THE COMMISSIONER OF INCOME vs. M/S ORCHID PHARMA LTD

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TCA/547/2018HC Madras28 August 2019Bench: 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 on the grounds of low tax effect, as per CBDT Circular No.17/2019. The Court noted that the tax effect in this case was below the revised monetary threshold for pursuing appeals before the High Court. Consequently, the substantial questions of law framed at the time of admission were left open and not decided on merits. The Revenue was granted liberty to seek restoration of the appeal if the tax effect was found to be above the threshold limit. No costs were imposed. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, Commissioner of Income Tax, Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 30.11.2016 passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'D' Bench. The appeal pertained to assessment year 2011-12 and concerned M/s. Orchid Pharma Limited. The High Court admitted the appeal on substantial questions of law. However, during the hearing, the Revenue's counsel submitted that the appeal was not being pursued due to a 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 tax effect in this case was stated to be below this threshold.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in holding that a literal interpretation of Section 92A(i) of the Income Tax Act leads to absurd results because it does not specify quantitative percentages, unlike other clauses (a) to (h) and (l) of the same section. 2. Whether the Tribunal's reasoning and finding were correct in rejecting the order passed by the Settlement Commission for an earlier assessment year in the same assessee's case, by holding that the intentional omission of quantifying any percentage in clause (i) does not affect the purpose of the provision. The Revenue argued that the Tribunal's interpretation of Section 92A(i) was flawed, leading to absurd results due to the absence of quantitative percentages. The Revenue also questioned the Tribunal's rejection of the Settlement Commission's order on similar facts. The judgment does not record specific arguments from the assessee on these issues, but the Tribunal's decision, as challenged by the Revenue, implies the assessee likely supported the Tribunal's findings.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92A

AI-generated summary — verify with the full judgment below

TCA.No.547 of 2018 In the High Court of Judicature at Madras Dated : 28.08.2019 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.547 of 2018 The Commissioner of Income Tax, Chennai. ...Appellant Vs M/s.Orchid Pharma Limited (earlier known as Orchid Chemicals and Pharmaceuticals Ltd) Orchid Towers, 313, Valluvarkottam High Road, Chennai - 600 034. PAN: AAACO0402B ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 30.11.2016 made in ITA.No.771/MDS/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'D' Bench for the assessment year 2011-12. For Appellant : Mr.T.Ravikumar, SSC and Ms.R.Hemalatha, SSC For Respondent : Mr.R.Sivaraman JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J.) We have heard Mr.T.Ravikumar, learned Senior Standing Counsel, and Ms.R.Hemalatha, learned Senior Standing Counsel appearing for the 1/4 http://www.judis.nic.in TCA.No.547 of 2018 appellant/revenue and Mr.R.Sivaraman, learned counsel appearing for the respondent/assessee. 2.This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 is directed against the order dated 30.11.2016 made in ITA.No.771/MDS/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'D' Bench for the assessment year 2011-12. 3.The appeal was admitted on 06.09.2018 on the following substantial questions of law : “1.Whether the Tribunal was right in holding that the provisions of Section 92A(i) if interpreted literally leads to absurd results on the ground that it did not specify any quantitative percentages as specified in clause (a) to (h) and (l) of the I.T. Act? 2.Whether the reasoning and finding of the Tribunal is correct by rejecting the order passed by the settlement commission on the same set of facts for the earlier assessment year in the case of same assessee holding that non quantification of any percentage in clause (i) does not affect the purpose of the provisions and it is intentional?" 4.The learned Senior Standing Counsel for the appellant 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 2/4 http://www.judis.nic.in TCA.No.547 of 2018 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. 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 make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (T.S.S.J.) (V.B.S.J.) 28.08.2019 cse Speaking (or) Non Speaking Order Index : Yes (or) No To The Income Tax Appellate Tribunal, Chennai 'D' Bench. 3/4 http://www.judis.nic.in TCA.No.547 of 2018 T.S.SIVAGNANAM,J. AND V.BHAVANI SUBBAROYAN,J. cse TCA.No.547 of 2018 28.08.2019 4/4 http://www.judis.nic.in

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