THE COMMISSIONER OF INCOME TAX vs. M/S. POYILAKADA FISHERIES LTD, KOLLAM.
What did the High Court hold?
The High Court held that the ITAT's dismissal of the appeal on the ground of the demand being below the monetary limit was appropriate. The Court noted that the Revenue had filed a statement indicating that the assessee had declared a loss in the subsequent eight years. Since losses can only be carried forward for eight years, the Court found it inexpedient to consider the appeal as it would not create any tax liability for the assessee in the subsequent years either, due to the consistent declaration of losses within the carry-over period. Therefore, the Income Tax Appeal was closed, leaving the question of law open. No order as to costs was made.
What were the facts?
The appeal concerns the assessment year for which the assessee, M/s. Poyilakada Fisheries Ltd., filed a revised return declaring a loss of Rs. 7,60,87,930/-, an increase from the initially declared loss of Rs. 3,50,00,000/-. The Income Tax Appellate Tribunal (ITAT) dismissed the appeal filed by the Revenue (The Commissioner of Income Tax, Thiruvananthapuram) on the grounds that the demand raised from the order appealed against was below the mandatory monetary limit prescribed by the Litigation Policy for maintaining an appeal before the Tribunal. The Revenue contended that the absence of a tax effect for the current assessment year should not be the sole determinant, as potential profits in subsequent years could trigger tax liability. The High Court directed the Revenue to provide details of subsequent years' returns.
What were the issues?
1. Whether the ITAT was justified in dismissing the appeal on the ground that the demand was below the monetary limit prescribed by the Litigation Policy, despite the potential for future tax implications arising from the revised return? (Question of law and fact, concerning the interpretation and application of the Litigation Policy). Assessee's Contention: Not recorded. Revenue's Contention: The mere fact that there was no tax effect for the subject assessment year would not determine the monetary limit for appeal, especially since the assessee could have earned profits in subsequent years, potentially exceeding the limit and making the propriety of the revised return a matter for consideration. The Revenue relied on the principle that the potential for future tax liability should be considered.
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Cause title — parties, addresses and appearances
JUDGMENT Vinod Chandran, J The Tribunal dismissed the appeal on the ground that the demand raised from the order appealed against is lower than the mandatory limit as prescribed under the Litigation Policy for maintaining an appeal before the Tribunal.
The question raised was with respect to the revised return filed declaring loss of Rs.7,60,87,930/- as against the earlier loss declared of Rs.3,50,00,000/-.
There was absolutely no tax effect for the subject assessment year. The learned Senior Standing Counsel, Government of India (Taxes) submitted that the mere fact that there was no tax effect for that year would not determine the monetory limit, especially since the assessee could have earned profits in the subsequent years and if that exceeded the limit, definitely there was a scope for consideration as to whether the revised return was proper or not. Hence we directed the revenue to file a statement as to the details of the returns for the subsequent year. The Department has today filed a statement clearly indicating that in the next eight years the assessee has been declaring a loss. Since loss could be carried over only for eight years, we do not think that the consideration of the appeal is expedient especially since this would not create any tax liability on the assessee for the subsequent years also for reason of the declaration of loss in the subsequent 8 years during which period alone the loss could be carried over. IT Appeal would stand closed leaving the question of law open. No order as to costs. K. Vinod Chandran, Judge Ashok Menon, Judge jma
Appendix — schedule of exhibits
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