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The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission by the Revenue's counsel that the appeal was not being pursued due to a low tax effect, as per CBDT Circular No. 17/2019. This circular increased the monetary limit for filing or pursuing appeals before the High Court to Rs. 1 Crore, and the tax effect in this particular case was below this limit. The Court explicitly stated that the substantial question of law framed in the appeal was left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit fixed in the circular, allowing for a decision on merits. No costs were awarded.
The High Court held that the Tribunal was correct in dismissing the Revenue's appeals. The Court found that the software expenses did not form part of the profit-making apparatus but merely facilitated the assessee's trading operations, enabling more efficient or profitable business conduct. Regarding license fees, the Tribunal found they were valid for only one year and, while useful for various business functions, did not confer an enduring benefit. The Court relied on several precedents, including CIT vs. Raychem RPG Ltd., CIT vs. Toyota Kirloskar Motors (P.) Ltd., CIT, Bangalore vs. Robert Bosh India Ltd., Oriental Bank of Commerce vs. Additional CIT, CIT, Trichy vs. Lakshmi Vilas Bank Ltd., and KGISL Technologies and Infrastructures Private Limited vs. Assistant/Deputy Commissioner of Income Tax, to support the view that software expenses and license fees for software with limited shelf life or that facilitate routine operations without providing enduring benefits are allowable as revenue expenditure. The substantial questions of law were answered against the Revenue.
The High Court held that the substantial questions of law raised in the appeal were identical to those pending before the Supreme Court in Assistant Commissioner of Income Tax v. Micro Labs Ltd. Since the Supreme Court's decision on these identical issues was awaited, and a similar matter was also pending before a Full Bench of the Madras High Court, the High Court deemed it unnecessary to keep the appeal pending. Consequently, the appeal was allowed, and the orders of the Tribunal and the Commissioner of Income Tax (Appeals) were set aside. The matter was restored to the file of the Assessing Officer, who was directed to await the decision of the larger Bench of the Supreme Court. The substantial questions of law were left undecided.
The High Court held that the Tribunal's decision on the applicability of Section 14A and Rule 8D was rendered before the Supreme Court's judgment in Commissioner of Income Tax, Mumbai v. Essar Teleholdings Ltd. (2018). The Supreme Court held that Rule 8D has a prospective operation and cannot be applied to assessment years prior to AY 2008-09. Given this, the High Court found that the Tribunal's findings on these issues required interference. The Court also noted the assessee's argument regarding low tax effect. Consequently, the High Court decided to remit the matter to the Tribunal for fresh consideration on issues 1 and 2, including the low tax effect argument. Regarding substantial questions of law 3, 4, and 5 concerning additional depreciation, the High Court noted that these were covered by a previous decision of the same High Court in CIT, Chennai v. Aztec Auto (P) Ltd. (2020), which was upheld by the Supreme Court. Following this precedent, the High Court decided these questions against the Revenue.
The High Court allowed the appeal filed by the Revenue and set aside the impugned order of the ITAT. The Court held that the ITAT was not justified in remanding the matter to the Assessing Officer. The Tribunal's power of remand, while significant, is not to be exercised routinely and should be used sparingly when facts warrant it. The Court noted that the Tribunal did not interfere with the factual findings of the AO and CIT(A) regarding the transaction done by the assessee. The Tribunal failed to record reasons as to why the matter should be remanded and why it could not decide the factual issue on the available material. The Court found that the assessee had not disputed the factual position brought out by the AO and CIT(A) before the lower authorities or the Tribunal. The Court relied on its earlier decision in CIT Vs. Manish D.Jain (HUF) and other precedents, which held that when all evidence has been produced and the lower authorities have given a definite finding, an order of remand by the Tribunal is invalid. The Court concluded that the ITAT had failed to exercise its jurisdiction in the manner known to law and that the order of remand was wholly unjustified, devoid of reasons, and unsustainable. The substantial questions of law were answered in favour of the Revenue.
