PRINCIPAL COMMISSIONER OF IN vs. M/S INDIA PISTONS LIMITED

TCA.No.605 of 2019 In the High Court of Judicature at Madras Dated : 19.8.2019 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.605 of 2019 The Principal Commissioner of Income Tax-2, Chennai ...Appellant Vs M/s.India Pistons Ltd., Chennai-11. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 09.5.2017 made in ITA.No.3346/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'A' Bench for the assessment year 2012-13. For Appellant: Mr.Karthik Ranganathan, SSC For Respondent: Mr.R.Vijayaraghavan Judgment was delivered by

T.S.Sivagnanam,J

We have heard Mr.Karthik Ranganathan, learned Senior Standing Counsel appearing for the appellant – Revenue and Mr.R.Vijayaraghavan, learned counsel accepting notice for the respondent – assessee. 2. This appeal, filed by the Revenue under Section 260A of the Income 1/7 http://www.judis.nic.in TCA.No.605 of 2019 Tax Act, 1961 is directed against the order dated 09.5.2017 made in ITA.No. 3346/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai 'A' Bench for the assessment year 2012-13. 3. The Revenue has filed this appeal by raising the following substantial questions of law : “i. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in allowing the balance of the additional depreciation carried forward from the earlier assessment year ? ii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that as per the Proviso to Section 32(1)(iia) of the Act where the asset is acquired and put to use by the assessee for the purpose of business for a period of less than one hundred and eighty days in the previous year, deduction under this Sub-Section shall be restricted to fifty percent of such asset ? iii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating the jurisdictional High Court's decision in the case of M/s.MM Forgings Ltd. [reported in 349 ITR 673], which is in favour of the Department ? iv. Whether, on the facts and in the 2/7 http://www.judis.nic.in TCA.No.605 of 2019 circumstances of the case and in law, the Tribunal was correct in allowing the belated remittance of employees' contribution to PF and ESI since the amounts involved are collected from the employees and not from the employer ? v. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that the amendment to Section 43B applies only to employer's contribution and not to the employees' contribution ? vi. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that Section 2(24)(x) of the Act refers to any sum received by the assessee from his employees as contribution to any PF or superannuation fund or any fund for the welfare of such employees and does not refer to employer's contribution. Therefore, with respect to any sum received by the tax payer from any of his employees, to which, provisions of Section 2(24)(x) of the Act applies, the assessee shall not be entitled to any deduction unless such sum is credited to the employees account in the relevant fund or funds before the due date specified under Section 36(1)(va) of the Act? vii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that the recent 3/7 http://www.judis.nic.in TCA.No.605 of 2019 Board's circular No.22/2015 dated 17.12.2015 has clarified that the provisions of Section 43B of the Act does not apply to the claim of deduction relating to employees' contribution to welfare fund, which are governed by Section 36(1)(va) of the Act? viii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating the decision of the Supreme Court in the case of Alom Extrusions Ltd., which is in favour of the Department ? ix. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that no disallowance on account of interest relating to exempt income under Limb (ii) of Rule 8D in the assessee's case ? x. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right and justified in deleting the disallowance under Section 14A holding that free funds in the form of reserves and surplus held by the assessee is more than the investment made in the assets yielding exempt income when the assessee was maintaining mixed bag of funds and failed to substantiate that such investment in assets yielding exempt income are out of interest free funds ? xi. Whether, on the facts and in the circumstances of the case and in law, the Tribunal 4/7 http://www.judis.nic.in TCA.No.605 of 2019 was correct in not appreciating that Rule 8D is a formula, which has to be strictly applied wherein the interest debited to the P&L account has to be taken for computing the disallowance as per the Second Limb of Rule 8D and there is no scope for bifurcating the interest in any manner ? xii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct and justified in holding that investment made in subsidiary companies are not liable for disallowance under Section 14A when the provisions of the said Section as well as Rule 8D do not provide for any such exception? xiii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in not appreciating the fact that investment in shares of subsidiary companies will also yield only dividend income, which is exempt from income tax and hence, the provisions of Section 14A are applicable? And xiv. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not appreciating that as per CBDT's Circular No. 5/2014 dated 11.2.2014 in paragraph No.6 has clarified that disallowance under Section 14A read with Rule 8D has to be made even when there is no exempt income earned during the relevant previous year?” 5/7 http://www.judis.nic.in TCA.No.605 of 2019 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 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 raised 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. 19.8.2019 Internet: Yes To The Income Tax Appellate Tribunal, Chennai 'A' Bench. RS 6/7 http://www.judis.nic.in TCA.No.605 of 2019 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS TCA.No.605 of 2019 19.8.2019 7/7 http://www.judis.nic.in