2019 (7) TMI 130 - HC - Income Tax

Monetary limit - low tax effect - maintainability of appeal by revenue - HELD THAT - Tax effect in these appeals are 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 matters. 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. Revenue cannot pursue these Appeals in view of the low tax effect. Hence, these Appeals are dismissed and the Substantial Questions of Law, framed for consideration, are left open.

Summary

Issues:
- Appeal against the common order of the Income Tax Appellate Tribunal for Assessment years 2004-05 and 2003-04.
- Validity of Chartered Engineer's certificate for determining installed capacity.

Analysis:
The Tax Case Appeals were filed by the Revenue against the common order of the Income Tax Appellate Tribunal Chennai 'B' Bench for the Assessment years 2004-05 and 2003-04. The Appeals raised substantial questions of law regarding the validity of the Chartered Engineer's certificate in determining the installed capacity. The first issue questioned the applicability of the criteria and method used by the Chartered Engineer, which was deemed suitable for textile mills but not relevant to the case involving the production of various non-homogeneous products using different machines. The second issue challenged the Tribunal's decision to consider the Chartered Engineer's certificate for determining installed capacity, arguing that the report was a post mortem report and impractical to estimate capacity increase accurately after several years.

Upon reviewing the Assessment order and the Commissioner of Income Tax's common order, the Court noted that the tax effect in the appeals fell below the threshold limit set by Circular No.3 of 2018 issued by the Central Board of Direct Taxes, which was Rs.50,00,000. The Revenue failed to identify any distinguishing features that would exempt them from the application of the circular. Consequently, the Court held that due to the low tax effect, the Revenue could not pursue the Appeals. As a result, the Appeals were dismissed, and the Substantial Questions of Law were left open for consideration. The Court also mentioned that the Revenue could request restoration of the appeals if the tax effect was later found to exceed the threshold limit.