PRINCIPAL COMMISSIONER OF vs. M/S. CRI PUMPS PVT LTD.,

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TCA/762/2017HC Madras15 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission by the Revenue that the matter was covered under the Low Tax Effect as per Circular No.9/2024 dated 17.09.2024. The Court noted that the substantial questions of law arising in the appeal were kept open to be decided at a later point of time. No decision was made on the merits of the substantial questions of law. Therefore, there is no specific finding or reasoning on the issues raised by the Revenue regarding Section 40A(2)(b), the relevance of judicial precedents, or mens rea. The operative direction was to dismiss the appeal on the ground of low tax effect.

What were the facts?

The appeal was filed by the Principal Commissioner of Income Tax, Coimbatore (Revenue) against the order of the Income Tax Appellate Tribunal (ITAT), Madras "D" Bench, dated 04.05.2017. The assessee is M/s. CRI Pumps Pvt. Ltd. The appeal was admitted by the High Court on 07.06.2019. The Revenue submitted that the matter is covered under the Low Tax Effect as per Circular No.9/2024 dated 17.09.2024. Consequently, the appeal was dismissed on this ground. The substantial questions of law were kept open.

What were the issues?

The High Court admitted the appeal on the following substantial questions of law: 1. Whether the ITAT was right in upholding the decision of the CIT(A), ignoring the fact that the quantum of royalty paid to the holding company was excessive and unreasonable, resulting in an undue benefit to the assessee company, thereby satisfying the condition for disallowance under Section 40A(2)(b) of the Income Tax Act, 1961? 2. Whether, on the facts and circumstances, the ITAT was right in following a judicial precedent in the assessee's own case, which relied on a Delhi High Court decision irrelevant to the assessee's case? 3. Whether, on the facts and circumstances, the ITAT was right in ignoring the fact that mens rea was apparent in this case? Contentions: Assessee: Not recorded in the judgment. Revenue: The matter is covered under the Low Tax Effect as per Circular No.9/2024 dated 17.09.2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

T.C.A.No.762 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.No.762 of 2017 Principal Commissioner of Income Tax 1 No.63, Race Course Road Coimbatore 641 018 .. Appellant Vs. M/s. CRI Pumps Pvt. Ltd. 7/46-1, Keeranatham Road Sravanamatti, Coimbatore – 641 035 PAN: AAA CC 9497 N .. Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal Madras “D” Bench dated 04.05.2017 passed in I.T.A.No.67/Mds/2017. For the Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For the Respondent : Mr.A.S.Sriraman JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeal was admitted on 07.06.2019 by this Court on the following substantial questions of law:- Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.762 of 2017 "1. Whether the ITAT was right in upholding the decision of the CIT(A), ignoring the fact that, the quantum of royalty paid to the holding company was excessive and unreasonable resulting in accrual of undue benefit to the assessee company, satisfying the essential condition for disallowance u/s 40A(2)(b) of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case , the ITAT was right in following the judicial precedence in the assessee's own case, in which reliance was placed on a decision of the Delhi High Court in a case having no relevance to the issue of the assessee's case under adjudication? 3. Whether on the facts and circumstances of the case, the ITAT is right in ignoring the fact that mens rea is apparent in this case?" 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that this matter is covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. 3. Hence, this appeal stands dismissed, as covered under the low tax effect and the substantial questions of law arising in this Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.762 of 2017 appeal are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 15.10.2024 Neutral Citation:Yes/No drm Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.762 of 2017 R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.No.762 of 2017 15.10.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

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