ACIT 22(2), NAVI MUMBAI vs. SUDHIR PURSHOTTAM MEHTA, MUMBAI

The Revenue has raised the following grounds in its appeal.

(A.Y. 2010-11) ACIT V/s. Shri Sudhir Purshottan Mehta. “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the exemption of Rs.50,00,000/- u/s.54EC of the Income Tax Act 1961 even though the investment in bond was made by assessee beyond the prescribed period of six months as per co-operation agreement dated 18.06.2009 and also not appreciating the fact that assessee could not fulfilled the conditions laid down in section u/s.54EC of Income Tax Act, 1961.”

At the outset, learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.10 lac, therefore, by virtue of Circular No.21 of 2015 dated 10.12.2015 the appeal may be dismissed as not pressed by Revenue.

Learned DR submits that report was called for from the Assessing Officer and according to which the tax effect in this appeal is more than Rs.10 lac if education cess is also included. Therefore, she submits that since the tax effect is more than Rs.10 lac the appeal should not be dismissed following the circular of the CBDT referred above. In reply, the learned counsel for the assessee submits that the issue of whether the term ‘tax’ used for the Board’s Instruction is inclusive of cess or without including the cess has been considered by the Lucknow Bench Tribunal in the case of DCIT Vs. Yuvraj Singh in dated 23.12.2013 and submits the tax effect should be worked out without including cess. Therefore, he submits that if education cess is not included the tax effect in this appeal is less than Rs.10 lac and the Revenue’s appeal is liable to be dismissed in view of instruction of the CBDT.

We have heard the rival submissions and perused the working given by the learned DR and the decision of ITAT Luknow Bench placed before

It could be seen from the above, the tax effect calculated by the Assessing Officer including education cess is Rs.10,29,999/- if the education cess is excluded for arriving tax effect is less than Rs.10 lac.

On a perusal of the order of the ITAT Lucknow Bench in the case of DCIT vs. Yuvraj Singh in dated 23.12.2013, we observe that the issue as to whether the term ‘tax’ used in Board’s instruction is inclusive of cess or excluding cess has been considered and held as under: “ 5. We have considered the rival submissions, perused the material available on record and the judgment cited by Learned A.R. of the assessee. We find that as per Board's Instruction No.3 of 2011 dated February 9, 2011, it was prescribed that the Revenue should not file any appeal before the Tribunal if the tax effect does not exceed Rs.3 lakhs. Admittedly, in the present case, tax effect without including cess is Rs.3 lakhs only and the same is not exceeding Rs.3 lakhs. Now the only question to be decided is whether the term tax used in Board's Instruction is inclusive of cess or without including cess. In this regard, we are of the considered opinion that the judgment of Hon'ble Delhi High Court cited by learned A.R. of the assessee is relevant because in this case also, the term tax and cess were looked into in respect of income tax proceedings only. It is noted by Hon'ble Delhi High Court that as per the provisions of section 43B, applicable during financial year 85-86, the disallowance was to be made u/s.43B in respect of any sum payable by the assessee by way of tax or (A.Y. 2010-11) ACIT V/s. Shri Sudhir Purshottan Mehta. duty under any law and later on with effect from 01/04/89, such disallowance was required to be made in respect of any sum payable by the assessee by way of tax, duty or cess or fee by whatever name called. In that case, it was held by Hon'ble Delhi High Court that cess and cess surcharge do not fall within the characteristics of the tax. Following this judgment, we hold that in the present case also, for the purpose of deciding applicability of Board's Instruction, tax effect should be worked out without including cess an the present case, the present appeal of the Revenue is hit by the Board's Instruction and tax effect being not excess of Rs.3 lakhs, this appeal of the Revenue is not maintainable. As a result, the appeal of the Revenue stands dismissed.”

It could be seen from the above, the co-ordinate bench of the Tribunal held that for the purpose of deciding applicability of board’s instruction tax effect should be worked out without including cess. In this case, the tax effect excluding education cess is admittedly less than Rs.10 lac, therefore, respectfully following the said decision of the ITAT Lucknow Bench and in view of board’s circular No.21 of 2015 dated 10.12.2015, we dismissed the Revenue’s appeal.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 7th September, 2016