2016 (7) TMI 1372 - AT - Income Tax

Maintainability of appeal - monetary limit - Calculation of tax effect on the tax part excluding surcharge and cess - Held that - As 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 education cess as well, if there was any intention to include them in the word tax . Thus, 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.

Summary

Issues involved:
1. Maintainability of the appeal based on the tax effect under Board's Circular.
2. Interpretation of the definition of "tax" under sub-section (43) of section 2 of the Income-tax Act, 1961.
3. Consideration of surcharge and education cess in determining the tax effect for filing appeals.

Detailed Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2007-08. The Counsel of the assessee argued that the tax effect in this case was below the threshold prescribed in Board's Circular dated 10th December 2015. The Counsel contended that only the tax amount should be considered for computing the tax effect, excluding surcharge and education cess. The Counsel relied on a decision of the Chennai Bench of the Tribunal to support this argument. The Departmental Representative could not provide any contrary judgments. The Tribunal examined the Circular and the definition of "tax" under sub-section (43) of section 2 and noted that the tax amount was below the prescribed limit for filing appeals. The Tribunal agreed with the Chennai Bench's decision that surcharge and education cess should not be included in the word "tax" for determining the tax effect. Consequently, the appeal by the Revenue was deemed not maintainable and was dismissed.

2. The Tribunal analyzed the definition of "tax" under sub-section (43) of section 2 of the Income-tax Act, 1961. The definition includes income-tax, super-tax, and fringe benefit tax but does not explicitly mention surcharge or education cess. Based on this analysis, the Tribunal concurred with the Chennai Bench's decision that surcharge and education cess should not be considered part of the word "tax" for assessing the tax effect under the Circular. The Tribunal emphasized that the legislature's inclusion of specific taxes in the definition implied the exclusion of surcharge and education cess. Therefore, the Tribunal concluded that the tax effect was below the threshold for filing appeals, rendering the Revenue's appeal not maintainable.

3. The Tribunal's decision was based on the interpretation of the Circular and the definition of "tax" under the Income-tax Act. The Tribunal highlighted that the Circular defined the tax effect based on the difference between the tax on total income assessed and the tax that would have been chargeable without considering surcharge. The Tribunal also noted that the definition of "tax" in the Act did not mention surcharge as part of the tax amount. Therefore, the Tribunal upheld that surcharge and education cess should not be included in the calculation of the tax effect for determining the maintainability of appeals. As the tax effect in this case was below the prescribed limit, the Revenue's appeal was dismissed by the Tribunal.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai focused on the interpretation of the tax effect for filing appeals, specifically excluding surcharge and education cess from the definition of "tax." The decision emphasized adherence to the Circular's guidelines and the legislative definition of "tax" under the Income-tax Act, leading to the dismissal of the Revenue's appeal due to the tax effect being below the threshold.