The High Court noted that the assessee had availed the benefit under the Direct Tax Vivad Se Vishwas Act, 2020, by filing the requisite forms. Consequently, the Court deemed it unnecessary to decide the substantial question of law. The appeal was disposed of with the observation that the Department should process the assessee's application under the Act at the earliest. The assessee was granted liberty to restore the appeal in the event the ultimate decision on their declaration under Section 4 of the Vivad Se Vishwas Act is not in their favour. The substantial question of law was left undecided.
The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission by the Revenue that the appeal was not being pursued due to a low tax effect, as per CBDT Circular No. 17/2019. The Court noted that the monetary limit for filing or pursuing an appeal before the High Court had been increased to Rs. 1 Crore by the said circular and that the tax effect in this case was less than the threshold limit. Consequently, the appeal was dismissed on the ground of low tax effect. The substantial questions of law framed were left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were awarded.
The High Court did not decide the substantial questions of law. It noted that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3. Consequently, the Court found no useful purpose in keeping the appeal pending. The Tax Case Appeal was disposed of with the observation that the Department should process the assessee's application under the Vivad Se Vishwas Act at the earliest. The assessee was granted liberty to restore the appeal if the ultimate decision under the Act was not in their favour. In such an event, the Registry was directed to entertain a Miscellaneous Petition for Restoration without insisting on a condonation of delay application. The substantial questions of law were left undecided.
The High Court decided not to adjudicate the substantial questions of law due to the enactment of the Direct Tax Vivad Se Vishwas Act, 2020, and the assessee's subsequent availing of its benefits, evidenced by the issuance of Form-3 on February 10, 2021. The Court held that keeping the appeal pending would serve no useful purpose. However, to safeguard the assessee's interest in case the decision under the Vivad Se Vishwas Act is unfavorable, the Court granted liberty to restore the appeal. The appeal was disposed of with the observation that the Department should process the assessee's application under the Act promptly. The substantial questions of law were expressly left undecided. The operative direction was to dispose of the appeal with liberty to restore.
The High Court did not decide the substantial questions of law. It was informed that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3. Consequently, the Court found no useful purpose in keeping the appeal pending. The appeal was disposed of with the observation that the Department should process the assessee's application under the Vivad Se Vishwas Act at the earliest. The assessee was granted liberty to restore the appeal if the ultimate decision under the Act was not in their favour. In such an event, the Registry was directed to entertain a Miscellaneous Petition for Restoration without insisting on a condonation of delay application. The substantial questions of law were left undecided.
The High Court did not decide the substantial questions of law. It was informed that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3 on February 10, 2021. Consequently, the Court found no useful purpose in keeping the appeal pending. The Tax Case Appeal was disposed of on the ground that the assessee had availed the Vivad Se Vishwas Scheme. The Department was directed to process the application at the earliest. The assessee was granted liberty to restore the appeal if the ultimate decision under the Vivad Se Vishwas Act was not in their favour. In such an event, the Registry was to entertain a Miscellaneous Petition for Restoration without insisting on condonation of delay. The substantial questions of law were left undecided.
The High Court did not decide the substantial questions of law. It noted that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3. Consequently, the Court found no useful purpose in keeping the appeal pending. The Tax Case Appeal was disposed of on the ground that the assessee had availed the scheme. The Department was directed to process the application under the Act at the earliest. The assessee was granted liberty to restore the appeal if the ultimate decision under the Vivad Se Vishwas Act was not in their favour. In such an event, the Registry was to entertain a Miscellaneous Petition for Restoration without insisting on condonation of delay. The substantial questions of law were left undecided.
The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission made by the Revenue's counsel regarding the low tax effect in the case, which was below the threshold limit stipulated in CBDT Circular No. 17/2019. Consequently, the substantial questions of law framed by the Revenue were left open. The Court granted liberty to the Revenue to mention the case for restoration if the tax effect was found to be above the threshold limit. No costs were awarded. The Tribunal's order dated 01.06.2016 was not decided on merits.
