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Income Tax Appellate Tribunal, JAIPUR BENCHES,’A’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 480/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 480/JP/2019 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke Assistant Commissioner of Income Smt. Abda Bai, Vs. Tax, Circle-1, Kota 203, Patel Ji Ka Makan, Dhakadkhedi, Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: CCMPB3745B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rohan Sogani (CA) jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 11/05/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/06/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by the revenue aggrieved from the order of the Commissioner of Income Tax (Appeal)- Kota [ Here in after referred as Ld. CIT(A) ] for the assessment year 2015-16 dated 11.01.2019 which in turn arises from the order passed by the assessing officer passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 10.12.2017.
2 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai
The hearing of the appeal was concluded through video conference by both the parties in view of the prevailing situation of Covid-19 Pandemic.
The revenue has taken following grounds in this appeal; “1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting addition made by the AO of Rs. 41,50,319/- on account of disallowance of deduction u/s 54F without appreciating the facts discussed by the AO. AO in the assessment order.
On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting addition of Rs. 2,32,310/- made by AO on account of commission on accommodation of entry without appreciating the facts discussed by the AO in the assessment order.
The appellant craves liberty to raise additional ground and to modify amend the ground of appeal at the time of hearing.”
This Bench has disposed, the appeal of the assessee holding that appeal of the department is not maintainable being monetary limit is less/not exceeding Rs. 50,00,000/- and therefore, the appeal was dismissed.
Thereafter, revenue filed MA No. 41/JP/2020 which has been disposed on 07.08.2020 wherein the ld. DR argued that in the present case, the tax effect is Rs. 55,01,470/- which is above the prescribed monetary limit prescribed by the CBDT vide the aforesaid circular No. 17 of 2019 and accordingly, the order passed by the Bench is recalled to decide the issue on merits.
3 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai 6. During the course of hearing, the ld. AR of the assessee argued that the department has calculated the tax effect wrongly. In support of his contention he has submitted that:-
“We are in receipt of the report of the ld. AO, as regards the calculation of the tax effect for the caption appeal, filed by the Department before the Hon’ble Bench. It is submitted that in the report, ld. AO has committed error in the calculating tax effect. In this regard, below mentioned submissions may please be considered: - 1. Assessee, during the relevant previous year, sold land, as part of Long-Term Capital Asset, and earned Capital Gain, before claiming exemption under Section 54F and Section 54B, amounting to Rs. 2,02,84,034. At time of filing the return of income, assessee claimed benefit of Section 54B, amounting to Rs. 1,40,05,701, and under Section 54F, amounting to Rs. 41,50,319, totalling to Rs. 1,81,56,020 [Rs. 1,40,05,701+ Rs. 41,50,319].
Accordingly, Net Capital Gain amount of Rs. 21,28,014 [Rs. 2,02,84,034 - Rs. 1,81,56,020] was calculated by the assessee as part of capital gains and offered for tax, while filing the return of income, for the relevant previous year.
It may be noted that Capital Gain arising out of sale of land, being Long Term Capital Asset, was the only taxable income derived by the assessee, for the relevant previous year.
During first appellate proceedings, revised claim of the assessee, in terms of enhanced deduction under Section 54B of Rs. 1,76,04,400, as against Rs. 1,40,05,701, claimed in the return of income, was accepted by the ld. CIT(A).
Resultantly, assessee after the first appellate proceedings was entitled to total exemption under Section 54B of Rs. 1,76,04,400, and under Section 54F of Rs. 41,50,319, with total exemption of Rs. 2,17,54,719 [Rs. 1,76,04,400 + Rs. 41,50,319].
As the assessee earned claimed Capital Gain, before claiming exemption under Section 54B and 54F, of Rs. 2,02,84,034, total benefit
4 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai under both the sections [i.e. 54B and 54F] could not be more than such amount i.e. Rs. 2,02,84,034.
Attention is also drawn towards Circular issued by CBDT, Circular No. 3/2018, in which at Para 4, of the said circular the mechanism of calculating tax effect has been specified. According to which tax effect means: - TAX ON INCOME TOTAL INCOME ASSESSED
MINUS
TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEING REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED. 8. In the present case, tax on total income assessed is Rs. 45,96,362. Capital Again Income Assessed by AO of which relief provided by CIT(A) 2,02,84,034 Gross Tax (20% on Long Term Capital Gain) 40,56,807 Surcharge 4,05,681 Education Cess 1,33,875 Tax Effect (Which is less than 50 Lacs) 45,96,362
Total income minus income in respect of the issues against which appeal is intended to be filed is equal to Rs. 2,02,84,034 minus Rs. 2,02,84,034. In the present case, “income in respect of the issues against which appeal is intended to be filed” figure cannot be considered as Rs 2,17,54,719, as the maximum benefit available to the assessee is Rs. 2,02,84,034. Even if such figure is considered to be Rs. 2,17,54,719, and applied in the said calculation, then the figure would be in negative. Such negative figure has to be considered as zero. This is for the reason that the assessee would not be able to derive any benefit out of the negative amount for the current as well as in the future years and the entire excess claim represented by such figure would have to be forgone by the assessee.
Ld. AO, in his report, at Page 2, is adding the amount of the claim allowed by ld. CIT(A), over and above the amount of assessed income, for the purpose of calculating tax effect, which is incorrect and not in accordance with the CDBT circular, in this regard.
