COMMISSIONER OF INCOME TAX vs. M/S. UCAL FUEL SYSTEMS LTD

TCA/671/2017HC Madras23 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on their merits. Instead, the Court took note of the CBDT Circular No.17/2019, which sets a monetary limit of Rs. 1,00,00,000/- for filing or pursuing appeals by the Department before the High Court. The learned counsel for the appellant/Revenue submitted that the tax effect in the present appeal was less than this threshold limit. Consequently, the High Court dismissed the appeal as withdrawn, stating that the substantial questions of law remain open for determination in an appropriate case. No costs were awarded. The Tribunal's earlier order deleting the reallocation of R&D expenditure was not disturbed on merits by the High Court.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, Company Circle - 3(2), Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 21.10.2016 passed by the Income Tax Appellate Tribunal (ITAT), “D” Bench, Chennai. This order pertained to the assessment year 2006-07 and concerned M/s. Ucal Fuel Systems Limited. The High Court admitted the appeal on two substantial questions of law. Subsequently, 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 particular appeal was below this threshold.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was right in deleting the reallocation of R & D expenditure between the 80IB eligible unit and other non-eligible units? 2. Whether the Tribunal was right in holding that there cannot be a reallocation of R & D expenditure despite the benefit of the R & D activity being utilized by all the units of the assessee company? The Revenue contended that R&D expenditure should be reallocated as its benefit was utilized by all units, including non-eligible ones. The assessee's arguments are not recorded in the provided judgment. The Tribunal's decision on these issues was challenged by the Revenue.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 23.08.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.671 of 2017 The Commissioner of Income Tax, Company Circle - 3 (2), Chennai. ... Appellant

Versus M/s. Ucal Fuel Systems Limited Raheja towers 7th Floor, Unit 705 No.177, Anna Salai, Chennai 600 002. PAN:AAACU 0541 K ... Respondent Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order dated 21.10.2016 passed by the Income Tax Appellate Tribunal, “D” Bench, Chennai, in I.T.A.No.724/Mds/2015. For Appellant : Mr.M.Swaminathan, Senior Standing Counsel Mrs.V.Pushpa, Standing Counsel For Respondent : Mr.R.Sivaraman Page 1/4 https://www.mhc.tn.gov.in/judis 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 21.10.2016 passed by the Income Tax Appellate Tribunal, “D” Bench, Chennai, in I.T.A.No.724/Mds/2015, relating to the assessment year 2006-07.

2.By order dated 14.12.2017, this court admitted the aforesaid tax case appeal on the following substantial questions of law: “(i) Whether the Tribunal was right in deleting the reallocation of R & D expenditure between the 80IB eligible unit and other non eligible unit? And (ii) Whether the Tribunal was right in holding that there cannot be reallocation of the R & D expenditure despite the benefit of the R & D activity was utilized by all the units of the assessee company? " 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 No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, Page 2/4 https://www.mhc.tn.gov.in/judis 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 questions of law for determination in an appropriate case. No costs. (R.M.D., J.) (M.S.Q., J.) 23.08.2022

Internet : Yes

Index : Yes / No av Page 3/4 https://www.mhc.tn.gov.in/judis R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. av To 1. The Income Tax Appellate Tribunal, “D” Bench, Chennai. 2. The Commissioner of Income Tax, Company Circle - 3(2) Chennai. 3. The Assistant Commissioner of Income-tax, Company Circle III (3), Chennai. 4. The Commissioner of Income Tax (Appeals)-11, Chennai. T.C.A.No.671 of 2017 23.08.2022 Page 4/4 https://www.mhc.tn.gov.in/judis

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