COMMISSIONER OF INCOME TAX vs. M/S VKC FINSOFT SOLUTIONS PVT

PDF · subscribers
TCA/678/2018HC Madras26 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 merits. Instead, the Revenue's counsel brought to the court's notice CBDT Circular No. 17/2019, which mandates that appeals with a tax effect not exceeding Rs. 1,00,00,000/- should not be filed or pursued. The counsel submitted that the tax effect in the present appeal was below this monetary limit. Consequently, the High Court, in light of this submission and the circular, dismissed the appeal as withdrawn. The court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Revenue, Commissioner of Income Tax, Corporate Circle 3 (2), Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 28.02.2018. The appeal pertained to assessment year 2012-13 and concerned M/s. VKC Finsoft Solutions Private Limited. The appeal challenged the Tribunal's decision regarding the applicability of deemed dividend provisions under Section 2(22)(e) of the Act. The Revenue's counsel brought to the court's attention 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/-. It was submitted that the tax effect in this appeal was below this threshold.

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether the Tribunal was right in holding that the deemed dividend provisions under Section 2(22)(e) of the Act are not applicable to the assessee company, considering the second limb of the provision. 2. Whether the Tribunal was right in holding that Section 2(22)(e) cannot be applied, given that the shares held by common shareholders in the assessee company and a sister concern company amounted to 33.02%, thus fulfilling the substantial interest condition. The Revenue argued that the second limb of Section 2(22)(e) was applicable and that the condition of substantial interest was met due to the 33.02% shareholding by common shareholders in both companies. The judgment records no specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(22)(e)

AI-generated summary — verify with the full judgment below

T.C.A.No.678 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.08.2022 CORAM : THE HON'BLE MR. JUSTICE R. MAHADEVAN AND THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.678 of 2018 The Commissioner of Income Tax, Corporate Circle 3 (2), Chennai. ... Appellant Versus M/s.VKC Finsoft Solutions Private Limited, Jayam Kondar Apartments, unit No.1-B, 1st Floor, 40/12, Murray's Gate Road, Alwarpet, Chennai- 600 018. ... Respondent (PAN No.AAACV 2278 D) Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai “A” Bench, dated 28.02.2018 in I.TA.No.1920/Chny/2016. For Appellant : M/s.M.Swaminathan &

S.Premalatha Standing Counsel Page 1/4 https://www.mhc.tn.gov.in/judis T.C.A.No.678 of 2018 J U D G M E N T (Judgment was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant / Revenue, challenging the order dated 28.02.2018 passed by the Income Tax Appellate Tribunal, Chennai 'A' Bench, in I.T.A.No.1920/Chny/2016, relating to the assessment year 2012-13, by raising the following substantial questions of law:- "(i) Whether the Tribunal was right and justified in holding that the deemed dividend provisions under Section 2(22)(e) of the Act is not applicable in the case of assessee company without appreciating that the second limb of the provisions of Section 2(22)(e) is applicable to the facts of the case? (ii) Whether the Tribunal was right in holding that the provision of Section 2(22)(e) cannot be applied in the present case without appreciating that the shares held by both the common shareholders in the assessee company and the sister concern company was to the extent of 33.02% and therefore fulfilled the conditions of substantial interest prescribed in the Section?" " 2. 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, wherein, it is stipulated that appeal shall not be filed/pursued by the Page 2/4 https://www.mhc.tn.gov.in/judis T.C.A.No.678 of 2018 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. 3. 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.) 26.08.2022 r n s

Internet : Yes.

Index : Yes / No. Page 3/4 https://www.mhc.tn.gov.in/judis T.C.A.No.678 of 2018 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. r n s To 1. The Income Tax Appellate Tribunal 'A' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals) - 11, Chennai. 3. The Deputy Commissioner of Income Tax, Company Circle 3 (2), Chennai-34 T.C.A.No.678 of 2018 26.08.2022 Page 4/4 https://www.mhc.tn.gov.in/judis

More judgments on Section 2(22)(e)

All 1,757 judgments and leading authorities on Section 2(22)(e) →

Recent GST High Court judgments

Search GST case law →