2018 (9) TMI 1030 - HC - Income Tax

Maintainability of appeal - tax effect - Held that - The tax effect in the present appeal relevant for the assessment year 2011-12 is less than the threshold limit. In the case of Commissioner of Income Tax vs. N. Meenakshisundaram 2018 (4) TMI 1582 - MADRAS HIGH COURT this Court had an occasion to consider various circulars issued by the Central Board of Direct Taxes (CBDT) as regards the threshold limits fixed for filing the appeal by the Revenue or pursue the appeal which is pending from 2008 onwards. As by Circular No. 3/2018 dated 11. 07. 2018 monetary limit has further been increased and appeals be maintainable before the High Courts. It has been increased to 50 00 000/-. Hence viewed from any angle the Revenue cannot pursue this appeal.

Summary

Issues involved:
1. Interpretation of subrule (6) of Rule 9A for expenditure of an abandoned film.
2. Claiming the cost of production of an abandoned film as a deduction.
3. Allowance of bad debts related to the cost of production of the abandoned film.
4. Justification of the CIT (A) verifying documents not produced before the assessing officer without complying with Rule 46A.

Interpretation of subrule (6) of Rule 9A:
The High Court considered the appeal by the Revenue against the order of the Income-tax Appellate Tribunal for the assessment year 2003-2004. The substantial question of law raised was whether subrule (6) of Rule 9A applied to the expenditure of an abandoned film, given that Rule 9A was meant for films certified for release by the Board of Film Censors. The Court analyzed the applicability of the rule in this context.

Claiming cost of production as a deduction:
Another substantial question was whether the cost of production of an abandoned film could be claimed as a deduction in the current year, even if it was expended in an earlier year and treated as a capital asset by the assessee in that year. The Court deliberated on the timing and treatment of such expenses in relation to tax deductions.

Allowance of bad debts:
The Tribunal's decision to allow bad debts claimed by the assessee, which were not offered for taxation in any earlier year, as they related to the cost of production of the abandoned film, was also a matter of contention. The Court examined the validity of this allowance in the given circumstances.

Verification of documents by CIT (A):
Lastly, the Tribunal's approval of the CIT (A) verifying documents not produced before the assessing officer without complying with Rule 46A was questioned. The Court assessed the procedural correctness of such verification and its implications on the appeal.

The Court highlighted the tax effect for the assessment year 2011-12 being below the threshold limit, making the appeal by the Revenue non-pursuable. Referring to Circular No. 3/2018, the Court noted the increased monetary limit for appeals before the High Courts, emphasizing that the Revenue could not pursue the current appeal due to the revised limit.