2018 (7) TMI 2255 - HC - Income Tax

Monetary limit for filing an appeal before High Court - HELD THAT - The tax effect in the present case as stated by the Appellants-Revenue is less than the prescribed limit of ₹ 50.00 lakhs for filing an appeal before High Court. Appellants-Revenue does not press this appeal and seeks leave of the Court to withdraw the present appeal in terms of paragraph-13 of the said Circular. Accordingly, in view of the aforesaid Circular issued by the Central Board of Direct Taxes, the present appeal is disposed of as withdrawn without answering the purported substantial questions of law.

Summary

Issues:
Revision of monetary limits for filing appeals by the Department before Income Tax Appellate Tribunal, High Courts, and Supreme Court.

Analysis:
The judgment pertains to the revision of monetary limits for filing appeals by the Department before the Income Tax Appellate Tribunal, High Courts, and Supreme Court. The Central Board of Direct Taxes issued Circular No.3/2018, dated 11th July 2018, revising the monetary limits for filing appeals. The earlier limit for High Courts was increased from ?20,00,000 to ?50,00,000. The Circular specified that appeals should not be filed solely based on exceeding the monetary limits but should be decided on the merits of the case. The concept of 'tax effect' was defined as the difference in tax assessed and tax chargeable if income is reduced by the disputed amount. The Circular emphasized calculating tax effect separately for each assessment year and clarified the treatment of interest, penalties, and returned losses in determining tax effect.

The Circular also provided guidelines for cases involving composite orders or judgments spanning multiple assessment years or involving multiple assessees. It outlined the formula for computing tax effect under specific provisions and highlighted the need for recording reasons when not filing an appeal due to monetary limits. Additionally, it addressed instances where the Department did not file appeals due to lower tax effects and emphasized that such decisions should not imply acceptance of the Tribunal or Court's decision. The Circular instructed Departmental representatives to clarify the reason for not filing appeals due to monetary limits to avoid setting precedents.

Furthermore, the Circular specified that adverse judgments on certain issues should be contested on merits regardless of tax effect. It exempted writ matters and Direct tax matters other than Income tax from the monetary limits specified. It also clarified that the limits do not apply to cases where tax effect is not quantifiable, such as registration of trusts. The Circular detailed the application of monetary limits to cross objections and references to High Courts and Supreme Court. It stated that the Circular would apply to pending appeals retrospectively and emphasized the need to withdraw appeals below the specified tax limits. The judgment in this case was disposed of as withdrawn in compliance with the Circular without addressing the substantial questions of law.