COMMISSIONER OF INCOME TAX IV vs. M/S.GOMATHY AND CO.,

TCA/989/2019HC Madras05 December 2019Bench: Hon`ble Mr Justice N. KIRUBAKARAN6 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Tax Case Appeal on the ground of tax effect. The Court noted that the tax effect in the case was less than Rs. 1 crore, which is the monetary limit for filing appeals before the High Court as stipulated in Circular No. 17/2019 dated 08.08.2019. Consequently, the appeal was dismissed without deciding the substantial questions of law framed. The Court granted liberty to the Revenue to seek restoration of the appeal if the tax effect is found to be above the prescribed limit, to be heard and decided on merits. No costs were awarded.

What were the facts?

The Revenue (Commissioner of Income Tax – IV, Chennai) filed an appeal before the High Court of Judicature at Madras against an order dated 30.05.2003 passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'B' Bench. The ITAT had dismissed the Revenue's appeal against the order of the CIT(A) for the assessment year 1991-92. The appeal before the High Court was admitted on substantial questions of law concerning the classification of expenditure as revenue expenditure or capital expenditure. The Revenue contended that the appeal should be dismissed as the tax effect was less than Rs. 1 crore, citing Circular No. 17/2019 dated 08.08.2019.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Tribunal was right in allowing a deduction of amounts spent on the replacement of old manual coners by new imported auto coners as revenue expenditure/current repairs? (Question of law) 2. Whether, in the facts and circumstances of the case, the replacement of independent complete machinery, which resulted in a reduction of labour and an increase in efficiency/capacity, can be treated as revenue expenditure? (Question of law) 3. Whether, in the facts and circumstances of the case, the Tribunal was right in treating the expenditure as revenue expenditure when the claim by the assessee was that it was repairs to existing machinery? (Question of law) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The appeal should be dismissed as the tax effect is less than Rs. 1 crore, which is the monetary limit for filing appeals before the High Court as per Circular No. 17/2019 dated 08.08.2019 issued by the CBDT.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.989 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 05.12.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.No.989 of 2019 Commissioner of Income Tax – IV, Chennai.

... Appellant Vs M/s.Gomathy & Co. Chennai. ... Respondent PRAYER : Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras “B” Bench, dated 30.05.2003 passed in ITA.No.125/Mds/95. For Appellant :Ms.S.Premalatha Junior standing counsel 1/6 http://www.judis.nic.in T.C.A.No.989 of 2019 J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J) This Tax Case Appeal has been preferred by the Revenue against the order dated 30.05.2003 passed in ITA.No.125/Mds/95 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment year 1991-92. 2.The order of the CIT(A) for the assessment year, 1991-92 was challenged before the Tribunal by the Revenue. The Appellate Tribunal rejected the contention of the Revenue and dismissed the same. Against the order of the Appellate Tribunal only, the present appeal has been filed. 3.The appeal is admitted on the following substantial questions of law : (i)Whether in the facts and circumstances of the case, the Tribunal was right in allowing a deducting of the amounts spent on replacement of old manual coners by new

imported

auto

coners

revenue expenditure/current repairs? 2/6 http://www.judis.nic.in T.C.A.No.989 of 2019 (ii)Whether in the facts and circumstances of the case, replacement of independent complete machinery which resulted in reduction of labour and increase of efficiency/capacity can be treated as revenue expenditure? (iii)Whether in the facts and circumstances of the case, the Tribunal was right in treating the expenditure as a revenue expenditure, when the claim by the assessee was that it was repairs to existing machinery? 4.Ms.S.Premalatha, learned Standing Counsel 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 this case, tax effect is less than Rs.1 crore and therefore, the case has to be dismissed. 3/6 http://www.judis.nic.in T.C.A.No.989 of 2019 5.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 3. Before Supreme Court 2,00,00,000 6.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 Appeal is 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 4/6 http://www.judis.nic.in T.C.A.No.989 of 2019 circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (NKKJ) (PVJ) 05.12.2019 sai To 1.The Commissioner of Income Tax – I, 63, Race Course Road, Coimbatore 641 018. 2.Income Tax Appellate Tribunal 'B' Bench, Chennai. 5/6 http://www.judis.nic.in T.C.A.No.989 of 2019 N.KIRUBAKARAN, J. and P.VELMURUGAN

, J.

sai T.C.A.No.720 of 2019 Dated : 05.12.2019 6/6 http://www.judis.nic.in

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