PRINCIPAL COMMISSIONER OF vs. M/S.MACRO MARVEL PROJECTS

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TCA/625/2016HC Madras18 September 2020Bench: Hon`ble Dr Justice VINEET KOTHARI5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. Instead, the learned Senior Standing Counsel for the Revenue brought to the court's notice CBDT Circular No.17/2019 dated August 8, 2019. This circular stipulates that appeals shall not be filed or pursued by the Department before the High Court if the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). In the present case, the tax effect was stated to be less than this monetary limit. Consequently, the Revenue's appeal was dismissed as withdrawn. The court explicitly stated that the substantial questions of law remain open for determination in appropriate cases. No costs were awarded.

What were the facts?

The Principal Commissioner of Income Tax (PCIT)-4, Chennai, filed a Tax Case Appeal before the High Court of Judicature at Madras against an order of the Income Tax Appellate Tribunal (ITAT), 'B' Bench, Chennai, dated January 20, 2016. This order was in relation to ITA No.2092/Mds/2015 for the Assessment Year 2005-2006. The appeal was filed by the Revenue against M/s. Macro Marvel Projects Ltd. The core of the dispute involved the disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961, which the ITAT had deleted. The Revenue challenged this deletion, raising substantial questions of law.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether the ITAT was correct in deleting the disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961, considering that the term 'payable' in the context of Section 40(a)(ia) should include amounts paid during the previous year. 2. Whether the ITAT was correct in holding that Section 40(a)(ia) applies only to amounts payable as of March 31st of the previous year, and not to amounts payable at any time during that previous year. 3. Whether the ITAT erred in not appreciating the ratio of the decision in Ryatar Sahakari Sakkare Karkhane Niyamit v. CIT (2016) 67 taxmann.com 283 (Karnataka), which held that Section 40(a)(ia) applies to amounts 'payable' and not just those 'paid'. 4. Whether the ITAT erred in not appreciating the ratio of decisions in CIT vs. M/s. Crescent Export Syndicate (216 Taxman 258 (Cal)) and CIT vs. Sekander Khan N Tunvar (33 Taxmann.com 133 (Gujarat)), as discussed in ACIT, Cir.4(2) Mumbai vs. Rishti Stock & Shares (P) Ltd (ITA No.112/Mum/2012), and whether the ITAT's order was perverse in light of Sudarshan Silk Sarees vs. CIT (306 ITR 205 (SC)). The Revenue contended that the ITAT was wrong in deleting the disallowance under Section 40(a)(ia) and that the interpretation of 'payable' was incorrect. The Revenue relied on the cited High Court and ITAT decisions. The judgment does not record specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 260A

AI-generated summary — verify with the full judgment below

Judgt. dt. 18.9.2020 in T.C.A.625/2016 PCIT-4 v. Macro Marvel Projects Ltd. 1/5 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.9.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY Tax Case (Appeal) No.625 of 2016 Principal Commissioner of Income Tax, No.121, Mahatma Gandhi Road, Chennai. Appellant Vs. M/s.Macro Marvel Projects Ltd., 813, Glenden Place, Poonamallee High Road, Kilpauk, Chennai 600 010. PAN: AAC CM 8816 D Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'B' Bench, Chennai, dated 20.1.2016 made in ITA No.2092/Mds/2015. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For Respondent : Ms.Sumitha for Mr.R.Sivaraman J U D G M E N T (Delivered by DR.VINEET KOTHARI,J) This Tax Case Appeal has been filed by the Revenue, calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, dated 20.1.2016 made in ITA No.2092/Mds/2015, for the Assessment Year 2005-2006, by raising http://www.judis.nic.in Judgt. dt. 18.9.2020 in T.C.A.625/2016 PCIT-4 v. Macro Marvel Projects Ltd. 2/5 the following substantial questions of law: "(i) Whether on the facts and circumstances of the case, the ITAT was right in law in deleting the disallowance made u/s.40(a)(ia) in the year under consideration as the statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act, the term ‘payable’ would include amounts which are paid during the previous year? (ii) Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the provision of section u/s.40(a)(ia) of the Act cover only the amounts which are payable as on 31st March of a previous year relevant to the assessment year under consideration and not amounts which are payable at any time during the relevant previous year? (iii) Whether on the facts and circumstances of the case and in law, the ITAT erred in not appreciating and ignoring the ratio of decision in the case of Ryatar Sahakari Sakkare Karkhane Niyamit v. CIT (2016) 67 taxmann.com 283 (Karnataka) wherein it is held that section 40(a)(ia) cannot be interpreted to mean that it http://www.judis.nic.in Judgt. dt. 18.9.2020 in T.C.A.625/2016 PCIT-4 v. Macro Marvel Projects Ltd. 3/5 applies only to amounts “payable” and not to those which have been “paid”? (iv) Whether on the facts and circumstances of the case and in law, the ITAT was correct in not appreciating and ignoring the ratio of decision in the case of CIT vs. M/s.Crescent Export Syndicate 216 Taxman 258(Cal) and CIT vs. Sekander Khan N Tunvar 33 Taxmann.com 133 (Gujarat) which constitutes ratio decidendi on the issue as discussed in order dated 02.08.2013 of Mumbai ITAT in the case of ACIT, Cir.4(2) Mumbai vs. Rishti Stock & Shares (P) Ltd - ITA No.112/Mum/2012 and further whether order of ITAT had turned perverse in view of ratio of decision in the case of Sudarshan Silk Sarees vs. CIT 306 ITR 205 (SC)?” 2. When the matter is taken up for hearing, learned Senior Standing Counsel brought to our notice the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.17/2019 dated 8th August 2019, wherein, it is stipulated that appeals 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). http://www.judis.nic.in Judgt. dt. 18.9.2020 in T.C.A.625/2016 PCIT-4 v. Macro Marvel Projects Ltd. 4/5 3. In the instant case, the tax effect is said to be less than the monetary limit imposed and therefore, the Appeal filed by the Revenue is dismissed, as withdrawn, keeping open the substantial questions of law for determination in appropriate cases. No costs. (V.K.,J.) (K.R.,J.) 18.9.2020 Index : Yes/No Internet : Yes/No ssk. To 1. Income Tax Appellate Tribunal, 'B' Bench, Chennai. 2. Principal Commissioner of Income Tax, No.121, Mahatma Gandhi Road, Chennai. 3. Dy. Commissioner of Income Tax, Company Circle IV(1), Chennai. 4. M/s.Macro Marvel Projects Ltd., 813, Glenden Place, Poonamallee High Road, Kilpauk, Chennai 600 010. http://www.judis.nic.in Judgt. dt. 18.9.2020 in T.C.A.625/2016 PCIT-4 v. Macro Marvel Projects Ltd. 5/5 DR.VINEET KOTHARI, J. and KRISHNAN RAMASAMY, J. ssk. T.C.(A) No.625 of 2016 18.9.2020. http://www.judis.nic.in

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