PRINCIPAL COMMISSIONER OF IN vs. M/S.SHRIRAM TRANSPORT FINANC

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TCA/878/2018HC Madras26 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeals as withdrawn. This decision was based on the submission by the Revenue's counsel, citing CBDT Circular No. 17/2019. The circular mandates that appeals should not be filed or pursued before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue stated that the tax effect in these particular appeals was below this monetary threshold. Consequently, the court found no necessity to adjudicate on the substantial questions of law that had been admitted. The dismissal was made without prejudice to the determination of these questions in other appropriate cases. No costs were awarded.

What were the facts?

These appeals by the Revenue challenge a common order of the Income Tax Appellate Tribunal (ITAT) dated May 24, 2018, concerning assessment year 2014-15. The ITAT had passed the order in ITA Nos. 2572/Chny/2017 and 2636/Chny/2017. The appeals were admitted by the High Court on specific substantial questions of law. During the hearing, the Revenue's counsel brought to the court's notice CBDT Circular No. 17/2019, which stipulates that appeals shall not be filed or pursued if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue submitted that the tax effect in these appeals was below this threshold.

What were the issues?

The High Court was to decide the following substantial questions of law: T.C.A.No.878 of 2018: 1. Whether the ITAT was correct in deleting the addition made towards royalty payment, considering the assessee derived enduring benefits and acquired an intangible asset, making the expenditure capital in nature? (Relates to the nature of expenditure and its capitalisation). 2. Whether the ITAT was correct in holding that the royalty was paid for the use of copyright, which is an intangible depreciable asset as per Explanation 3 to Section 32(1) of the Income Tax Act, and thus capital in nature? (Focuses on the classification of copyright as a depreciable asset). 3. Whether the ITAT was correct in deleting the addition made under Section 14A read with Rule 8D, on the ground that the assessee did not earn any dividend income during the year, despite no provision for such exclusion in Rule 8D? (Concerns the applicability of Section 14A and Rule 8D when no dividend income is earned). T.C.A.No.879 of 2018: 1. Whether the ITAT was correct in restricting the disallowance under Section 14A read with Rule 8D up to the exempt income, when Rule 8D does not provide for such exclusion? (Similar to issue 3 in TCA 878, but framed around restriction). 2. Whether the ITAT was correct in deleting the addition made towards book profits computed under Section 115JB, for expenditure incurred to earn exempt income, even though Clause (f) to Explanation 1 to Section 115JB specifically provides for it? (Deals with the computation of book profits under Section 115JB and the treatment of expenditure related to exempt income). Assessee's arguments were not recorded as the appeals were dismissed based on the Revenue's submission regarding tax effect.

Which sections of the Income-tax Act were involved?

Section 32(1),Section 14A,Section 115JB

AI-generated summary — verify with the full judgment below

T.C.A.Nos.878 & 879 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.08.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVAN AND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.Nos.878 & 879 of 2018 The Principal Commissioner of Income Tax-6, No.121, Nungambakkam High Road, Chennai - 600 034. ... Appellant in both TCAs Versus M/s.Shriram Transport Finance Co.Ltd., Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai - 600 004. ... Respondent in both TCAs (PAN No.AAA CS 7018 R) Appeals preferred under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, “C” Bench, Chennai dated 24.05.2018 in I.T.A.Nos.2572/Chny/2017 & 2636/Chny/2017 in respect of assessment year 2014-15. For Appellant in both TCAs' : Mr.J.Narayanaswamy Senior Standing Counsel For Respondent in both TCAs' : Mr.R.Sivaraman Page 1/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.878 & 879 of 2018 COMMON JUDGMENT (Judgment of the Court was delivered by R.MAHADEVAN, J.) These tax case appeals have been filed by the appellant / Revenue, challenging the common order dated 24.05.2018 passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai in I.T.A.Nos.2572/Chny/2017 & 2636/Chny/2017, relating to the assessment year 2014-15. 2. By order dated 03.12.2018, this court admitted the aforesaid tax case appeals on the following substantial questions of law: T.C.A.No.878 of 2018:- “(i) Whether the Appellate Tribunal was right in deleting the addition made towards royalty payment since the assessee was getting enduring benefits and acquired an intangible asset, which made the expenditure capital in nature? (ii) Whether the Tribunal was right in deciding that the royalty is being paid for use of copyright, which is, as per Explanation 3 to Section 32(1) of the Income Tax Act, is an intangible depreciable asset and is capital in nature? and (iii) Whether the Appellate Tribunal was right in deleting the addition made under Section 14A read with Rule 8 D on the reasoning that the assessee did not earn any dividend income during the year, when there is no provision for such exclusion in method of computing disallowance under Rule 8D? and Page 2/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.878 & 879 of 2018 T.C.A.No.879 of 2018:- (i) Whether the Appellate Tribunal was right in restricting the disallowance upto the exempt income under Section 14A read with Rule 8D, when there is no provision for such exclusion in method of computing disallowance under Rule 8D? and (ii) Whether the Appellate Tribunal was right in deleting the addition made towards book profits computed under Section 115JB being expenditure incurred to earn exempt income even though Clause(f) to Explanation 1 to Section 115JB specifically provided for it?" 3.When the matters were taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeal 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). It is also submitted that the tax effect in these appeals is less than the threshold limit. 4. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeals, wherein, the tax effect is said to be less than the monetary limit imposed, are dismissed as withdrawn, Page 3/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.878 & 879 of 2018 keeping open the substantial questions of law for determination in appropriate cases. No costs. (R.M.D., J.) (M.S.Q., J.) 26.08.2022

Internet : Yes

Index : Yes / No r n s Page 4/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.878 & 879 of 2018 To 1. The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Commissioner of Income-Tax (Appeals)-15, Chennai. 3. The Deputy Commissioner of Income Tax, Corporate Circle 6(1), Chennai - 34. Page 5/6 https://www.mhc.tn.gov.in/judis T.C.A.Nos.878 & 879 of 2018 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. r n s T.C.A.Nos.878 & 879 of 2018 26.08.2022 Page 6/6 https://www.mhc.tn.gov.in/judis

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