PRINCIPAL COMMISSIONER OF vs. M/S MCC FINANCE LTD,

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TCA/77/2017HC Madras06 March 2020Bench: Hon`ble Dr Justice VINEET KOTHARI4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. The Court noted that the learned Standing Counsel for the Revenue brought to its notice CBDT Circular No.17/2019, which stipulates that appeals shall not be filed or pursued by the Department before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue stated that the tax effect in the present appeals was less than this monetary limit. Consequently, the Court dismissed the appeals filed by the Revenue as not pressed. The Court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No operative directions for deletion, remand, or relief were granted as the appeals were dismissed on a procedural ground.

What were the facts?

These Tax Case Appeals were filed by the Principal Commissioner of Income Tax (Revenue) against M/s. MCC Finance Ltd. (Assessee). The appeals challenged orders of the Income Tax Appellate Tribunal ('C' Bench, Chennai) dated 4.5.2016, concerning Assessment Years not explicitly stated but implied to be prior to 2017. The Revenue sought to question the Tribunal's findings on disallowance of interest under Section 36(1)(iii) and depreciation on assets. During the hearing, the Revenue's counsel brought to the Court's notice 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/-. The Revenue stated that the tax effect in these appeals was below this monetary limit.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was right in holding that no interest disallowance under Section 36(1)(iii) could be made since the assessee had surplus funds at its disposal? 2. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was correct and justified in deleting the disallowance of interest when the assessee NBFC engaged in finance business failed to prove the commercial expediency in advancing interest-free loan to employees of MAC group or to Star Enterprises? In addition, for TC.(A) No.79 of 2017, the following questions were raised: 3. Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was right and justified in holding that the assessee is entitled to depreciation on assets which were retained by lessees even after expiry of the lease period? 4. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct and justified in granting depreciation on assets which the assessee did not put to use for any business purposes and was lying with the lessees after expiry of the lease period? The Revenue contended that the Tribunal erred in its findings regarding interest disallowance and depreciation. The Assessee's contentions are not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Order in TCA Nos.77 to 79 /2017, dated 06.03.2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.03.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) Nos.77 to 79 of 2017 Principal Commissioner of Income Tax 4 No.121, Mahatma Gandhi Road, Chennai 600 034. ... Appellant in all appeals Vs. M/s. MCC Finance Ltd., (Formerly Mercantile credit Corporation Ltd.,) No.21, 3rd Floor, Arhti Arcade, No.84, Radhakrishnan Road, Mylapore, Chennai 600 004. ... Respondent in all appeals ----- Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal 'C' Bench, Chennai dated 4.5.2016 in ITA Nos.911/Mds/2015, 1597/Mds/2015 and 1598/Mds/2015 respectively. ----- For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel assisted by Mr.V.Rajesh, Jr. Standing counsel Page 1 of 4 http://www.judis.nic.in Order in TCA Nos.77 to 79 /2017, dated 06.03.2020

J U D G M E N T [Judgment of the Court was delivered by DR.VINEET KOTHARI,J] These Tax Case Appeals have been filed by the Revenue calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai, by raising the following substantial questions of law: "1. Whether, on the facts and in the circumstances of the case and in law, Appellate Tribunal was right in holding that no interest disallowance under section 36(1)(iii) could be made since assessee had surplus funds at its disposal? 2. Whether, on the facts and in the circustances of the case and in law, Appellate Tribunal was correct and justified in deleting the disallowance of interest when assessee NBFC engaged in finance business failed to prove the commercial expediency in advancing interest free loan to employees of MAC group or to Star Enterprises?” and in addition to the above questions of law, the following questions of law were also raised for consideration in respect of TC.(A) No.79 of 2017. ' 1. Whether, on the facts and in the circumstances of the case and in law, Appellate Tribunal was right and justified in holding that assessee is entitled to depreciation on assets which were retained by lessees even after expiry of lease period? 2. Whether, on the facts and in the circumstances of the case and in law, Tribunal was correct and justified in Page 2 of 4 http://www.judis.nic.in Order in TCA Nos.77 to 79 /2017, dated 06.03.2020 granting depreciation on assets which the assessee did not put to use for any business purposes and was lying with the lessees after expiry of lease period?' 2. When the matter was taken up for hearing, the learned Standing Counsel brought to our notice the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.17/2019 dated 8th August 2019, wherein, it is 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.1,00,00,000/- (Rupees One Crore) . 3. In the instant case, the tax effect is said to be less than the monetary limit imposed and therefore, the appeals 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.) (R.S.K.,J.) 06.03.2020 msr To Income Tax Appellate Tribunal 'C' Bench,Chennai. DR.VINEET KOTHARI, J. Page 3 of 4 http://www.judis.nic.in Order in TCA Nos.77 to 79 /2017, dated 06.03.2020 AND R.SURESH KUMAR, J. msr Tax Case (Appeal) Nos.77 to 79 of 2017 06.03.2020 Page 4 of 4 http://www.judis.nic.in

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