The High Court held that the Tribunal was correct in its conclusion. The Court referred to the explanatory notes on the Finance Act, 1994, which indicated that the amendment to Section 2(42A) aimed to provide a level playing field for units of UTI, mutual funds, and securities traded on recognized stock exchanges with company shares, by reducing the holding period to 12 months. The Court noted that the definition of 'securities' in the Securities Contracts (Regulation) Act, 1956, was relevant. The Court also cited a previous High Court decision and a Tribunal decision in Analjit Singh vs. Deputy Commissioner of Income Tax, which held that the term 'shares held in a company' does not distinguish between listed or unlisted shares, and the condition of being listed on a recognized stock exchange applies to 'any other security'. Furthermore, a CBDT Circular No. 01/2014 clarified that all shares, whether listed or unlisted, enjoyed the benefit of a shorter holding period for long-term capital gains. Therefore, the appeal by the Revenue was dismissed.
The High Court held that the challenge to the reopening proceedings had become academic in light of the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax. The Supreme Court had ruled that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for the resale/use of computer software through EULAs/distribution agreements are not royalty payments for the use of copyright and do not give rise to taxable income in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. Given this binding precedent, the High Court found the reopening unsustainable in law. The appeal was allowed, and the reopening was held to be unsustainable. The substantial question of law was answered accordingly. No costs were awarded.
The High Court held that the substantial questions of law raised in the appeal had already been answered in favour of the assessee by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021 SCC Online SC 159). The Supreme Court, in that decision, held that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to any income taxable in India, and therefore, persons referred to in Section 195 of the Income Tax Act were not liable to deduct TDS under Section 195. This ruling applied to all four categories of cases enumerated by the Supreme Court. Accordingly, the High Court dismissed the appeal filed by the Revenue and answered the substantial questions of law against the Revenue.
The High Court held that the challenge to the reopening proceedings under Section 147 of the Income Tax Act had become academic in light of the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another. The Supreme Court had ruled that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to taxable income in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. The High Court found that since the Supreme Court's answer to the legal question was in favour of the assessee, the reopening, even if upheld by the Tribunal, was unsustainable in law. Therefore, the Tax Case Appeal was allowed, and the reopening was held to be unsustainable.
The High Court held that substantial questions of law Nos. 1 to 4 are answered against the Revenue, following the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax. The Supreme Court held that payments made by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for the resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to taxable income in India. Consequently, persons under Section 195 were not liable to deduct TDS. For substantial questions of law Nos. 5 and 6, the High Court answered them against the Revenue, following the Supreme Court's decision in Commissioner of Income-tax, Central-III v. HCL Technologies Ltd. This decision held that the definition of 'total turnover' for Section 10A deduction does not envisage reduction of expenses and the technical meaning of total turnover should be considered. Thus, the appeal was dismissed.
The High Court held that substantial questions of law Nos. 1 to 4 are answered against the Revenue, following the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another. The Supreme Court held that payments made by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to taxable income in India, and persons referred to in Section 195 of the Income Tax Act were not liable to deduct TDS. The High Court further held that substantial questions of law Nos. 5 and 6 are also answered against the Revenue, by following the Supreme Court's decision in Commissioner of Income-tax, Central-III v. HCL Technologies Ltd. This decision clarified that the definition of 'total turnover' under Sections 80HHC and 80HHE should not be adopted for Section 10A, and the technical meaning of total turnover, which does not envisage expense reduction, should be considered for Section 10A deductions. The appeal was dismissed.
