The Commissioner vs. M/s. Ucal Fuel

TCA/671/2021HC Madras23 August 2022Bench: HONOURABLE MR. JUSTICE R. MAHADEVAN4 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court of Judicature at Madras, considering the submission by the Revenue regarding CBDT Circular No.17/2019, which mandates that appeals should not be filed or pursued if the tax effect does not exceed Rs. 1,00,00,000/-, found that the tax effect in this appeal was below the stipulated threshold. Consequently, the Court dismissed the appeal as withdrawn. The substantial questions of law were kept open for determination in an appropriate case. No costs were awarded. The specific findings of the Tribunal on the reallocation of R&D expenditure, which were the subject of the appeal, were not adjudicated upon by the High Court due to the procedural reason of the tax effect being below the monetary limit.

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, “D” Bench, Chennai. This order pertained to the assessment year 2006-07 and concerned M/s. Ucal Fuel Systems Limited. The High Court of Judicature at Madras admitted the appeal on two substantial questions of law. Subsequently, during the hearing, the Revenue brought to the court's attention CBDT Circular No.17/2019, which stipulates that appeals should 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 explicitly recorded in the provided text, but their position was upheld by the Tribunal, leading to the Revenue's appeal. The Revenue relied on the fact that the benefit of R&D activity was utilized by all units of the assessee company.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.671 of 2021 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 2021 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 T.C.A.No.671 of 2021 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 T.C.A.No.671 of 2021 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 T.C.A.No.671 of 2021 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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