2021 (8) TMI 74 - AT - Income Tax

Deduction u/s 80IC for the amount of profit determined - HELD THAT - Admittedly, there is no effect on the tax liability on the assessee on account of the reduction made in the deduction claimed under section 80 IC of the Act - whatever amount of deduction is reduced by allocating the expenses which is resulting the deduction in the amount of profit that will get adjusted in the deduction available to the assessee under section 80 IC of the Act. Thus the entire exercise carried out by the Revenue is tax neutral. Accordingly, we hold that the appeals filed by the Revenue are not maintainable. As there is no demand of tax in th e appeals filed by the Revenue, these appeals are also not maintainable in view of the CBDT Circular No. 17 of 2019 dated 8-8-2019. As per the circular all pending appeals filed by the Revenue are liable to dismissed as a measure for reducing tax litigation where the tax effect does not exceed the prescribed monetary limit which is at ₹ 50 lakhs. Therefore, all the appeals filed by the Revenue are dismissed in limine.

Summary

Issues: Appeal by Revenue and Assessee against CIT (A) order, Maintainability of appeals filed by Revenue, Effect of reduction in deduction under section 80-IC on tax liability, Dismissal of appeals based on CBDT Circular.

Analysis:
1. Appeal by Revenue and Assessee against CIT (A) order: The case involved appeals by both the Revenue and the Assessee against the order of the CIT (A) concerning the assessment years 2009-10 to 2011-12. The Revenue had raised concerns regarding the expenses claimed by the Assessee, leading to the rejection of books of accounts by the Assessing Officer (AO). The CIT (A) enhanced the income of the Assessee but allowed the deduction under section 80-IC of the Act. Consequently, both parties were aggrieved by the CIT (A) order and filed appeals.

2. Maintainability of appeals filed by Revenue: The learned AR representing the Assessee contended that the appeals filed by the Revenue were not maintainable as the amount determined as the Assessee's income was allowed as a deduction under section 80-IC, resulting in nil tax demand. The learned DR for the Revenue agreed with this proposition. Ultimately, the Tribunal held that the appeals filed by the Revenue were not maintainable due to the tax-neutral nature of the adjustments made in the deduction claimed under section 80-IC.

3. Effect of reduction in deduction under section 80-IC on tax liability: The Tribunal noted that the reduction in the deduction claimed under section 80-IC did not impact the tax liability of the Assessee. The adjustment made by allocating expenses resulted in a deduction in the profit amount, which was offset by the deduction available to the Assessee under section 80-IC. This tax-neutral exercise led the Tribunal to conclude that the appeals filed by the Revenue were not maintainable.

4. Dismissal of appeals based on CBDT Circular: The Tribunal also considered the CBDT Circular No. 17 of 2019, dated 8-8-2019, which directed the dismissal of pending appeals filed by the Revenue where the tax effect did not exceed the prescribed monetary limit of ?50 lakhs. As there was no demand of tax in the appeals filed by the Revenue, and the tax effect was below the specified limit, all the appeals by the Revenue were dismissed in limine in accordance with the circular.

In conclusion, the Tribunal dismissed all the appeals of the Revenue and the Cross-Objections (C.O.) of the Assessee based on the aforementioned reasons and considerations, as detailed in the judgment pronounced on 30/07/2021.