2019 (6) TMI 1059 - HC - Income Tax

Low tax effect - maintainability of appeal - HELD THAT - The tax effect in this appeal is lesser than the threshold limit mentioned in Circular No.3 of 2018, dated 11.07.2018, issued by the Central Board of Direct Taxes, which fixes the monetary limit as ₹ 50,00,000/- for the Department to pursue the matter. Furthermore, the Revenue has not been able to point out any distinguishing features, by which the Circular No.3 of 2018, dated 11.07.2018, cannot be applied. Thus Revenue cannot pursue this Appeal in view of the low tax effect. Hence, the Appeal is dismissed and the Substantial Questions of Law, framed for consideration, are left open.

Summary

Issues:
1. Interpretation of Section 14A of the Income Tax Act.
2. Applicability of the proviso to Section 14A in different scenarios.

The High Court of Madras heard a Tax Case Appeal concerning an order of the Income Tax Appellate Tribunal for the Assessment year 2000-01. The appeal raised substantial questions of law related to the application of Section 14A of the Income Tax Act. The first issue was whether the Tribunal was correct in holding that the Assessing Officer could not disallow under Section 14A without considering the proviso's application. The second issue was whether the Tribunal was right in not delving into the merits of the appeal due to the proviso's restrictions on reassessment under Section 147 of the Act.

Upon examination, the Court noted that the tax effect in the appeal was below the monetary limit set by Circular No.3 of 2018 issued by the Central Board of Direct Taxes. As the Revenue failed to demonstrate any reasons why the circular should not apply, the Court concluded that the appeal could not be pursued due to the low tax effect. Consequently, the Court dismissed the appeal, leaving the substantial questions of law open for future consideration. The Revenue was granted the liberty to seek restoration of the appeal if the tax effect exceeded the threshold limit at a later stage.