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2013 (11) TMI 833 - AT - Income TaxMonetary limit for filing an appeal - Tax effect less than the prescribed limit INSTRUCTION No.3/2011(F No.279/MISC.142/2007-ITJ) dt.9.2.2011 Reference to Board s instruction No. 5/2008 dated 15-5-2008 Held that - Since this appeal has been filed by department on 21.04.2011 and the tax effect in this appeal is Rs.2,33,155/-, the above instructions of CBDT are applicable and the appeal filed by department is liable to be dismissed as the tax effect in this appeal is below Rs.3 lakhs Decided against the Revenue.
Issues involved:
1. Classification of rent received on warehouse as business income or income from house property. 2. Interpretation of CBDT Instruction No.3 of 2011 regarding monetary limits for filing departmental appeals. Issue 1: Classification of rent received on warehouse The Department filed an appeal against the order of the ld. CIT(A) for assessment year 2007-08, challenging the classification of rent received on a warehouse as business income instead of income from house property. The grounds of appeal raised by the Department questioned the decision of the ld. CIT(A) based on various legal precedents, including the case of CIT V/s National Storage Pvt Ltd and Vora Warehousing Pvt.Ltd V/s CIT. The Department argued that the rental income should be assessed as income from house property, citing the case of Shambhu Investment Pvt.Ltd V/s CIT where the Supreme Court held similarly. However, during the hearing, the ld. AR pointed out that the tax effect in the appeal was only Rs.2,33,155, which fell below the monetary limit specified by CBDT Instruction No.3 of 2011. As per the instruction, appeals should be filed based on merits and not solely due to the tax effect exceeding certain monetary limits. Issue 2: Interpretation of CBDT Instruction No.3 of 2011 The Tribunal considered the submissions of both parties and reviewed CBDT Instruction No.3 of 2011, which specified monetary limits for filing departmental appeals in income-tax matters. The instruction clarified that appeals should not be filed merely based on the tax effect exceeding the monetary limits, emphasizing that the decision to appeal should be made on the merits of the case. The instruction defined "tax effect" as the difference between the tax on the total income assessed and the tax that would have been chargeable if the total income were adjusted based on the disputed issues. It further detailed the calculation of tax effect for various scenarios, including cases involving penalty orders. The instruction also addressed situations where disputed issues span multiple assessment years and highlighted the importance of recording reasons for not filing appeals due to monetary limits. Additionally, it outlined exceptions where adverse judgments on specific issues should be contested regardless of the tax effect. The Tribunal, applying the CBDT instruction, dismissed the department's appeal as the tax effect fell below the specified monetary limit for filing appeals before the Appellate Tribunal. In conclusion, the Tribunal's judgment in this case revolved around the proper classification of rental income and the application of CBDT Instruction No.3 of 2011 regarding monetary limits for filing departmental appeals. The decision highlighted the importance of considering the merits of each case rather than solely relying on the tax effect to determine the filing of appeals.
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