THE COMMISSIONER OF INCOME TAX, vs. M/S REGAN POWERTECH (P) LTD.,

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TCA/695/2019HC Madras22 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not adjudicate on the merits of the substantial questions of law. Instead, it recorded the submission made by the learned Senior Standing Counsel for the appellant Revenue. The submission stated that as per CBDT's Circular No. 9 of 2024, the tax effect in the instant case is less than the monetary limit imposed. Therefore, the Revenue requested that the appeal be disposed of, keeping the substantial questions of law raised open for adjudication at a later point in time. The Court accepted this submission and accordingly dismissed the Tax Case Appeal on the ground of low tax effect, explicitly keeping the substantial questions of law open for adjudication at the appropriate stage. No order as to costs was made.

What were the facts?

The Revenue, Commissioner of Income Tax, Chennai, filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order of the Income Tax Appellate Tribunal, Chennai, dated August 17, 2016. The appeal pertains to Assessment Year 2011-12 and concerns M/s. Regen Powertech (P) Ltd. The appeal raises several substantial questions of law regarding the deletion of additions made by the Assessing Officer. However, during the proceedings, the Revenue's counsel submitted that as per CBDT's Circular No. 9 of 2024, the tax effect is below the monetary limit. Consequently, the Revenue requested the appeal be disposed of, keeping the substantial questions of law open.

What were the issues?

The Tribunal was asked to decide seven substantial questions of law: 1. Whether the Tribunal erred in deleting additions related to Corporate Social Responsibility (CSR) expenses not pertaining to the assessee's business. 2. Whether CSR expenditure, introduced by the Finance Act, 2014, is applicable to the present assessment year (2011-12) or only subsequent years. 3. Whether VAT subsidy received from the Andhra Pradesh Government should be treated as a capital or revenue subsidy, considering it's received year after year. 4. Whether the Tribunal should have applied the Supreme Court's decision in Sahani Steels and Press Works Limited regarding subsidies granted year after year after setting up new industries. 5. Whether a provision for warranty amounting to Rs. 29,68,000, not based on a scientific basis, should be allowed, contrary to decisions in Renowned Auto Products Mfrs.Ltd and Forbes Campbell Finance Ltd. 6. Whether excess royalty payment on bought-out components not manufactured by the assessee but procured from third parties is allowable. 7. Whether downward adjustment made by the TPO on bought-out components based on technical specifications, in violation of RBI guidelines, should be allowed. The Revenue argued that the CSR expenses were not related to the assessee's business and that the provisions for CSR were not applicable to the assessment year in question. The Revenue also relied on specific case law for issues concerning subsidies and warranty provisions. The Assessee's contentions are not explicitly detailed in the provided text, but their arguments would have led to the Tribunal's favorable decision on these points.

Which sections of the Income-tax Act were involved?

Section 260A,Section 37

AI-generated summary — verify with the full judgment below

T.C.A.No.695 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.10.2024 CORAM THE HONOURABLE MR.JUSTICE R.SURESH KUMAR and THE HONOURABLE MR.JUSTICE C.SARAVANAN T.C.A.No.695 of 2019 The Commissioner of Income Tax, Chennai. ... Appellant -Vs- M/s.Regen Powertech (P) Ltd., Samson Towers, 3rd, 4th and 5th Floors, 403, Pantheon Road, Egmore, Chennai - 600 008. PAN: AADCR5531M ... Respondent PRAYER : Tax Case Appeal filed under Section 260 A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal 'D' Bench, Chennai dated 17.08.2016 in I.T.A.No.786/Mds/2016 for the assessment year 2011-12. For Appellant : Mrs.V.Puspha Senior Standing Counsel For Respondent : Mr.R.Sivaraman 1/5 https://www.mhc.tn.gov.in/judis T.C.A.No.695 of 2019 J U D G M E N T (Judgment of the Court was delivered by R.SURESH KUMAR, 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, Chennai by raising the following substantial questions of law: 1. Whether the Tribunal was correct in deleting the additions made on account of Corporate Social Responsibility expenses even though the same is not pertaining to the Assessee's business? 2. Whether the expenditure incurred on Corporate Social Responsibility which are not mandatory and was introduced only with by Finance Act, 2014 by way of Explanation to Section 37 is applicable only in the subsequent year and not for the present assessment year and therefore not allowable? 3. Whether the VAT subsidy received from the Andhra Pradesh Government is to be treated as a capital subsidy or revenue subsidy as they are in the nature of supplementary trading receipt received year after year? 4. Whether the Tribunal ought to have applied the decision of the Apex Court in the case of Sahani Steels and Press Works Limited reported in 228 ITR 2/5 https://www.mhc.tn.gov.in/judis T.C.A.No.695 of 2019 253 wherein it had been held subsidy which are granted year after year after setting up of a new industries that too after commencement of production and therefore is to be treated as assistance given for the purpose of carrying on the business? 5. Whether the claim for provision for warranty amounting to Rs.29,68,000/- which is not based on any scientific basis is to be allowed as it is contrary to the decision of the Madras High Court in the case of Renowned Auto Products Mfrs.Ltd reported in 354 ITR page 127 Mds and that of Forbes Campbell Finance Ltd reported in 352 ITR page 602 Mds? 6. Whether the excess royalty payment is to be allowed on bought out components which are not manufacture by the Assessee but are procured from 3rd parties? 7. Whether the downward adjustment made by the TPO on bought out components based on technical specification which are in violation of the RBI guidelines are to be allowed? 2. It is brought to our notice by the learned Senior Standing Counsel for the appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of 2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit imposed and therefore, the appeal can be disposed of, keeping the 3/5 https://www.mhc.tn.gov.in/judis T.C.A.No.695 of 2019 substantial questions of law raised in this appeal open for adjudication at a later point of time. 3. Recording the aforesaid submission made by the learned Senior Standing Counsel for the appellant Revenue, this Tax Case Appeal is dismissed for low tax effect, keeping open the substantial questions of law for adjudication at appropriate stage. However, there shall be no order as to costs. (R.S.K., J.) (C.S.N., J.) 22.10.2024 (1/3) NCC : Yes / No Index : Yes / No Speaking Order : Yes / No vji To The Income Tax Appellate Tribunal 'D' Bench, Chennai. 4/5 https://www.mhc.tn.gov.in/judis T.C.A.No.695 of 2019 R.SURESH KUMAR, J. and C.SARAVANAN, J. vji T.C.A.No.695 of 2019 22.10.2024 (1/3) 5/5 https://www.mhc.tn.gov.in/judis

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