ACIT, NEW DELHI vs. M/S. DALLAS FINANCE LTD., NEW DELHI

Following grounds have been raised in this appeal:

During the course of hearing the ld. Counsel for the assessee at the very outset stated that the issue involved in this case is as to whether the income was to be treated as business income or Short Term Capital Gain u/s 111A of the Income Tax Act, 1961 (hereinafter referred to as the Act). It was stated that the tax effect in this case comes less than Rs. 10,00,000/-, therefore, the department ought not to have filed the appeal. The calculations for the tax effect were given as under: STCG of Rs.45,35,289/- Tax already paid by assessee @ 10% under 4,53,529/- section 111A. Add Surcharge @ 10% 45,353/- 4,98,882/- Add: Education Cess @ 2% 9,978/- Dallas Finance Ltd. Total Tax paid by assessee in returned 5,08,860/- income Tax Calculated by learned AO in the order of assessment. Tax on Rs.45,35,289/- @ 30% 13,60,587/- Total Tax worked out by AO in assessment 13,60,587/- order Less: Tax already paid as returned income 5,08,860/- Net Tax Effect for which Revenue is in 8,51,727/- Appeal before Hon’ble ITAT 5. In his rival submissions the ld. DR submitted that the tax effect in this case will be more than Rs.10,00,000/- if the surcharge & cess is treated as a part of the tax. In his rejoinder the ld. Counsel for the assessee submitted that the cess and surcharge cannot be a part of the tax as per the ratio laid down by the various benches of the ITAT. The reliance was placed on the decision of the ITAT Mumbai Benches “D:”, Mumbai, in the case of DCIT Vs M/s Dome Bell Electronics India Ltd. in vide order dated 22.07.2016 (copy of the aforesaid order was furnished which is placed on record).

We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that on the issue relating to the inclusion of the surcharge and education cess for the Dallas Finance Ltd. determination, the tax effect, the Coordinate Bench of ITAT Mumbai in the case of DCIT Vs M/s Dome Bell Electronics India Ltd. in (supra) held as under: “3.2. We have gone through the facts of this case and also gone through the aforesaid circular as well as sub-section (43) of section 2 of the Act which defines word ‘tax’. It is noted that the identical issue came up before the Hon’ble Chennai Bench wherein Hon’ble Bench held as under: “We find that in clause (4) of Instruction No.5 of 2008 dated 15th May, 2008 of CBDT, tax effect is defined as under:- “4. For this purpose, “tax effect” means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issue against which appeal is intended to be filed (hereafter referred to as “disputed issues”). However, the tax will not include any interest thereon. Similarly, in loss cases notional tax effect should be taken into account. In the case of penalty orders, the tax effect will mean 3 M.P. No. 155/Mds/11 quantum of penalty deleted or reduced in the order to be appealed against.” Nothing has been mentioned in the above definition to show that tax will include Dallas Finance Ltd. surcharge for the purpose of applying the said Circular. Now if we look at the definition of “tax” as per sub-section (43) of Section 2 of Income-tax Act, 1961, it runs as under:- “(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income- tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under Section 115WA]” It is clear that tax, as per the above definition, would include supertax and also fringe benefit tax but not surcharge. Admittedly, here, the tax was only Rs. 2,90,250/- which is below the limit of Rs.3 lakhs prescribed in the Circular for filing appeals before this Tribunal. Resultantly, we do not find any mistake in the order of this Tribunal much less any mistake apparent on record. 3.3. We have also gone through sub-section (43) of section 2 which defines ‘tax’. The perusal of the definition shows that whatever was intended to be included in tax has been mentioned therein. When the legislature has mentioned the words ‘super- tax’ and ‘fringe benefit tax’, then, it could have also mentioned the words ‘surcharge’ and Dallas Finance Ltd. ‘education cess’ as well, if there was any intention to include them in the word ‘tax’. Thus, we respectfully agree with the decision taken by the Chennai Bench. In our view, surcharge and education cess shall not be include in word ‘tax’ for the purpose of examining of tax effect as envisaged in circular of Board dt 10th December 2015 No.21/2015. Thus, the tax effect being less than 10 lakhs, impugned appeal filed by the revenue is not maintainable and therefore same is hereby dismissed. Our order has no effect on the merits of this case.”

So, respectfully following the aforesaid view of the Coordinate Bench, we do not see merit in this contention of the ld. DR that the surcharge and the cess is a part of the tax.

After considering the submissions of both the parties and the material available on record, it is noticed that Section 268A has been inserted by the Finance Act, 2008 with retrospective effect from 01/04/99. The said section 268 of the Act provides that the Board may issue instruction or directions to the other income-tax authorities fixing monetary limits for not filing the appeals before the Appellate Tribunal or the Courts, said instructions/directions are binding on the income tax authorities.

It is noticed that the CBDT has issued Circular No.21 of 2015 dated 10.12.2015, vide which it has revised the monetary limit to Rs.10,00,000/- for not filing the appeal before the Tribunal. The relevant portion of the said circular reads as under: “…………………….. ……………………...

Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: S. No Appeals in Income-tax matter Monetary Limit (in Rs) 1 Before Appellate Tribunal 10,00,000/- 2 Before High Court 20,00,000/- 3 Before Supreme Court 25,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. ………………………… ………………………… 9. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section Dallas Finance Ltd. 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.

From Clause 10 of the above said circular it is clear that these instructions are applicable to the pending appeals also and as per clause 3, there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than Rs.10,00,000/-. These instructions are operative retrospectively to the pending appeals.

Keeping in view the CBDT Circular No.21 of 2015 dated 10.12.2015 and also the provisions of Section 268A of Income Tax Act, 1961, we are of the view that the Revenue should not have filed the instant appeal before the Tribunal.

In view of the above, without going into merits of the case, the appeal filed by the department is dismissed.