HC Madras20 January 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the Revenue on the grounds of low tax effect, as per CBDT Circular No.17/2019. The Court noted that the Revenue's counsel submitted that the appeals were not being pursued because the tax effect was less than the increased monetary limit of Rs.1 crore for appeals to the High Court. Consequently, the substantial questions of law framed were 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. The operative direction was the dismissal of the appeals. No decision was made on the merits of the substantial questions of law.

What were the facts?

The Revenue, identified as the Principal Commissioner of Income Tax 4, filed two appeals (T.C.A.Nos. 393 & 394 of 2017) under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal, Chennai, dated 07.10.2016. These appeals pertained to Assessment Year 2011-12 and challenged the Tribunal's deletion of additions made under Section 40A(3A). The assessee is M/s. Mohamad Idris Bros. (P) Ltd. The appeals were filed against the Tribunal's order in ITA.No.908/Mds/2016 and C.O.No.69/Mds/2016. The High Court heard arguments from both the Revenue and the assessee.

What were the issues?

The High Court was asked to decide three substantial questions of law: 1. Whether the Appellate Tribunal was correct in deleting the addition made under Section 40A(3A) by relying on Rule 6DD(d), which pertains to book adjustments and cash payments outside the purview of Rule 6DD(d). 2. Whether the Appellate Tribunal was correct in deleting the addition made under Section 40A(3A) by relying on Rule 6DD(k), which pertains to payments made directly to weavers of a sister concern, and is outside the purview of Rule 6DD(d). 3. Whether the Appellate Tribunal was correct in allowing the Cross Objection filed by the assessee. 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 the High Court to Rs.1 crore. The Revenue stated that the tax effect in these cases was below this threshold. The judgment does not record specific arguments from the assessee regarding the merits of the case, but their counsel was present.

Which sections of the Income-tax Act were involved?

Section 260A,Section 40A(3A)

AI-generated summary — verify with the full judgment below

T.C.A.Nos. 393 & 394 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 20.01.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI T.C.A.Nos. 393 & 394 of 2017 Principal Commissioner of Income Tax 4, No.121, Mahatma Gandhi Road, Chennai - 600 034. ... Appellant in both TCAs v. M/s. Mohamad Idris Bros. (P) Ltd., No.5 Armenian Street, Mannadi, Chennai - 600 001. PAN : AAA CM 5231 G ... Respondent in both TCAs

T.C.A. No. 393/2017 : Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, “B” Bench, dated 07.10.2016 in ITA.No.908/Mds/2016 for the Assessment Year 2011-12. Page 1/5 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos. 393 & 394 of 2017 T.C.A. No. 394/2017 : Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, “B” Bench, dated 07.10.2016 in C.O.No.69/Mds/2016 for the Assessment Year 2011-12. For Appellant : Mr.S. Rajesh for Mr.Karthik Ranganathan Standing Counsel For Respondent : Mr. G.Baskar COMMON JUDGMENT (Judgment was delivered by M.DURAISWAMY, J.) We have heard Mr.S. Rajesh, learned Standing Counsel for the appellant/Revenue and Mr. G.Baskar, learned counsel for the respondent. 2. These appeals, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) are directed against the order dated 07.10.2016 made in ITA.No.908/Mds/2016 & C.O.No.69/Mds/ 2016 on the file of the Income Tax Appellate Tribunal, Chennai, ''A'' Bench (for brevity, the Tribunal) for the Assessment Year 2011-12. Page 2/5 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos. 393 & 394 of 2017

3.

In the above appeals, the assessee has raised the following Substantial Questions of Law for consideration: “(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the addition made under section 40A[3A], by relying on Rule 6DD(d) which deals with book adjustments and cash payment totally outside the purview of Rule 6DD(d) of the Income Tax Rules?

(ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the addition made under section 40A[3A], by relying on Rule 6DD(k) which deals with payments directly made to the weavers of the sister concern which is totally outside the purview of Rule 6DD(d) of the Income Tax Rules?

(iii) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in allowing the Cross Objection filed by the assessee?” 4. The learned Standing Counsel appearing 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 Page 3/5 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos. 393 & 394 of 2017 High Court has been increased to Rs.1 crore. It is further submitted that the tax effect in respective cases is less than the threshold limit. 5. In the light of the said submissions, the above Tax Case Appeals are dismissed on account of the Low Tax Effect. The substantial questions of law framed is left open. In the event the tax effect in the respective 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 appeals to be heard and decided on merits. No costs. [M.D., J.] [T.V.T.S., J.] 20.01.2021

Index : Yes/No Internet : Yes Rj To The Income Tax Appellate Tribunal, Chennai, ''B'' Bench Page 4/5 https://www.mhc.tn.gov.in/judis/ T.C.A.Nos. 393 & 394 of 2017 M. DURAISWAMY, J. and T.V. THAMILSELVI, J. Rj T.C.A.Nos. 393 & 394 of 2017 20.01.2021 Page 5/5 https://www.mhc.tn.gov.in/judis/

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