The High Court held that substantial questions of law Nos. 1 to 4 were answered against the Revenue, following the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021 SCC Online SC 159). In this decision, the Supreme Court held that payments made by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to taxable income in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. The High Court further held that substantial questions of law Nos. 5 and 6 were also answered against the Revenue, by following the Supreme Court's decision in Commissioner of Income-tax, Central-III v. HCL Technologies Ltd. (2018) 93 taxmann.com 33 (SC). This decision clarified that the definition of 'total turnover' under Sections 80HHC and 80HHE should not be adopted for Section 10A, and the technical meaning of total turnover, which does not envisage reduction of expenses, should be considered for computing deduction under Section 10A. The appeal was dismissed.
The High Court held that the challenge to the reopening proceedings under Section 147 of the Income Tax Act had become academic in light of the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax. The Supreme Court had ruled that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to income taxable in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. Given this Supreme Court ruling, which answered the substantive question in favour of the assessee, the High Court found the reopening proceedings to be unsustainable in law. Therefore, the appeal was allowed, and the reopening was held to be invalid.
The High Court held that substantial questions of law Nos. 1 to 4 were to be answered against the Revenue, following the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021 SCC Online SC 159). The Supreme Court held that payments made by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to taxable income in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. The Court also held that the provisions of Section 9(1)(vi) of the Income Tax Act, dealing with royalty, were not applicable in the facts of these cases. For substantial questions of law Nos. 5 and 6, the High Court held they were to be answered against the Revenue by following the Supreme Court's decision in Commissioner of Income-tax, Central-III v. HCL Technologies Ltd. (2018) 93 taxmann.com 33 (SC). This decision clarified that the definition of 'total turnover' under Sections 80HHC and 80HHE should not be adopted for Section 10A, and the technical meaning of 'total turnover' without expense reduction should be considered for Section 10A deductions. The appeal was dismissed.
The High Court held that the substantial questions of law raised in the appeal had been answered in favour of the assessee in the Supreme Court's decision in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021) SCC Online SC 159. The Supreme Court, in that judgment, had categorized various scenarios involving the purchase and use of computer software. The Supreme Court concluded that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to taxable income in India, and persons referred to in Section 195 were not liable to deduct TDS. The High Court, following this precedent, dismissed the appeal filed by the Revenue and answered the substantial questions of law against the Revenue.
The High Court held that the substantial questions of law raised in the appeal had been answered in favour of the assessee in the Supreme Court's decision in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another reported in (2021) SCC Online SC 159. The Supreme Court, in that judgment, dealt with four categories of cases concerning payments for computer software. The Supreme Court held that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for the resale/use of computer software through EULAs/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to any income taxable in India, and therefore, persons referred to in Section 195 of the Income Tax Act were not liable to deduct TDS under Section 195. The High Court followed this precedent and dismissed the appeal, answering the substantial questions of law against the Revenue. No costs were awarded.
The High Court held that the substantial questions of law raised in the appeal had been answered in favour of the assessee in the Supreme Court's decision in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021 SCC Online SC 159). Following this decision, the High Court dismissed the appeal filed by the Revenue and answered the substantial questions of law against the Revenue. The Supreme Court in the cited case held that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for the resale/use of computer software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to taxable income in India. Consequently, persons referred to in Section 195 of the Income Tax Act were not liable to deduct TDS under Section 195. This ruling applied to all four categories of cases enumerated by the Supreme Court.
The High Court, following the decision of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021 SCC Online SC 159), dismissed the appeal filed by the Revenue. The Supreme Court, in its judgment, categorized software transactions into four types and held that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through End User License Agreements (EULAs)/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to any income taxable in India, and therefore, persons referred to in Section 195 of the Income Tax Act are not liable to deduct TDS. This ruling applies to all four categories of cases considered by the Supreme Court. The High Court found that the substantial questions of law raised in the appeal were answered against the Revenue by the Supreme Court's decision. Therefore, the Tax Case Appeal was dismissed, and the substantial questions of law were answered against the Revenue.
The High Court held that the challenge to the reopening proceedings under Section 147 of the Income Tax Act had become academic in light of the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another. The Supreme Court had ruled that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute royalty for the use of copyright and do not give rise to income taxable in India. Consequently, persons referred to in Section 195 were not liable to deduct TDS. Therefore, the High Court concluded that the reopening, based on the premise of TDS liability, was unsustainable in law. The substantial question of law was answered in favour of the assessee, and the appeal was allowed.
