PRINCIPAL COMMISSIONER OF IN vs. M/S.SIVAGAMI HOLDINGS PVT LTD

TCA/94/2020HC Madras27 February 2020Bench: Hon`ble Mr Justice N. KIRUBAKARAN7 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Tax Case Appeals on the ground of tax effect. The Court referred to CBDT Circular No. 17/2019, which stipulates a monetary limit of Rs. 1 crore for filing appeals before the High Court. The Revenue's counsel submitted that the tax effect in these cases was below this limit. Consequently, the Court found it appropriate to dismiss the appeals based on this circular. However, the Court explicitly stated that the substantial questions of law framed remain open. Liberty was granted to the Revenue to mention the case before the Court to restore the appeals for hearing and decision on merits if the tax effect is found to be above the limit fixed in the circular. The connected Miscellaneous Petitions were also closed. No costs were awarded.

What were the facts?

The Revenue (Principal Commissioner of Income Tax 6, Chennai) filed four appeals (T.C.A.Nos.94, 95, 101 & 104 of 2020) before the High Court of Judicature at Madras against orders of the Income Tax Appellate Tribunal (ITAT), Madras 'C' Bench, dated 14.03.2018. These appeals challenged the ITAT's decisions concerning the taxability of income earned by Sivagami Holdings Pvt. Ltd. from its Malaysian branch. The appeals were admitted on substantial questions of law. The Revenue's primary contention was that the tax effect in these cases was less than Rs. 1 crore, which, according to CBDT Circular No. 17/2019, was the monetary limit for filing appeals before the High Court. Therefore, the Revenue argued that the appeals should be dismissed on this ground.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in holding that income of the assessee from sources outside Malaysia is not taxable in India, despite the assessee being a resident in India and the control and management of the Malaysian branch being vested in India, in light of the Double Taxation Avoidance Agreement (DTAA) between India and Malaysia. 2. Whether the Tribunal was correct in holding that income from sources outside Malaysia is not taxable in India under the DTAA, even if it forms part of the assessee's global income. 3. Whether the Tribunal was correct in holding that the Malaysian branch is a Permanent Establishment (PE) of the assessee in Malaysia. 4. Whether the Tribunal was correct in holding that the Malaysian branch is not taxable in India even though its management is situated in India, in view of the DTAA. 5. Whether the Tribunal was correct in holding that no tax is chargeable in India under the Indian Income Tax Act, 1961, on rental and interest receipts of the Malaysian Branch in view of the DTAA, even if such receipts were not taxed in Malaysia as they arose outside Malaysia. 6. Whether the Tribunal was correct in allowing the Cross Objections filed by the assessee. Contentions: Assessee: Not recorded in the judgment. Revenue: The tax effect in these cases is less than Rs. 1 crore and is covered by CBDT Circular No. 17/2019, which sets the monetary limit for filing appeals before the High Court at Rs. 1 crore. Therefore, the appeals should be dismissed.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.Nos.94,95,101 & 104 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.02.2020 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.Nos.94, 95, 101 & 104 of 2020 and C.M.P.Nos.3738, 3714, 3703, 3697 of 2020 Principal Commissioner of Income Tax 6, No.121, Mahatma Gandhi Road, Chennai 600 034. ... Appellant in all the Appeals Vs Sivagami Holdings Pvt. Ltd., No.202, Anna Salai, Chennai 600 002. PAN: AAECS 3279 A ... Respondent in all the Appeals PRAYER in T.C.A.No.94 of 2020 : Appeal under Section 260A of Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018 in ITA.No.1422/Chny/2016. PRAYER in T.C.A.No.95 of 2020 : Appeal under Section 260A of 1/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018, CO No.92/Chny/2016 in ITA.No.1420/Chny/2016. PRAYER in T.C.A.No.101 of 2020 : Appeal under Section 260A of Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018 in ITA.No.1420/Chny/2016. PRAYER in T.C.A.No.104 of 2020 : Appeal under Section 260A of Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018, CO No.93/Chny/2016 in ITA.No.1422/Chny/2016. For Appellant :Mr.J.Narayanaswamy Senior standing counsel For Respondent :Mr.A.S.Sriraman C O M M O N J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J) Delink from T.C.A.Nos.89, 92 & 100 of 2020. T.C.A.No.94 of 2020 has been preferred by the Revenue against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018 in ITA.No.1422/Chny/2016. 2/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 2.T.C.A.No.95 of 2020 has been preferred by the Revenue against the order of the Income Tax Appellate Tribunal, Madras “C” Bench,

dated

14.03.2018,

No.92/Chny/2016

in ITA.No.1420/Chny/2016. 3.T.C.A.No.101 of 2020 has been preferred by the Revenue against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated 14.03.2018 in ITA.No.1420/Chny/2016. 4.T.C.A.No.104 of 2020 has been preferred by the Revenue against the order of the Income Tax Appellate Tribunal, Madras “C” Bench,

dated

14.03.2018,

No.93/Chny/2016

in ITA.No.1422/Chny/2016. 5.These appeals are admitted on the following substantial questions of law : “(i)Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the assessee from sources outside Malaysia cannot be taxed in India, though the assessee is a resident in India and the control and management of the Malaysian branch is vested 3/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 in India, in view of DTAA between India and Malaysia? (ii)Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the assessee from sources outside Malaysia cannot be taxed in India, in view of DTAA between India and Malaysia, even though the same forms part of assessee's global income? (iii) Whether the Appellate Tribunal was right in holding that Malaysian branch is a permanent Establishment of the assessee in Malaysia? (iv)Whether the Appellate Tribunal was right in holding that the Malaysia branch is not taxable in India even though the management is situated in India, in view of DTAA between India and Malaysia? (v)Whether on the facts and circumstances of the case, the Tribunal was right in holding that no tax is chargeable in India under the Indian Income Tax Act, 1961 on rental and interest receipts of the Malaysian Branch of the assessee company in view of the Double Taxation Avoidance Agreeement even though such receipts have not been subjected to tax in Malaysia since they arose outside Malaysia? (vi)Whether the Appellate Tribunal was right in allowing the Cross Objections filed by the assessee?” 6.Mr.J.Narayanaswamy, learned Senior Standing Counsel 4/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 appearing on behalf of the appellant would submit that the tax effect in this case is less than Rs.1 crore and is covered by Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.1 crore. In these cases, tax effect is less than Rs.1 crore and therefore, the cases have to be dismissed. 7.This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the said Circular, which prescribes monetary limit for filing appeal is usefully extracted as follows: 2.As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: S.No. Appeals / SLPs in Income- tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 5/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 S.No. Appeals / SLPs in Income- tax matters Monetary Limit (Rs.) 3. Before Supreme Court 2,00,00,000 8.In view of the submissions made by the learned counsel appearing on behalf of the appellant and also in view of the Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, the Tax Case Appeals are dismissed on account of tax effect. However, the substantial questions of law framed is left open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeals to be heard and decided on merits. No costs. Consequently, connected Miscellaneous Petitions are also closed. (NKKJ) (PVJ) 27.02.2020 sai To 1.The Principal Commissioner of Income Tax 6, No.121, Mahatma Gandhi Road, Chennai 600 034. 2.Income Tax Appellate Tribunal 'C' Bench, Chennai. 6/7 http://www.judis.nic.in T.C.A.Nos.94,95,101 & 104 of 2020 N.KIRUBAKARAN, J. and P.VELMURUGAN

, J.

sai T.C.A.Nos.94, 95, 101 & 104 of 2020 Dated : 27.02.2020 7/7 http://www.judis.nic.in

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