COMMISSIONER OF INCOME vs. EASTMAN EXPORTS GLOBAL CLOTHING PRIVATE LIMITED

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TCA/67/2022HC Madras15 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on a Circular dated 17.09.2024 (Circular No.9/2024) concerning the 'Low Tax Effect'. The Court stated that the appeal stands dismissed as covered under the low tax effect. Crucially, the substantial questions of law arising in this appeal were expressly kept open to be decided at a later point in time. Therefore, the High Court did not render a decision on the merits of the substantial questions of law. No order as to costs was made.

What were the facts?

The Revenue, Commissioner of Income Tax, Circle-1, Tirupur, has filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT), Madras "D" Bench, Chennai, dated 09.08.2021, passed in I.T.A.No.2227/CHNY/2018. The assessee is M/s. Eastman Exports Global Clothing Pvt. Ltd. The appeal concerns the assessment year(s) not explicitly stated but relates to the ITAT's decision on the nature of expenditure incurred by the assessee on the construction of a building on leasehold land. The Revenue challenges the ITAT's finding that this expenditure was revenue in nature.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Income Tax Appellate Tribunal was justified in holding that expenditure on construction of a building on leasehold land is revenue expenditure, whereas the said expenditure is of capital in nature? 2. Whether the Income Tax Appellate Tribunal was right in ignoring the fact that the enduring benefit, a settled concept, had flown to the assessee and hence, the expense was capital in nature? 3. Whether the Income Tax Appellate Tribunal was right in holding that the construction of a building as revenue expense, when even renovation or extension to such building has been defined as a capital expense in Explanation 1 to Section 32(1) of the Income Tax Act? The Revenue contended that the expenditure was capital in nature due to the enduring benefit derived by the assessee and by referencing Explanation 1 to Section 32(1) of the Income Tax Act regarding renovation/extension being capital. The judgment does not record any specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 32(1)

AI-generated summary — verify with the full judgment below

T.C.A.No.67 of 2022 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.No.67 of 2022 The Commissioner of Income Tax Circle -1, Tirupur. .. Appellant Vs. M/s.Eastman Exports Global Clothing Pvt. Ltd. No.10, 12, 2nd Street Kumar Nagar South, Tirupur 641 603 PAN: AACCC 0952 E .. Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal, Madras “D”

Bench,

Chennai

dated

09.08.2021

passed

in I.T.A.No.2227/CHNY/2018. For the Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For the Respondent : Ms.A.Sharren for Mr.R.Sivaraman JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeal was admitted on 21.02.2022 by this Court on the following substantial questions of law:- Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.67 of 2022 "1. Whether the Income Tax Appellate Tribunal was justified in holding that expenditure on construction of building on leasehold land is revenue expenditure, whereas the said expenditure is of capital in nature? 2. Whether the Income Tax Appellate Tribunal was right in ignoring the fact that the enduring benefit, a settled concept had flown to the assessee and hence, the expense was capital in nature? 3. Whether the Income Tax Appellate Tribunal was right in holding that the construction of a building as revenue expense, when even renovation or extension to such building has been defined as a capital expense in Explanation 1 to Section 32(1) of the Income Tax Act?" 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that this matter is covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.67 of 2022 3. Hence, this appeal stands dismissed, as covered under the low tax effect and the substantial questions of law arising in this appeal are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 15.10.2024 Neutral Citation:Yes/No drm Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.67 of 2022 R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.No.67 of 2022 15.10.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

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