The High Court held that the substantial questions of law raised in the appeal had been answered in favour of the assessee by the Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and another (2021) SCC Online SC 159. The Supreme Court, in its judgment, clarified that amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers for resale/use of software through EULAs/distribution agreements do not constitute payment of royalty for the use of copyright. Consequently, such payments do not give rise to any income taxable in India, and therefore, persons referred to in Section 195 of the Income Tax Act were not liable to deduct TDS under Section 195. This ruling applied to all four categories of cases discussed by the Supreme Court. Following this precedent, the High Court dismissed the appeal filed by the Revenue, answering the substantial questions of law against the Revenue.
The High Court noted that the assessee had filed a declaration under the Vivad Se Vishwas Act, 2020. Consequently, the Court directed the Competent Authority to process the application in accordance with the Act and pass appropriate orders. The assessee was granted liberty to restore the appeal if the decision on the declaration was not in their favour. In such an event, the Registry was instructed to entertain the restoration petition without insisting on a delay condonation application. The substantial question of law was expressly left undecided. The appeal was disposed of with the aforementioned liberty.
The High Court noted that the assessee had filed a declaration under the Vivad Se Vishwas Scheme, 2020, and was awaiting orders. Consequently, the Court directed the Competent Authority to process the declaration expeditiously. The appeal was disposed of with liberty granted to the assessee to restore it if the decision on the Vivad Se Vishwas declaration was not in their favour. In such an event, the Registry was directed to entertain the restoration petition without insisting on a condonation of delay application. The substantial questions of law were expressly left undecided. No finding was given on the merits of the case, and no operative directions were issued regarding the tax liability.
The High Court noted that the assessee had filed a declaration under the Direct Tax Vivad Se Vishwas Act, 2020. In light of this subsequent event, the Court directed the Competent Authority to process the application/declaration expeditiously and pass appropriate orders. The appeal was disposed of with liberty granted to the assessee to restore it if the ultimate decision on the declaration filed under Section 4 of the Vivad Se Vishwas Act is not in their favour. If such a prayer is made, the Registry is to entertain it without insisting on a condonation of delay application. Consequently, the substantial question of law raised in the appeal was left undecided. No costs were awarded.
The High Court noted that the assessee had filed a declaration/undertaking under the Vivad Se Vishwas Scheme on 30.1.2021 and was awaiting orders. In light of this subsequent event, the Court directed the Competent Authority to process the application/declaration under the Direct Tax Vivad Se Vishwas Act, 2020, and pass appropriate orders expeditiously. The assessee was granted liberty to restore the appeal if the decision on the declaration was not in their favour. If such a prayer was made, the Registry was directed to entertain it without insisting on a condonation of delay application. Consequently, the substantial questions of law raised in the appeal were left undecided. The appeal was disposed of with the aforementioned liberty.
The High Court noted that the assessee had filed a declaration under the Vivad Se Vishwas Act, 2020, and was awaiting orders. In light of this subsequent event, the Court directed the Competent Authority to process the application expeditiously. The appeal was disposed of with liberty granted to the assessee to restore it in the event the decision on their declaration under Section 4 of the Vivad Se Vishwas Act is not in their favour. If such a prayer is made, the Registry is to entertain it without insisting on a condonation of delay application. Consequently, the substantial questions of law were left undecided. No costs were awarded.
The High Court disposed of the Tax Case Appeal in light of the subsequent event of the assessee filing a declaration under the Vivad Se Vishwas Scheme, 2020. The Court directed the Competent Authority to process the declaration expeditiously and pass appropriate orders. The assessee was granted liberty to restore the appeal if the decision on the declaration was not in their favour. In such an event, the Registry was directed to entertain the restoration petition without insisting on a delay condonation application. Consequently, the substantial questions of law raised in the appeal were left undecided. No costs were awarded. The operative direction was to dispose of the appeal with liberty to restore.
