2014 (2) TMI 1081 - AT - Income Tax

Deleting the disallowance of interest Held that - The CBDT instruction No.3 of 2011 dated 9.2.2011 followed - The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee - In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit, the Commissioner of Income-tax shall specifically record that even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction these appeals have been filed by department on 11.2.2012 and the tax effect in both the appeals is of Rs.1,71.663/- and Rs.1,76,354/-, respectively, the above instructions of CBDT are applicable and the appeals filed by department are liable to be dismissed as the tax effect in these appeals are below Rs.3 lakhs - Decided against Revenue.

Summary

Issues:
Department's appeal against deletion of interest disallowance for assessment years 2005-06 & 2008-09 based on CBDT Instruction No.3 of 2011 - maintainability and tax effect below threshold.

Analysis:
The Department filed appeals against the deletion of interest disallowance for assessment years 2005-06 & 2008-09. The core issue revolved around whether the appeals were maintainable based on CBDT Instruction No.3 of 2011, which sets monetary limits for filing departmental appeals. The tax effect in each appeal was below Rs. 3 lakhs, leading to a challenge regarding the maintainability of the appeals. The assessee argued that the appeals were not maintainable as per CBDT instruction, citing a decision of the Mumbai High Court. However, the Department contended that the appeals should be adjudicated on merits, referencing a Supreme Court decision.

Upon considering the written submissions and relevant instructions, the Tribunal noted that the issue at hand was factual, not a question of law with cascading effects in subsequent years. The primary issue in both appeals was whether the assessee had an interest-free loan exceeding interest-free advances given. The Tribunal examined the CBDT Instruction No.3 of 2011, which specified monetary limits for filing appeals based on tax effect. The instruction clarified that appeals should not be filed solely due to tax effect exceeding the limits, emphasizing the need to consider the merits of each case.

The Tribunal highlighted that the tax effect in the appeals was below the specified threshold, rendering the appeals liable for dismissal as per the CBDT instruction. As the tax effect in both appeals was below Rs. 3 lakhs, the Tribunal concluded that the appeals filed by the Department were not maintainable. Consequently, the appeals of the Department were dismissed based on the monetary limits set forth in the CBDT instruction. The decision was pronounced in the open court on 21st February 2014.