2019 (9) TMI 1643 - AT - Income Tax

Maintainability of Revenue appeal against the order of CIT(A) in deleting the additions - low tax effect - HELD THAT - Undisputedly, the tax effect involved in appeal is less than the monetary limit prescribed by the recent CBDT Circular No.17/2019 F.No.279/Misc.142/2007-ITJ (Pt) dated 08th August, 2019 read with Circular No.3 of 2018 dated 11.07.2018 for filing of appeals before the Tribunal by the Department. The CBDT vide circular dated 08-08-2019 (supra) has amended Para 3 of Circular No.3 of 2018 dated 11-07-2018 thereby enhancing monetary limit of tax effect from ₹ 20 Lakhs to ₹ 50 Lakhs for filing of appeals by the Department before the Tribunal. Thus, without going into merit of the issues raised in the appeal, in view of the CBDT Circular (supra) the present appeal of the Revenue is dismissed on account of low tax effect. Appeal of revenue dismissed. Deduction in respect of education cess - HELD THAT - Allowability of the said cess as allowable deduction is decided in favour of the assessee by virtue of the Hon ble Rajasthan High Court s judgement in the case of Chambal Fertilisers And Chemicals Ltd 2018 (10) TMI 589 - RAJASTHAN HIGH COURT

Summary

Issues:
1. Tax effect below prescribed limit for appeal by Revenue.
2. Allowability of education cess deduction.

Analysis:

Issue 1:
The appeal by the Revenue was against the order of the CIT(A) for the assessment year 2012-13. The Revenue's appeal was challenged by the assessee based on the tax effect being less than the prescribed limit according to the CBDT Circular No.17/2019. Both sides acknowledged that the tax effect in this case was indeed below the limit. The Tribunal noted that the tax effect was less than the monetary limit set by the CBDT Circular, thereby dismissing the Revenue's appeal solely on the grounds of low tax effect. The Tribunal clarified that the Revenue could seek restoration of the appeal if it falls under the exceptions outlined in the Circular.

Issue 2:
In the cross objection, the assessee raised three objections, but only the third objection regarding the deduction for education cess was pursued. The assessee relied on a judgment by the Hon’ble Rajasthan High Court in favor of Chambal Fertilisers And Chemicals Ltd. The Court's decision was based on the interpretation that cess is not considered a tax. Referring to a circular from 1967, the Tribunal allowed the cross objection related to the education cess deduction. Consequently, the cross objection was partially allowed in favor of the assessee.

In conclusion, the Revenue's appeal was dismissed due to the low tax effect, and the cross objection by the assessee regarding the education cess deduction was partially allowed based on the legal precedent and circular from 1967.