The High Court dismissed the appeal filed by the Revenue. The Court followed its previous decision in S.P. Spinning Mills Pvt. Ltd. Vs. ACIT, Circle – 1(3), Salem, which in turn relied on various High Court decisions, including that of the Andhra Pradesh High Court in CIT vs. My Home Power Ltd. The consistent view held by these courts was that the sale of carbon credits results in a capital receipt and is not taxable as business income. The Andhra Pradesh High Court had specifically found that carbon credits are an offshoot of environmental concerns, not directly linked to the business operations, and no asset is generated in the course of business. The High Court noted that the Tribunal had correctly held these receipts as capital in nature. The Revenue's argument that the assessee could not claim deduction under Section 80IA if the receipt was capital was also considered, but the appeal was dismissed based on the established precedent. The substantial question of law was answered against the Revenue.
The High Court dismissed the appeal filed by the Revenue on the ground of low tax effect, as per CBDT Circular No.17/2019. The Court noted the submission by the Revenue's counsel that the tax effect was less than the increased threshold limit for pursuing appeals before the High Court. Consequently, the appeal was dismissed without deciding the substantial question of law on its merits. The substantial question of law framed at the time of admission was expressly left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were awarded.
The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission made by the learned Senior Standing Counsel for the Revenue that the appeal was not being pursued due to 'Low Tax Effect' as per Circular No.17/2019 dated 08.08.2019 issued by the Central Board of Direct Taxes. This circular increased the monetary limit for filing or pursuing appeals before the High Court to Rs.1 Crore, and the tax effect in this case was stated to be below this threshold. Consequently, the substantial question of law framed by the court was left open. Liberty was granted to the Revenue to mention the case for restoration if the tax effect was found to be above the threshold limit. No costs were awarded.
The High Court noted that it was not necessary to decide the substantial questions of law due to subsequent developments. The assessee's counsel submitted that the assessee had availed the Direct Tax Vivad Se Vishwas Scheme, 2020, and had been issued Form-3 on 23.12.2020. Since the assessee had been issued Form-3, the Court found that nothing survived for adjudication in the appeal. Therefore, the Tax Case Appeal was disposed of on this basis, with no costs. The specific findings of the ITAT on the questions of law were not adjudicated by the High Court.
The High Court noted that it was not necessary to decide the substantial questions of law due to subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020, to resolve disputed tax matters. The assessee informed the Court that they had availed the benefit of this scheme and had been issued Form-3 on 22.04.2021. Consequently, the Court held that keeping the appeal pending would serve no useful purpose. The appeal was disposed of on the ground that the assessee had availed the Vivad Se Vishwas scheme. The Court granted liberty to the assessee to restore the appeal if the ultimate decision under the scheme was not in their favour. The substantial questions of law were left undecided. No costs were awarded.
The High Court did not decide the substantial questions of law framed for consideration. This was due to subsequent developments, specifically the enactment of the Direct Tax Vivad Se Vishwas Act, 2020. The Court was informed that the assessee had availed the benefit of this scheme and had been issued Form-3 on 13.01.2021. Therefore, the Court found no useful purpose in keeping the appeal pending. The Tax Case Appeal was disposed of on the ground that the assessee had availed the Vivad Se Vishwas scheme. The Department was directed to process the application under the Act at the earliest. The assessee was granted liberty to restore the appeal if the ultimate decision under the Vivad Se Vishwas Act was not in their favour. In such an event, the Registry was directed to entertain the restoration petition without insisting on a delay condonation application. The substantial questions of law were expressly left undecided.
