PRINCIPAL COMMISIONER OF vs. M/S NARMADA INFRASTRUCTURE

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TCA/441/2017HC Madras13 June 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court, in light of the submission by the Revenue's counsel regarding CBDT Circular No. 17/2019, decided to dismiss the appeal as withdrawn. The Court noted that the tax effect in this appeal was less than the monetary limit stipulated in the circular. Consequently, the substantial questions of law were not adjudicated on merits. The Court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded. The operative direction was to dismiss the appeal as withdrawn.

What were the facts?

This appeal was filed by the Principal Commissioner of Income Tax 4 (Revenue) against an order dated 25.11.2016 passed by the Income Tax Appellate Tribunal, Chennai, 'C' Bench, for the assessment year 2004-05. The appeal was admitted by the High Court on two substantial questions of law concerning the treatment of foreign exchange loss on a loan obtained for purchasing a capital asset. The assessee, M/s. Narmada Infrastructure Construction Enterprises Ltd, did not appear before the High Court. The Revenue, through its counsel, brought to the court's notice CBDT Circular No. 17/2019, which mandates that appeals shall not be filed or pursued if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue submitted that the tax effect in this appeal was below this threshold.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether foreign exchange loss on a loan obtained for purchasing a capital asset would be treated as a capital loss, even if the acquired capital asset was not imported. 2. Whether Section 43A of the Income Tax Act, 1961, which deals with the adjustment of the actual cost of an asset due to fluctuations in foreign exchange, would apply when an asset is acquired domestically using finance from a foreign bank in foreign exchange. The Revenue argued that the appeal should be dismissed as withdrawn in light of CBDT Circular No. 17/2019, as the tax effect was below the prescribed monetary limit of Rs. 1,00,00,000/-. The Revenue relied on this circular to justify not pursuing the appeal. The judgment records no specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 43A,Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.441 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.06.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.441 of 2017 Principal Commissioner of Income Tax 4, No.121, Mahatma Gandhi Road, Chennai 600 034. ... Appellant Versus M/s.Narmada Infrastructure Construction Enterprises Ltd, Mount Poonammallee Road, Manapakkam, TCTC Building, Chennai-600 089. PAN: AAA CN 3579 L ... Respondent Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai, “C” Bench, dated 25.11.2016 in I.TA.No.1559/Mds/2016. For Appellant : Mr.Karthik Ranganathan Standing Counsel For Respondent : No appearance

Page 1/4 https://www.mhc.tn.gov.in/judis T.C.A.No.441 of 2017 J U D G M E N T (Judgment of the Court was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant / Revenue, challenging the order dated 25.11.2016 passed by the Income Tax Appellate Tribunal, Bench 'C', Chennai, in I.T.A.No.1559/Mds/2016, relating to the assessment year 2004-05. 2. By order dated 09.08.2017, this court admitted the aforesaid tax case appeal on the following substantial questions of law: “(i) Whether Foreign Exchange loss in respect of loan obtained for purchase of capital asset would be capital loss, even though the capital asset acquired through such loan was not imported into the country from abroad? (ii) Whether Section 43A of the Income Tax Act, 1961, relating to deduction of foreign exchange loss from the actual cost of the asset, would be attracted in a case where the asset is acquired within the country but by obtaining finance from a foreign bank in foreign exchange?” Page 2/4 https://www.mhc.tn.gov.in/judis T.C.A.No.441 of 2017 3.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 effect in this appeal is less than the threshold limit. 4.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 question of law for determination in an appropriate case. No costs. (R.M.D., J.) (M.S.Q., J.) 13.06.2022

Internet : Yes

Index : Yes / No psa/av Page 3/4 https://www.mhc.tn.gov.in/judis T.C.A.No.441 of 2017 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. psa/av To 1. The Income Tax Appellate Tribunal, “C” Bench, Chennai, 2. Principal Commissioner of Income Tax 4, No.121, Mahatma Gandhi Road, Chennai 600 034. 3. The Assistant Commissioner of Income Tax Corporate Circle 4(2), Chennai. 4. The Commissioner of Income Tax (Appeals) - 8, Chennai. T.C.A.No.441 of 2017 13.06.2022 Page 4/4 https://www.mhc.tn.gov.in/judis

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