PRINCIPAL COMMISSIONER OF IN vs. M/S ROCKY MARKETING (CHENNAI

TCA/760/2018HC Madras18 March 2019Bench: Hon`ble Mr Justice C.V. KARTHIKEYAN4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court noted that the Central Board of Direct Taxes (CBDT) had issued Circular No. 3/2018 dated 11.7.2018, stipulating that appeals shall not be filed or pursued by the Department before the High Court in cases where the tax effect does not exceed Rs. 50 lakhs. In the present case, the tax effect was stated to be less than this monetary limit. Consequently, the Revenue's appeal was dismissed as not pressed. The Court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No decision was made on the merits of the substantial questions of law raised by the Revenue.

What were the facts?

The Revenue, Principal Commissioner of Income Tax, Central 1, Chennai, filed a Tax Case Appeal under Section 260A of the Income Tax Act, 1961, challenging an order dated 5.2.2018 passed by the Income Tax Appellate Tribunal (ITAT), Madras 'A' Bench, in ITA No.1707/Mds/2017. The appeal was against M/s. Rocky Marketing (Chennai) Pvt. Ltd. The ITAT's order directed the Assessing Officer to apply the ratio of the Supreme Court judgment in S.A. Builders Ltd. v. CIT and remitted the assessment back to the Assessing Officer to re-examine the commercial exigency of interest-free advances made by the assessee to its sister concern. The Revenue questioned the ITAT's approach, particularly regarding the onus on the assessee to prove commercial exigency.

What were the issues?

1. Whether the Appellate Tribunal is correct in law in directing the Assessing Officer to apply the ratio of the judgment of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. V. CIT, reported in 288 ITR 1, by ignoring the fact that the said judgment is under re-consideration by the Hon'ble Supreme Court? (Question of law) 2. Whether the ITAT is correct in law in remitting the assessment back to the assessing officer to do the same again afresh, without ascertaining whether there exists any commercial exigency as claimed by the assessee, in the transaction of diversion of its interest bearing funds to its sister concern as interest-free advance? (Question of mixed law and fact) 3. Whether, on the facts and in the circumstances of the case, the ITAT is correct in law in making observation that the aspect with respect to the activities of the group companies are not brought out by the assessing officer to examine the commercial exigency, whereas, the real onus lies upon the assessee to prove such commercial exigency and the addition was made as the assessee failed to discharge such onus? (Question of mixed law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue argued that the ITAT erred in applying the S.A. Builders Ltd. judgment while it was under reconsideration by the Supreme Court. It also contended that the ITAT wrongly remitted the matter without ascertaining commercial exigency and wrongly placed the onus on the Assessing Officer instead of the assessee to prove commercial exigency.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.3.2019 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE C.V.KARTHIKEYAN Tax Case Appeal No.760 of 2018 Principal Commissioner of Income Tax Central 1, 108, Nungambakkam High Road, Chennai 600 034. Appellant Vs. M/s.Rocky Marketing (Chennai) Pvt. Ltd. No.3/8, Mayor Sambandam Street, Rangarajapuram, Chennai 600 024. PAN: AABCR 0196G Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai, dated 5.2.2018 made in ITA No.1707/Mds/2017. For Appellant : Mrs.K.G.Usha Rani, Junior Standing Counsel For respondent : Mr.C.Mohan J U D G M E N T (Delivered by DR.VINEET KOTHARI,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, 'A' Bench, Chennai, dated 5.2.2018 made in ITA No.1707/Mds/2017, by raising the following substantial questions of law: "i) Whether the Appellate Tribunal is correct in law in http://www.judis.nic.in 2 directing the Assessing Officer to apply the ratio of the judgment of the Hon'ble Supreme Court in the case of S.A.Builders Ltd. V. CIT reported in 288 ITR 1, by ignoring the fact that the said judgment is under re-consideration by the Hon'ble Supreme Court? ii) Whether the ITAT is correct in law in remitting the assessment back to the assessing officer to do the same again afresh, without ascertaining whether there exists any commercial exigency as claimed by the assessee, in the transaction of diversion of its interest bearing funds to its sister concern as interest-free advance? ii) Whether, on the facts and in the circumstances of the case, the ITAT is correct in law in making observation that the aspect with respect to the activities of the group companies are not brought out by the assessing officer to examine the commercial exigency, whereas, the real onus lies upon the assessee to prove such commercial exigency and the addition was made as the assessee failed to discharge such onus?" 2. When the matter is taken up for admission, the learned Standing Counsel brought to our notice the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.3/2018 dated 11.7.2018 wherein it is http://www.judis.nic.in 3 stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.50 lakhs. 3. In the instant case, the tax effect is said to be less than the monetary limit imposed and therefore, the appeal filed by the Revenue is dismissed as not pressed, keeping open the substantial questions of law for determination in an appropriate case. (V.K.,J.) (C.V.K.,J.) 18.3.2019 Index : Yes/No Internet : Yes/No ssk. To 1. Principal Commissioner of Income Tax Central 1, 108, Nungambakkam High Road, Chennai 600 034. 2. Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai 3. The Deputy Commissioner of Income Tax, Central Circle I (3) Chennai. http://www.judis.nic.in 4 DR.VINEET KOTHARI, J. and C.V.KARTHIKEYAN, J. ssk. TCA No.760 of 2018 18.3.2019. http://www.judis.nic.in

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