The High Court decided not to adjudicate the substantial questions of law due to subsequent developments. The court noted that the assessee had availed the benefit of the Direct Tax Vivad Se Vishwas Act, 2020, and had been issued Form-3. Consequently, the Tax Case Appeal was disposed of on the ground that the assessee had availed the Vivad Se Vishwas scheme. The court granted the assessee liberty to restore the appeal if the ultimate decision under the Vivad Se Vishwas Act was not in their favour. In such an event, the Registry was directed to entertain a Miscellaneous Petition for Restoration without insisting on a delay condonation application. The substantial questions of law were left undecided.
The High Court held that the ITAT erred in its decision. The Court found that the assessee had not discharged the primary onus cast upon them under Section 68 of the Income Tax Act, 1961, to prove the genuineness of the transaction, the identity of the creditors, and the creditworthiness of the investors. The Court referred to the Supreme Court's decision in Principal Commissioner of Income Tax Vs. NRA Iron & Steel Pvt. Ltd., which clearly laid down that the assessee must prove by cogent and credible evidence that investments made in share capital are genuine, as the facts are exclusively within the assessee's knowledge. The Court noted that the assessee failed to provide details such as PAN numbers of alleged investors, and the intermediary companies were found to be paper entities. Therefore, the initial onus was not discharged, and the AO was justified in making the addition. The substantial questions of law were answered in favour of the Revenue, the ITAT's order was set aside, and the AO's order, as confirmed by the CIT(A), was restored.
The High Court answered the first substantial question of law against the Revenue, following the Supreme Court's decision in CIT v. Rajasthan and Gujarati Charitable Foundation Poona, which held that normal depreciation is a legitimate deduction in computing the real income of the assessee. The third substantial question of law was remitted back to the Tribunal for fresh consideration, following a previous decision in the assessee's own case (TCA No. 890 of 2019). The Court noted that the Tribunal's finding on the gold bullion investment was made without affording the assessee an opportunity to present their contentions regarding proviso (iia) to Section 13(1)(d). The second substantial question of law was also remanded to the Tribunal for a fresh decision, considering the interpretation of Section 13(2) and whether the construction contract awarded to a firm where the Managing Trustee was a partner constituted a 'service' under Section 13(2)(c). The Tribunal was directed to decide afresh whether there was a violation under Section 13(1)(c) read with Section 13(2) and 13(3) and if the assessee is entitled to exemption under Section 11. The operative directions were to dismiss the appeal in respect of the first substantial question of law and partly allow it in respect of the second and third questions, remanding the matter to the Tribunal.
The High Court dismissed the appeal as withdrawn on account of low tax effect. The Revenue's counsel submitted that the appeal was not being pursued due to the Central Board of Direct Taxes Circular No. 17/2019, which increased the monetary limit for appeals to the High Court to Rs. 1 Crore, and the tax effect in this case was below that threshold. Consequently, the appeal was dismissed as withdrawn. The substantial questions of law framed by the Revenue were expressly left open. Liberty was granted to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were awarded.
The High Court, in its judgment delivered by T.S. SIVAGNANAM, J., noted the submissions of the learned Senior Standing Counsel for the appellant/Revenue. The Revenue submitted that the appeal was not being pursued due to the low tax effect, in terms of CBDT Circular No.17/2019, which increased the monetary limit for filing appeals before the High Court to Rs.1 Crore. Since the tax effect in this case was below the threshold limit, the Court dismissed the appeal as withdrawn on account of low tax effect. The substantial questions of law framed were expressly left open. Liberty was granted to the Revenue to mention the case for restoration if the tax effect was found to be above the threshold limit. No costs were awarded.
The High Court held that the Tribunal was not justified in remitting the matter back to the Assessing Officer. The Court noted that the Tribunal did not interfere with the factual findings recorded by the Assessing Officer and the CIT(A) regarding the transaction done by the assessee. The power of remand should be exercised sparingly and only when facts warrant it, not as a routine measure. The Tribunal should have arrived at its own conclusion on facts after considering the available material. The Court found that the assessee had not disputed the factual position brought out by the Assessing Officer and the CIT(A). The shares were purchased off-market, the seller was untraceable, and the share prices were artificially hiked. The Court referred to its earlier decision in CIT Vs. Manish D.Jain (HUF) and other precedents, which held that when all evidence has been produced and the lower authorities have given definite findings, a remand order by the Tribunal is invalid. Therefore, the appeal was allowed, the Tribunal's order was set aside, and the order of the CIT(A) was restored.
