2013 (6) TMI 282 - HC - Income Tax

Assessee in default - payment made towards liaison services - DTAA with Mauritius - tax effect - assessee contended taht the tax effect or the actual liability has been assessed by the Assessing Officer in respect of the question that is sought to be examined by this court being only Rs. 4,50,000 as submitted by Mr. Chaitanya and Rs. 6,22,000 as determined by the Assessing Officer, is nevertheless less than Rs. 10,00,000. Hence, the appeal cannot be entertained. - Held that - As we have noticed that a large number of appeals have been disposed of by this court on such premise, this appeal is also dismissed as not tenable, reserving liberty to the Revenue to revive the appeal in the event of success in their appeal before the hon ble Supreme Court in the case of Ranka and Ranka.

Issues:
1. Maintainability of the appeal under section 260A of the Income-tax Act, 1961 based on the tax effect criteria.
2. Interpretation of Board Instruction No. 3 of 2011 regarding the minimum tax effect for appeal by the Department.
3. Applicability of the Board circular to pending cases.
4. Distinction between different judgments on the applicability of the Board circular.
5. Disposal of appeals based on the premise of pending cases and reserved liberty for the Revenue.

Issue 1: Maintainability of the appeal under section 260A:
The appeal under section 260A was admitted to examine the substantial question of law regarding the tax liability on payments made for liaison services. The respondent raised a preliminary objection citing the tax effect criteria set by Board Instruction No. 3 of 2011, which requires a minimum tax effect of Rs. 10,00,000 for appeal by the Department. The actual liability assessed for the question in consideration was below this threshold, leading to a challenge on the maintainability of the appeal.

Issue 2: Interpretation of Board Instruction No. 3 of 2011:
The counsel for the appellant-Revenue argued that previous judgments, including CIT v. Ranka and Ranka, supported the applicability of the Board circular to pending cases. However, a Division Bench in another case took a different view, distinguishing the applicability of the Board circular to the present case. The counsel highlighted the distinction between judgments and emphasized that the present case was also distinguishable, indicating a lack of uniformity in the interpretation of the Board Instruction.

Issue 3: Applicability of the Board circular to pending cases:
The conflicting views on the applicability of the Board circular to pending cases were evident from the arguments presented. While one judgment supported the application of the circular to pending cases, another judgment differed in its interpretation, creating uncertainty regarding the consistent application of the Board Instruction in similar cases.

Issue 4: Distinction between different judgments on the applicability of the Board circular:
The arguments presented by the counsel for the appellant highlighted the varied interpretations of different judgments on the applicability of the Board circular. The mention of specific cases and the distinction made between them emphasized the lack of clarity and uniformity in the legal interpretation of the Board Instruction in similar scenarios.

Issue 5: Disposal of appeals based on pending cases:
The court noted that several appeals had been disposed of based on the premise of pending cases and reserved liberty for the Revenue to revive the appeal in case of success in their appeal before the Supreme Court in a specific case. Following the same pattern, the court dismissed the present appeal as not tenable, with a similar liberty reserved for the Revenue to revive the appeal in the future based on the outcome of relevant appeals.

This detailed analysis of the judgment addresses the various issues involved, including the maintainability of the appeal, interpretation of Board Instruction, applicability to pending cases, distinctions between judgments, and the disposal of appeals based on pending cases with reserved liberty for the Revenue.

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