M/S.PEIRCE LESLIE INSURANCE vs. THE INCOME TAX OFFICER

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TCA/796/2017HC Madras21 April 2021Bench: Hon`ble Mr Justice M.DURAISWAMY6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court noted that the Direct Tax Vivad Se Vishwas Act, 2020, was enacted to provide for the resolution of disputed tax. The assessee had already been issued Form-3 under this Act, indicating they had availed its benefits. In light of this subsequent development, the Court found no useful purpose in keeping the appeal pending. Consequently, the Tax Case Appeal was dismissed on the ground that the assessee had availed the benefit under the Vivad Se Vishwas Act. The Court granted liberty to the assessee to restore the appeal if the ultimate decision under the Act was not in their favour. The substantial questions of law were left open. The operative direction was the dismissal of the appeal with liberty to restore.

What were the facts?

The assessee, M/s. Peirce Leslie Insurance Surveyors & Loss Assessors Ltd., filed an appeal before the High Court of Judicature at Madras against an order dated 18.09.2017 passed by the Income Tax Appellate Tribunal (ITAT) in I.T.A.No.1112/Mds/2017 for Assessment Year 2013-14. The appeal was admitted on substantial questions of law concerning the allowability of corporate and secretarial charges paid to its holding company as revenue expenditure under Section 37(1) of the Income Tax Act, 1961, and whether the ITAT's finding on the onus of proof was perverse. During the pendency of the appeal, the Direct Tax Vivad Se Vishwas Act, 2020, was enacted. The assessee informed the court that Form-3 had been issued to it under this Act.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that expenditure incurred by the appellant towards payment of Corporate and Secretarial Charges to its Holding Company, for availing strategic and business development advices and for development of pay-roll and e-TDS software, was not allowable as revenue expenditure under Section 37(1) of the Income Tax Act, 1961? 2. Is the order of the Income Tax Appellate Tribunal perverse in holding that the appellant had not discharged the onus to prove that the services rendered by the Holding Company helped its business, merely on the ground that there was no agreement between the appellant and its Holding Company? Assessee's Contention: The assessee argued that the expenditure was for business development and strategic advice, and the ITAT's finding on the onus of proof was perverse. The assessee relied on the fact that Form-3 was issued under the Direct Tax Vivad Se Vishwas Act, 2020. Revenue's Contention: The judgment does not record any specific contentions made by the revenue regarding the substantial questions of law.

Which sections of the Income-tax Act were involved?

Section 260A,Section 37(1)

AI-generated summary — verify with the full judgment below

Tax Case No.796 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.04.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY Tax Case Appeal No.796 of 2017 M/s.Peirce Leslie Insurance Surveyors & Loss Assessors Ltd., No.37, P.V.Cherian Cresent, Egmore, Chennai – 600 008. ... Appellant Vs.

The Income Tax Officer, Corporate Ward 5(1), Chennai – 600 034.

... Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "B" SMC Bench, dated 18.09.2017 passed in I.T.A.No.1112/Mds/2017. For Appellant : Mr.M.P.Senthil Kumar For Respondent : Mr.T.Ravi Kumar, Senior Standing Counsel Page 1/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.796 of 2017 J U D G M E N T (Delivered by M. DURAISWAMY, J) The appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 18.09.2017 passed by the Income Tax Appellate Tribunal, Madras "B" SMC Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No.1112/Mds/ 2017 for the Assessment Year 2013-14. 2.The above appeal was admitted on the following Substantial Questions of Law for consideration: “1)Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that expenditure incurred by the appellant towards payment of Corporate and Secretarial Charges to its Holding Company availing strategic and business development advices and the development of pay-roll and e-TDS software was not allowable as revenue expenditure u/s 37(1) of the Income Tax Act, 1961? 2)Is not the order of the Income Tax Appellate Tribunal perverse in holding that appellant had not discharged the onus to prove that the services rendered by Page 2/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.796 of 2017 the Holding Company helped its business merely on the ground that there was no agreement between the appellant and its Holding Company?” 3. We have heard Mr.M.P.Senthil Kumar, learned counsel for the appellant/assessee and Mr.T.Ravi Kumar, learned Senior Standing Counsel for the respondent/Revenue. 4. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. Page 3/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.796 of 2017 5.We are informed by the learned counsel for the appellant/ assessee that the assessee has already been issued with Form – 3 on 09.12.2020. 6. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping this appeal pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, the Tax Case Appeal is dismissed on the ground that the assessee has already been issued with Form - 3 and the Department shall process the applications at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request Page 4/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.796 of 2017 made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. 7. With this observation, the Tax Case Appeal is dismissed with the aforementioned liberty and consequently, the Substantial Questions of Law are left open. No costs.

[M.D., J.] [K.R., J.] Index : Yes/No 21.04.2021 Internet : Yes

va To 1. Income Tax Appellate Tribunal, Madras "B" SMC Bench 2.The Income Tax Officer, Corporate Ward 5(1), Chennai – 600 034. Page 5/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.796 of 2017 M. DURAISWAMY, J. and KRISHNAN RAMASAMY, J. va Tax Case Appeal No.796 of 2017

21.04.2021 Page 6/6 https://www.mhc.tn.gov.in/judis/

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