The High Court dismissed the appeals filed by the Revenue. The court followed its own previous decisions in the assessee's own case and in similar cases like Commissioner of Income Tax vs. City Union Bank Ltd., Commissioner of Income Tax vs. Karur Vysya Bank Ltd., and The Commissioner of Income Tax, Trichy vs. The Lakshmi Vilas Bank Ltd. Regarding the first substantial question of law concerning interest on securities, the court reiterated the principle that an assessee is taxable for interest on securities only on specified dates when it becomes due for payment, in view of the third proviso to Section 145(1) of the Act, which was in force during the relevant assessment years. For the second substantial question of law regarding loss on revaluation of securities, the court affirmed the Tribunal's view that when investments are made in accordance with the Act and the market price changes from the opening balance, such revaluation loss could be allowed as depreciation. The substantial questions of law were answered against the Revenue.
The High Court held that the substantial questions of law framed for consideration in this appeal had to be answered against the revenue and accordingly answered. The Court found that the case on hand had to be dealt with on a different yardstick, particularly on the factual position elaborated. The Court referred to the decision in Commissioner of Income Tax vs. Kattabomman Transport Corporation Ltd. and found that the facts in the instant case were even stronger in favour of the assessee. The absorption of employees into the respondent/assessee/Board was pursuant to a State Government decision, giving them the option to become permanent employees with unaltered service conditions, including gratuity. Therefore, the decision in Kattabomman Transport Corporation Ltd. was held to fully apply. The Court also noted that it was not the assessee's case that the funds were approved, but approval was granted later. The Court distinguished the revenue's reliance on cases where Section 36(1)(iv) and Section 40A(9) were pitted against Section 37, stating that in this case, the assessee never claimed benefit under Section 36, nor was the remittance towards an approved fund. The Court concluded that the decision rendered in the assessee's own case in previous appeals would hold good. The appeal was dismissed.
The High Court allowed the appeal filed by the Revenue. It held that the ITAT's order was devoid of reasons and lacked proper appreciation of the facts and findings of the lower authorities. The Tribunal had remanded the matter to the AO for a limited verification of equity capital and reserves/surplus, stating that if the non-interest bearing fund exceeded the interest-free advances, the addition should be deleted. However, the Tribunal failed to address the detailed findings of the AO and CIT(A) regarding the fund flow, the nature of transactions, and the lack of business expediency in advancing interest-free loans. The CIT(A) had confirmed the AO's finding that the assessee's funds were diverted to sister concerns for their capital expenditure, not for material costs, and that the assessee received nothing in return, justifying the disallowance of proportionate interest. The High Court found the Tribunal's order to be erroneous and lacking in reasoning, thus calling for interference. The substantial questions of law were answered in favour of the Revenue.
The High Court held that the substantial questions of law involved in the present appeal were covered by the decisions relied upon by the assessee. Specifically, the Court referred to the Supreme Court's judgment in Commissioner of Income-tax, Central – III Vs. HCL Technologies Ltd., which held that expenses excluded from export turnover must also be excluded from total turnover to avoid an illogical and unworkable result, and that expenses incurred in foreign exchange for providing technical services outside India should also be excluded from total turnover. The Court also cited its own previous judgments in cases like Sak Soft Ltd. and S.R.A. Systems Ltd., which followed the Supreme Court's ratio and dealt with the computation of deduction under Section 10A/10B. The Court found no distinguishing features in the present case that would warrant a different approach. Therefore, the questions of law were answered against the Revenue and in favour of the assessee. The appeal was dismissed.