THE PRINCIPAL COMMISSIONER O vs. M/S.L AND T SOUTH CITY PROJE

PDF · subscribers
TCA/422/2020HC Madras01 December 2020Bench: Hon`ble Mr Justice T. S. SIVAGNANAM4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the Revenue's submission that the appeal was not being pursued due to a low tax effect, in terms of CBDT Circular No. 17/2019. This circular increased the monetary limit for pursuing appeals before the High Court to Rs. 1 Crore, and the tax effect in this case was below that threshold. Consequently, the substantial questions of law framed by the Revenue were left open. The Court granted liberty to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were imposed.

What were the facts?

The appeal was filed by the Principal Commissioner of Income Tax, Corporate Circle – II(4), Chennai (Revenue) against M/s. L & T South City Projects Ltd (assessee) for the Assessment Year 2009-10. The appeal challenged an order of the Income Tax Appellate Tribunal (ITAT), Chennai, dated 15.03.2017, which had allowed the assessee to claim an expenditure of Rs. 1,47,82,209/- as revenue expenditure. The Revenue contended that the assessee had not set up its business activities or commenced commercial operations. The ITAT's decision was based on its finding that mere commencement of set-up activities constituted business set-up and that the expenses were revenue in nature, despite the assessee's admission of not commencing commercial operations.

What were the issues?

1. Whether, on the facts and in law, the ITAT was correct in allowing an expenditure of Rs. 1,47,82,209/- as revenue expenditure when the assessee had not set up its business activities and commenced commercial operations, as per Section 3 of the Income Tax Act, 1961. 2. Whether, on the facts and in law, the ITAT was correct in holding that mere commencement of set-up activities amounts to the set-up of business within the meaning of Section 3 of the Income Tax Act, 1961. 3. Whether, on the facts and in law, the ITAT was correct in holding that the expenses were revenue in nature, given the assessee's admission in Schedule I of its accounts that commercial operations had not commenced. Assessee's Arguments: The judgment does not record any specific arguments made by the assessee. Revenue's Arguments: The Revenue argued that the ITAT erred in allowing the expenditure as revenue expenditure because the assessee had not commenced business operations. The Revenue also questioned the ITAT's interpretation of 'set up of business' under Section 3 of the Act and its finding on the nature of expenses, particularly in light of the assessee's own admission.

Which sections of the Income-tax Act were involved?

Section 3,Section 260-A

AI-generated summary — verify with the full judgment below

T.C.A.No.422 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 01.12.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE PUSHPA SATHYANARAYANA T.C.A.No.422 of 2020 The Principal Commissioner of Income Tax, Corporate Circle – II(4), Chennai – 34.

.. Appellant Versus M/s.L & T South City Projects Ltd, Mount Poonamallee Road, Manapakkam, P.B.No.979, Chennai – 89, PAN:AACCD3198H

.. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai made in I.T.A.No.808/Mds/2016 dated 15.03.2017 relating to the Assessment Year 2009-10. For Appellant : Mr.S.Rajesh For Mr.R.Karthik Ranganathan 1/4 http://www.judis.nic.in T.C.A.No.422 of 2020 JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

We have heard Mr.S.Rajesh for Mr.R.Karthik Ranganathan, learned counsel appearing for the appellant / Revenue. 2. This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 is directed against the order dated 15.03.2017 made in I.T.A.No.808/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'C' Bench for the Assessment Year 2009-10. 3. The Revenue has raised the following Substantial Questions of Law for consideration: “1.Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in allowing the expenditure incurred of Rs.1,47,82,209/- as revenue expenditure when the assessee has not set up the business activities and commenced its commercial operations. 2. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in 2/4 http://www.judis.nic.in T.C.A.No.422 of 2020 holding that mere commencement of set up activities would amount to set up of business within the meaning of Section 3 of the IT Act, 1961. 3. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in holding that the expenses is of revenue in nature when the assessee company itself has admitted in the Schedule I – Schedule Forming Part of Accounts that the assessee has not commenced its commercial operations?” 4. The learned counsel for the appellant / Revenue 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 08.8.2019 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 this case is less than the threshold limit. 3/4 http://www.judis.nic.in T.C.A.No.422 of 2020 T.S.SIVAGNANAM, J. AND PUSHPA SATHYANARAYANA, J. Kak 5. In the light of the said submissions, the above tax case appeal is dismissed on account of the low tax effect. The substantial questions of law framed are left open. In the event the tax effect is above the threshold limit fixed in the said circular, liberty is granted to the Revenue to file an application before this Court to restore this appeal to be heard and decided on merits. No costs. (T.S.S.,J) (P.S.N.,J) 01.12.2020 Kak Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To The Income Tax Appellate Tribunal, 'C' Bench, Chennai. T.C.A.No.422 of 2020 4/4 http://www.judis.nic.in

More judgments on Section 3

All 288 judgments and leading authorities on Section 3 →

Recent GST High Court judgments

Search GST case law →