2017 (4) TMI 1374 - AT - Income Tax

Maintainability of appeal - monetary limit - Nature of income - business income or Short Term Capital Gain u/s 111A - Held that - From Clause 10 of the circular No.21 of 2015 dated 10.12.2015 it is clear that these instructions are applicable to the pending appeals also and as per clause 3 there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than 10, 00, 000/-. These instructions are operative retrospectively to the pending appeals. Keeping in view the CBDT Circular No.21 of 2015 dated 10.12.2015 and also the provisions of Section 268A of Income Tax Act 1961 we are of the view that the Revenue should not have filed the instant appeal before the Tribunal. In view of the above without going into merits of the case the appeal filed by the department is dismissed.

Summary

Issues:
1. Determination of income as short term capital gain or business income.
2. Applicability of tax effect in filing the appeal.

Analysis:

*Issue 1: Determination of income as short term capital gain or business income*

The appeal revolved around whether the income of a certain amount should be treated as short term capital gain under section 111A or as income from business. The appellant argued that the income should be considered as business income due to frequent trading of shares and lack of separate books of accounts. However, during the hearing, it was highlighted that the tax effect in this case was less than ?10,00,000, making the appeal questionable. The calculations presented during the hearing showed that the tax effect fell below the threshold.

In response, the department argued that considering surcharge and cess as part of tax would push the tax effect over ?10,00,000. The appellant, citing a decision by ITAT Mumbai Benches, contended that surcharge and education cess should not be included in tax for determining the tax effect. The tribunal, in alignment with the Mumbai Bench decision, concluded that surcharge and cess should not be considered part of tax for this purpose, thereby dismissing the appeal by the department.

*Issue 2: Applicability of tax effect in filing the appeal*

The CBDT Circular No.21 of 2015 set a monetary limit of ?10,00,000 for not filing appeals before the Tribunal. The circular specified that appeals should not be filed based solely on exceeding the tax limits, but on the merits of the case. It was noted that Section 268A of the Income Tax Act empowered the Board to issue instructions on monetary limits for filing appeals. Considering the circular and legislative provisions, the tribunal found that the Revenue should not have filed the appeal due to the tax effect falling below the specified limit.

In conclusion, the tribunal dismissed the appeal filed by the department based on the CBDT circular and the provisions of the Income Tax Act, without delving into the merits of the case. The decision was made in adherence to the monetary limit set by the circular, emphasizing the importance of considering tax effect in determining the viability of filing appeals.