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Facts
The Revenue filed an appeal against the order of the CIT(A)/NFAC for Assessment Year 2017-18. The grounds raised by the Revenue primarily challenge the deletion of additions and disallowances made by the Assessing Officer, particularly concerning Section 14A expenses and capitalization of ropeway expenses.
Held
The Tribunal held that the tax effect involved in the present appeal was below the monetary limit prescribed by the CBDT for filing appeals. As there were no exceptions applicable, the appeal was found to be not maintainable.
Key Issues
Whether the appeal filed by the Revenue is maintainable considering the tax effect is below the prescribed monetary limit by the CBDT, as per Circular No. 17/2019.
Sections Cited
14A, 8D, 268A
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Order PER LALIET KUMAR, J.M: This appeal has been filed by the Revenue against the order passed by the Ld. CIT(A)/NFAC, Delhi dated 13.06.2023 for the Assessment Year 2017-18. 2. In the present appeal Revenue has raised the following grounds:
1. 1. 1. 1. 1. That the Ld. CIT(A) has erred in deleting t-he addition of Rs. 8,50,542/- without appreciating the facts of the case.
2. That the Ld. CIT(A) is not justified in not upholding. disallowance of Rs. 8,50,547 /- u/s 14A of the Income Tax Act on the ground that disallowance cannot be made where there is no exempt income without appreciating the fact that applicability of section 14A or Rure 8D does not depend on earning of income as held by Supreme Court in the case of CIT vs. Rajender prasad Moody (1978), 115 ITR 519.
3. That the Ld. CIT(A) has erred in ignoring the legislative intent expressed in CBDT,s Circular no. 5/2074 dated 11.02.2014, which explicitly states that expenses relatable to earning of exempt income have to be considered for disallowance irrespective of the fact whether any such income has been earned during the Financial year or not as confirmed by Apex court in Maxopp Investment Ltd. vs. CIT, 91 Taxman.com 154[SC).
4. That the Ld CIT(A) has erred in holding that disall0wance u/s 14A cannot be made where there is no exempt income, when Supreme Court has upheld the principles of apportionment and department is in SLP on the same issue in the case of Moderate Leasing and capital Services Pvt. Ltd. in A.Y. 2009-10 and Matrix Cellular Services (p)Ltd. in and SLP has also been approved against the decision of Hon’ble Jurisdiction High court in the case of M/s Vardhman Chemtech Pvt. Ltd. in ITANo.322/2016.
5. That the Ld. CIT(A) has erred in ignoring the Legislative intent expressed in clarifactory explanation inserted in section 14A as, "notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not a accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income.
6. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,10,432/ made on account of capitalization of ropeway expenses ignoring the material aspect that the expenditure incurred was capital in nature and was giving enduring benefit to the Assessee.
7. That the Ld. CIT(A) has erred in accepting the plea of the assessee that the ropeway cable change in every year when the assessee has failed to bring on the record the relevant evidences establishing the fact that ropeway is actually have a life span of less than one year.
At the outset of the hearing, the Ld. AR for the assessee submitted that the tax effect involved in the present appeal filed by the Revenue is less than Rs. 60,00,000/-. It was submitted that as per the monetary limits prescribed by the Central Board of Direct Taxes (CBDT), the Department is precluded from filing appeals before the Income Tax Appellate Tribunal where the tax effect does not exceed Rs. 60,00,000/-.
The Ld. AR drew our attention to the computation of the tax effect in the present case and submitted that the tax effect involved in the issues raised by the Revenue is admittedly below the threshold limit prescribed by the CBDT. It was further submitted that the present appeal is covered by CBDT Circular No. 17/2019 dated 08.08.2019, issued under section 268A of the Income Tax Act, 1961, whereby the monetary limit for filing departmental appeals before the ITAT has been enhanced to Rs. 60,00,000/-.
The Ld. DR, though relying upon the order of the Assessing Officer, did not dispute the factual position that the tax effect involved in the present appeal is below the monetary limit prescribed by the CBDT.
We have heard the rival submissions and perused the material available on record. The CBDT, vide Circular No. 17/2019 dated 08.08.2019, issued under section 268A of the Act, has revised the monetary limits for filing of appeals by the Department before various appellate forums and has prescribed that no appeal shall be filed before the Income Tax Appellate Tribunal where the tax effect does not exceed Rs. 60,00,000/-. The said circular is applicable to pending appeals as well.
In the present case, it is an admitted position that the tax effect involved in the appeal filed by the Revenue is less than the prescribed monetary limit of Rs. 60,00,000/-. Further, nothing has been brought on record by the Revenue to show that the case falls under any of the exceptions provided in the aforesaid circular.
7.1 In view of the binding instructions issued by the CBDT under section 268A of the Act and considering the fact that the tax effect in the present case is below the prescribed monetary limit, we hold that the present appeal filed by the Revenue is not maintainable. Accordingly, the appeal filed by the Revenue is dismissed in limine on account of low tax effect, without going into the merits of the case.
However, it is made clear that if it is subsequently found that the tax effect exceeds the prescribed limit or the case falls within any of the exceptions provided in the CBDT circular, the Revenue shall be at liberty to seek recall of this order in accordance with law.