PRINCIPAL COMMISSIONER OF INCOME TAX vs. CRI PUMPS PVT LTD

PDF · subscribers
TCA/435/2023HC Madras15 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. Instead, the Revenue submitted that the matter is covered under the 'Low Tax Effect' as per Circular No. 9/2024 dated 17.09.2024. Consequently, the appeal was dismissed on this procedural ground. The Court explicitly stated that the substantial questions of law arising in this appeal are kept open to be decided at a later point in time. No order as to costs was made. Therefore, the Tribunal's order allowing the royalty payment stands, but the legal issues remain undecided by the High Court.

What were the facts?

The appeal is filed by the Principal Commissioner of Income Tax, Coimbatore (Revenue) against the order of the Income Tax Appellate Tribunal (ITAT), Chennai, dated 18.11.2022, passed in I.T.A.No.430/CHNY/2018. The assessee is CRI Pumps Pvt. Ltd. The appeal concerns assessment year(s) not explicitly stated but relates to a royalty payment issue. The core of the dispute involves the transfer of the trademark "CRI" from CRI Industries (P) Ltd to CRI Amalgamations (P) Ltd for a nominal amount of Rs. 1000/- through a family arrangement, and subsequent royalty payments made by the assessee to the holding company for using this trademark. The Revenue challenges the ITAT's allowance of this royalty payment.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was justified in allowing the royalty payment when the transfer of the trademark "CRI" was not permitted during merger proceedings before the High Court and was subsequently transferred for a meager amount of Rs. 1000/- through a family arrangement? 2. Whether the ITAT was justified in allowing the royalty payment when the value of the trademark "CRI" as fixed by the transferor company's directors was low, and the royalty paid to the holding company was excessive and unreasonable compared to its fair market value? 3. Whether the ITAT was justified in not considering Section 40A(2)(a) and the violation of Section 40A(2)(b) of the Income Tax Act, irrespective of the recipient offering the income to tax? The Revenue's contentions, as presented in the appeal, revolve around the questionable transfer of the trademark and the reasonableness of the royalty payments. The assessee's arguments are not recorded in the provided judgment excerpt. The Revenue relies on the facts surrounding the trademark transfer and the valuation of royalty payments. The judgment does not record any specific authorities, circulars, or precedents relied upon by either side in the context of the ITAT's decision being challenged.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40A(2)(a),Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

T.C.A.No.435 of 2023 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.No.435 of 2023 Principal Commissioner of Income Tax Corporate Circle – 2, 63-A Race Course Road Coimbatore. .. Appellant Vs. CRI Pumps Pvt. Ltd. 7/46-I, Keerthanam Road Saravanampatti, Coimbatore – 641 035 PAN: AAACC 9497N .. Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal “A” Bench,

Chennai

dated

18.11.2022

passed

in I.T.A.No.430/CHNY/2018. For the Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For the Respondent : Mr.A.S.Sivaraman JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeal was admitted on 09.08.2023 by this Court on the following substantial questions of law:- Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.435 of 2023 "1. Whether on the facts and circumstances of the case, the Ld. Income Tax Appellate Tribunal was justified in allowing the royalty payment when the transfer of trade mark “CRI” was not allowed during the merger proceedings before the Hon'ble High Court and which was subsequently transferred from CRI Industries (P) Ltd to CRI Amalgamations (P) Ltd through a family arrangement for a meager amount of Rs.1000/-? 2. Whether on the facts and circumstances of the case and in law, the Ld. Income Tax Appellate Tribunal was justified in allowing the royalty payment, when the value of the CRI Trade Mark as fixed by the directors of the transferor company was low and the payment made to the holding company as royalty for using the trade mark was excessive and unreasonable having regard to the fair market value of the trade mark itself? 3. Whether on the facts and circumstances of the case and in law, the Ld. Income Tax Appellate Tribunal is justified in not considering the Section 40A(2)(a) and that there is a violation of Section 40A(2)(b) of the Income Tax Act irrespective of the fact that the recipient has offered the same to tax?" Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.435 of 2023 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that this matter is covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. 3. Hence, this appeal stands dismissed, as covered under the low tax effect and the substantial questions of law arising in this appeal are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 15.10.2024 Neutral Citation:Yes/No drm Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.435 of 2023 R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.No.435 of 2023 15.10.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →