2015 (8) TMI 86 - HC - Income Tax

Compensation received for delay in commencement of project - revenue v/s capital receipt - Whether Tribunal was right in holding that the compensation received for delay in commencement of project is a capital receipt? - Held that - Even though this appeal was admitted on the question of law, referred supra, we are not inclined to entertain this appeal in view of the preliminary objection made by the learned counsel for the respondent that the monetary limit to prefer an appeal is pegged at ₹ 4,00,000/- by the Central Board of Direct Taxes vide Instruction No.2 of 2005, dated 24.10.2005 read with Instruction No.5 of 2007, dated 16.7.2007. - Decided against revenue.

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal regarding the nature of compensation received for delay in project commencement.
2. Preliminary objection on the maintainability of the Department's Tax Case Appeals based on monetary limits set by the Central Board of Direct Taxes.

Analysis:
1. The High Court addressed the challenge to the order of the Income Tax Appellate Tribunal regarding the nature of compensation received for the delay in project commencement. The question of law raised was whether the compensation received for the delay in project commencement should be considered a capital receipt. Despite the appeal being admitted on this question, the Court decided not to entertain the appeal due to a preliminary objection raised by the respondent's counsel regarding the monetary limit set by the Central Board of Direct Taxes for filing an appeal. The respondent argued that the appeal did not meet the monetary limit of Rs. 4,00,000 specified by the Board.

2. The preliminary objection raised by the respondent was based on the monetary limit set by the Central Board of Direct Taxes for filing Tax Case Appeals. The respondent contended that the tax effect in the present case was below the specified limit of Rs. 4 Lakhs, as per the instructions issued by the Board. The Court considered the instructions provided by the Board, which stated that the tax effect must exceed Rs. 4 Lakhs for each case to prefer an appeal. The Court noted that the total tax effect in the case, excluding interest, was below the specified limit. Additionally, the counsel for the assessee argued that the case did not fall within the exceptions outlined in the instructions, which mandate the department to prefer an appeal.

3. The Court further examined the instructions issued by the Central Board of Direct Taxes, particularly Instruction No.1979, which specified conditions under which adverse judgments should be contested irrespective of revenue effect. The instructions outlined scenarios where the Department should contest adverse judgments, including cases where revenue audit objections have been accepted, or where prosecution proceedings are contemplated against the assessee. However, in the present case, the tax effect was below the prescribed limit, and the case did not fall within the exceptions specified in the instructions.

4. In light of the circulars issued by the Central Board of Direct Taxes and the tax effect involved in the case, the Court concluded that the appeal was not maintainable. The Court decided not to delve into the merits of the question of law raised and dismissed the appeal on grounds of not meeting the monetary limit set by the Board. No costs were awarded in this judgment.