2018 (7) TMI 2171 - HC - Income Tax

Maintainability of appeal by revenue - low tax effect - effect involved being less than the prescribed monetary limit of ₹ 20 lakhs in the Instructions issued by Central Board of Direct Taxes in 2011 - HELD THAT - In view of the reasons and the Circular dated 11.07.2018 issued by the Central Board of Direct Taxes, the present appeal filed by the appellant-Revenue is permitted to be withdrawn.

Summary

Issues Involved:
1. Maintainability of the appeal due to the tax effect being below the prescribed monetary limit.
2. Retrospective application of CBDT Circulars regarding monetary limits for maintaining pending appeals.
3. Revision of monetary limits by the CBDT for filing appeals.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The Income Tax Appeal filed by the Appellant-Revenue was initially disposed of by a co-ordinate Bench of the Karnataka High Court on 02.11.2011. The dismissal was based on the ground that the appeal was not maintainable due to the tax effect involved being less than the prescribed monetary limit of ?20 lakhs as per the CBDT Instructions issued in 2011.

2. Retrospective Application of CBDT Circulars:
The matter was remanded back to the High Court by the Hon’ble Supreme Court in light of a common order passed in several Civil Appeals, including the lead Civil Appeal No.16815 of 2017 (THE COMMISSIONER OF INCOME TAX, BANGALORE-I & ANOTHER vs. M/S.GEMINI DISTILLERIES). The Supreme Court's decision in the case of DIRECTOR OF INCOME-TAX vs. S.R.M.B. DAIRY FARMING (P.) LTD. clarified the retrospective application of CBDT Circulars regarding monetary limits. The Supreme Court held that the Circular should not be applied ipso facto when the matter has a cascading effect or involves common principles in a large number of matters. This view was supported by the three-Judges Bench in CIT v. Surya Herbal Ltd., which emphasized two caveats for the retrospective application of the Circular: (i) the Circular should not be applied ipso facto in cases with cascading effects, and (ii) where common principles are involved in subsequent group matters or a large number of matters.

3. Revision of Monetary Limits by CBDT:
Recently, the CBDT revised the Instructions, raising the monetary limits for maintaining Income Tax appeals before the High Court from ?20 lakhs to ?50 lakhs. This revision was detailed in Circular No. 3/2018, issued on 11th July 2018. The Circular specifies that appeals should not be filed merely because the tax effect exceeds the monetary limits; decisions should be based on the merits of the case. The Circular also provides detailed guidelines on calculating the tax effect, handling composite orders, and dealing with cases where the tax effect is not quantifiable.

Conclusion:
The learned counsel for the appellant-Revenue acknowledged that the present appeal neither has any cascading tax effect nor involves issues of common principles in a group of matters. The respondent-Assessee's counsel did not dispute this position. Consequently, in view of the recent CBDT Circular dated 11.07.2018 and the reasons provided, the High Court permitted the withdrawal of the appeal filed by the appellant-Revenue. The appeal was dismissed as withdrawn/not pressed, with no costs awarded.