5 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai Accordingly, the tax effect calculated, as per the CDBT circular is Rs. 45.96 Lacs, being less than Rs. 50 lacs. Thus, present appeal of the Department deserves to be dismissed.
In addition to the above written argument, ld. AR of the assessee also argued before us that the deduction claimed by the assessee was considered to be at higher figure than decided by the ld. Assessing Officer for the assessment year under consideration by the CIT(A). Merely that excess deduction decided in favour of the assessee will not change the taxable income or income assessed by the assessing officer, and so the tax effect too. Therefore, taxable income does not change whereas the deduction that has been considered under the provisions of section 54D and 54F and assessed income is remained same in that circumstance. The ld. AR of the assessee further argued that this excess deduction is neither any income nor the loss or like unabsorbed depreciation carried forward to subsequent year and merely excess investment arising out of capital gain will not generate any further benefit. In the light of that back ground as per para 4 of CBDT circular dated 11th July 2018. The tax effect is to be calculated strictly in accordance with the income, for sake of brevity for calculation of tax effect para-No. 4 of CBDT circular is reproduced herein below.
“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 issues against which appeal is intended to be filed (hereinafter referred to as ‘disputed issues’). Further, ‘tax effect’ shall be tax including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax
6 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.”
The income of the assessee chargeable at Rs. 2,02,84,034/- and deduction was decided to be allowable at Rs. 2,17,54,719/-. This additional investment is not allowed to be carried forward for benefit of future income, so the tax effect is required to be calculated in the consonance to the ultimate income under a particular head chargeable to tax and not the deduction allowable. Therefore, the CBDT Circular should be interpreted, accordingly hence the ld. AR heavily argued that CBDT Circular No.03/2018 should be read and interpreted in accordance with the income chargeable to tax but not to the extent of deduction allowable to the assessee. If this additional deduction if it is allowed to be carried forward against the future income then the contention of department is maintainable. But there is no such benefit arising out of its additional investment with that of with the tax effect and so the same is to be calculated in accordance with income chargeable to tax only which in this case comes to below Rs. 50 lacs.
Per contra, the ld. DR drawn our attention to AO ‘s report which has been read and relied upon. The same is extracted herein below for the sake brevity of the facts:
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8 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai
9 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai
The ld. DR relied on the above submission of the AO and heavily argued that since the ld. CIT(A) has given the benefit of additional deduction to the extent of Rs. 35,98,699/- as calculated in point no. 11 above in the letter of the AO. It is not denied by the ld. DR that the assessed income is at Rs. 2,02,84,034/- and tax on that assessed income comes to Rs. 45,28,383/-. In the report of the AO the tax has been calculated on the additional relief in the form of investments granted by ld. CIT(A) at differential value of Rs. 35,98,699/- and consequently the additional tax effect worked out to Rs. 8,15,464/- resultantly tax liability as computed comes to Rs. 53,43,847/- by the
10 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai department. Therefore, the ld. DR submitted that the tax effect is in excess of Rs. 50,00,000/- and therefore, the appeal is maintainable.
We have heard the rival contentions and perused the material placed on record. The only issue raised by both the party is maintainability of appeal in terms of CBDT’s instruction and calculation of tax effect. In this case the issue is of calculation of tax effect whether it is below Rs. 50 lac or not?. It is very much clear from the CBDT’s instruction that the tax effected is to be calculated based on the assessed income. It is evident from the AO’s letter dated 09.05.2022 that the assessed income is at Rs. 2,02,84,034/- ( Sr No. 4 of table -3 of the letter dated 09.05.2022) and the tax as computed on the said table at Sr. no. 5 is calculated at Rs. 45,28,383/-. This calculation is submitted by the AO. The only contention raised by the AO in that letter is that the CIT(A) has given the additional benefit u/s. 54B & 54F for additional sum of Rs. 35,98,699/- and the AO has calculated the tax on this additional deduction allowed by the CIT(A) and the ld. DR heavily relied upon that calculation done by the AO is correct and the tax effect is above Rs. 50 lacs.
Au contraire, the ld. AR argued that in any case by allowing the excess deduction the addition made by the AO will not be changed and thereby the assessed income will not change. Thus, tax amount is to be calculated at assessed income and not the allowable deduction amount. Merely the amount allowable decided more than the income assessed the tax liability did not change. Thus, the contention and calculation made by the department need to be restricted to the amount assessed in the assessment order and the tax is required to be calculated
11 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai accordingly. Here we inclined to agree that the deduction claimed are not in the nature of amount unutilized benefit or claim and is not carried over to the next year for deduction, if so the contention of the department has force, but in the absence this excess amount has no benefit coming to the assessee directly or indirectly. Thus, the tax effected is to be calculated based on the assessed income which in this case is at Rs. 45,96,362/-. This amount being less than 50,00,000/- limit this appeal of the revenue is not maintainable in accordance with above CBDT circular.
In terms of the above observations the appeal of the department is not maintainable and is hereby dismissed.
In the result the appeal of the revenue is dismissed.
Order pronounced in the open Court on 20/06/2022.
Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20/06/2022 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Assistant Commissioner of Income Tax, Circle-01, Kota 2. izR;FkhZ@ The Respondent- Smt. Abda Bai, Kota 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत.
12 ITA No. 480/JP/2019 ACIT vs. Smt. Abda Bai 6. xkMZ QkbZy@ Guard File {ITA No. 480/JP/2019} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत