COMMISSIONER OF INCOME TAX vs. M/S. RMK VISWANATHA PILLAI A

TCA/445/2017HC Madras18 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court, in light of the CBDT Circular No. 17/2019, which sets a monetary threshold for filing and pursuing appeals before the High Court (Rs. 1,00,00,000/-), noted that the tax effect in the present appeal was below this limit. Consequently, the Revenue's counsel submitted that the appeal should be dismissed as withdrawn. The Court accepted this submission and dismissed the appeal as withdrawn, stating that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded. The specific findings of the Tribunal on the nature of the hospitality expenses as accrued liability and the reasoning for deleting the addition were not re-examined by the High Court due to the withdrawal of the appeal.

What were the facts?

The Revenue, Commissioner of Income Tax, Central Circle 1, Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against the order dated 08.02.2017 passed by the Income Tax Appellate Tribunal, Chennai. The appeal pertained to assessment year 2011-12 and challenged the Tribunal's decision regarding hospitality expenses treated as accrued liability by the assessee, M/s. RMK Viswanatha Pillai & Sons. The High Court admitted the appeal on substantial questions of law. Subsequently, during the hearing, the Revenue brought to the court's notice CBDT Circular No. 17/2019, which stipulates 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 was to decide the following substantial questions of law: 1. Whether the Tribunal was right in treating hospitality expenses (Bonus redemption expenses) as accrued liability, even though the incurring of liability fully depends upon the uncertain future visit of the customers, and there is no scientific method to estimate the future visit and purchase of customers? 2. Whether the Tribunal erred in law in deleting the addition of hospitality expenses (Bonus redemption expenses) rejecting the contention of the Revenue that the expenditure shown was only a contingent liability? The Revenue argued that the hospitality expenses were contingent liabilities, dependent on uncertain future events, and lacked a scientific basis for estimation. The assessee's arguments are not explicitly recorded in the provided text, but their position was that these expenses constituted an accrued liability.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.445 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.08.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.445 of 2017 The Commissioner of Income Tax, Central Circle 1, Chennai. ... Appellant

Versus M/s. RMK Viswanatha Pillai & Sons No.176F Trivandrum Road, Tirunelveli 627 003. PAN: AABFR 1307 C ... Respondent Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order dated 08.02.2017 passed by the Income Tax Appellate Tribunal, “A” Bench, Chennai, in I.T.A.No.1451/Mds/2016. For Appellant : Mr.M.Swaminathan, Senior Standing Counsel Mrs.V.Pushpa, Standing Counsel For Respondent : Mr.R.Venkatanarayanan for M/s. Subbaraya Aiyar Page 1/4 https://www.mhc.tn.gov.in/judis T.C.A.No.445 of 2017

JUDGMENT (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 08.02.2017 passed by the Income Tax Appellate Tribunal, “A” Bench, Chennai, in I.T.A.No.1451/Mds/2016, relating to the assessment year 2011-12.

2.By order dated 09.08.2017, this court admitted the aforesaid tax case appeal on the following substantial questions of law: “(i) Whether the Tribunal was right in treating hospitality expenses (Bonus redemption expenses) as accrued liability, even though the incurring of liability fully depends upon the uncertain future visit of the customers, and there is no scientific method to estimate the future visit and purchase of customers? (ii) Whether the Tribunal erred in law in deleting the addition of hospitality expenses (Bonus redemption expenses) rejecting the contention of the Revenue that the expenditure shown was only a contingent liability? " 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 Page 2/4 https://www.mhc.tn.gov.in/judis T.C.A.No.445 of 2017 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.) 18.08.2022

Internet : Yes

Index : Yes / No av Page 3/4 https://www.mhc.tn.gov.in/judis T.C.A.No.445 of 2017 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. av To 1. The Income Tax Appellate Tribunal, “A” Bench, Chennai. 2. The Commissioner of Income Tax, Central Circle 1, Chennai.

The Deputy Commissioner of Income-tax, Company Circle- (1) (1), Chennai. 4. The Commissioner of Income Tax (Appeals), Chennai. T.C.A.No.445 of 2017 18.08.2022 Page 4/4 https://www.mhc.tn.gov.in/judis

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