PRINCIPAL COMMISSIONER OF IN vs. MUSTAQ AHMED

PDF · subscribers
TCA/988/2018HC Madras24 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. Instead, the appeal was dismissed as withdrawn by the Revenue. This decision was based on the submission by the Revenue's counsel that the tax effect in the appeal was less than the threshold limit of Rs. 1,00,00,000/- stipulated in CBDT Circular No. 17/2019. The Court noted that the substantial questions of law were kept open for determination in an appropriate case. Therefore, there is no finding on the issues of deemed dividend under Section 2(22)(e), disallowance of commission under Section 40A(2)(b), or the computation of interest under Sections 234A and 234B. The operative direction was to dismiss the appeal as withdrawn.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated January 7, 2016, passed by the Income Tax Appellate Tribunal (ITAT), Madras 'B' Bench. The appeal pertained to assessment year 2010-11 and concerned the assessee, Shri Mustaq Ahmed. The ITAT's order had addressed several issues, including deemed dividend, disallowance of commission expenditure, and the charging of interest under Sections 234A and 234B. The High Court was informed by the Revenue's counsel about CBDT Circular No. 17/2019, which stipulated that appeals should not be filed or pursued if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue acknowledged that the tax effect in this appeal was below this threshold.

What were the issues?

The Tribunal was asked to decide four substantial questions of law: 1. Whether the interest-free advances of Rs. 68,46,548/- received by the assessee from M/s. Adampur Distributors P Ltd., a private limited company in which the assessee held 99.98% shares, could be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act. 2. Whether the Tribunal was correct in confirming the deletion of addition made on account of disallowance of commission expenditure under Section 40A(2)(b) of the IT Act. 3. Whether the Tribunal was correct in holding that interest under Section 234A is to be charged for every month or part of the month comprised in the period commencing from the day immediately following the expiry of the time allowed in the notice under Section 153A. 4. Whether the Tribunal was correct in holding that interest under Section 234B would be leviable only on the tax on the total income determined in the order passed under Section 153A which exceeds the tax on the total income determined under Section 143(1) in response to the notice under Section 153A, and whether Section 153A contemplates processing of a return of income under Section 143(1) filed in response to a notice under Section 153A. The Revenue contended that the advances were deemed dividends. The assessee's contentions are not explicitly detailed in the provided text, but the Tribunal's decision implies they argued against the addition of deemed dividend and the disallowance of commission. The arguments regarding Sections 234A and 234B are framed as questions of law for the Tribunal to decide.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(22)(e),Section 40A(2)(b),Section 234A,Section 234B,Section 153A,Section 143(1)

AI-generated summary — verify with the full judgment below

T.C.A.No.988 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24.08.2022 CORAM : THE HON'BLE MR. JUSTICE R. MAHADEVAN AND THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No.988 of 2018 The Principal Commissioner of Income Tax, Central-I, No.108, Mahatma Gandhi Road, Chennai.

... Appellant Versus Shri.Mustaq Ahmed, No.4/52, 4th South Street, Kapaleeswar Nagar, Neelangarai, Chennai - 600 041. ... Respondent (PAN No.ADE PA 1181 B) Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras “B” Bench, dated 07.01.2016 in I.TA.No.1678/Mds/2013. For Appellant : Mr.J.Narayanaswamy Senior Standing Counsel For Respondent : Mr.R.Sivaraman Page 1/5 https://www.mhc.tn.gov.in/judis T.C.A.No.988 of 2018 J U D G M E N T (Judgment was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant / Revenue, challenging the order dated 07.01.2016 passed by the Income Tax Appellate Tribunal, Madras 'B' Bench in I.TA.No.1678/Mds/2013, relating to the assessment year 2010-11, by raising the following the substantial questions of law:- "(i) Whether the Appellate Tribunal is correct in law in holding that the interest free advances of Rs.68,46,548/- received by the assessee from the Company M/s.Adampur Distributors P Ltd., which is a private limited Company and in which the assessee held 99.98% shares, cannot be treated as deemed dividend under Section 2 (22) (e) of Income Tax Act? (ii) Whether the Appellate Tribunal is correct in law in confirming the order of CIT(A) which deleted the addition made on account of disallowance of commission expenditure under Section 40A(2)(b) of IT Act? (iii) Whether the Appellate Tribunal is correct in law in holding that the interest 234A is to be charged for every month or part of the month comprised in the period commencing on the day immediately following the expiry of the time allowed in the notice under Section 153A? (iv) Whether the Appellate Tribunal is correct in law in holding that the interest under Section 234B would be leviable only on the tax on the total income determined in the order passed under Section 153A which exceeds the tax on the total income determined under sub-section (1) of Section 143 in Page 2/5 https://www.mhc.tn.gov.in/judis T.C.A.No.988 of 2018 response to the notice under Section 153A, whereas the provisions of the Section 153A does not contemplate processing of Return of income under Section 143(1) filed in response to notice under Section 153A of the Income Tax Act?" 2. When the matter was 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 this appeal is less than the threshold limit. 3. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. (R.M.D., J.) (M.S.Q., J.) 24.08.2022 (1/2) r n s

Internet : Yes.

Index : Yes / No. Page 3/5 https://www.mhc.tn.gov.in/judis T.C.A.No.988 of 2018 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. r n s To 1. The Income Tax Appellate Tribunal Madras 'B' Bench, Chennai. 2. The Commissioner of Income Tax, (Appeals), Central-I, Chennai. 3. The Assistant Commissioner of Income Tax, Central Circle-IV(2), Chennai. T.C.A.No.988 of 2018 24.08.2022 Page 4/5 https://www.mhc.tn.gov.in/judis T.C.A.No.988 of 2018 (1/2) Page 5/5 https://www.mhc.tn.gov.in/judis

More judgments on Section 2(22)(e)

All 1,757 judgments and leading authorities on Section 2(22)(e) →

Recent GST High Court judgments

Search GST case law →