2022 (3) TMI 1287 - HC - Income Tax

Enhanced book profit towards profit u/s 10A by way of exclusion of receipt and expenses of the unit - AO also made disallowances of indexation benefit against long term capital gain on the sale of shares - company in question was in liquidation and was not in a position to pay its outstanding dues including its taxes - CIT (A) allowed the appeal of the assessee by holding that the proviso to Section 73A is not applicable to assessee company in respect of indexation benefit against long term capital gains and deleted the addition by holding that no deduction was claimed u/s 10A - HELD THAT - A perusal of the aforesaid order of Apex Court in Civil Appeal 2020 (7) TMI 760 - SC ORDER makes it clear that the respondent company Moser Baer India Ltd. is not financially viable and is in liquidation before NCLT. The order also makes it clear that even if the Revenue were to succeed the Official Liquidator would not be in a position to pay the tax amount involved in these appeals. Thus even if the appellant-department succeeds in the present appeal there would be no fructifying effect as the respondent company which is under liquidation would not be able to discharge its debts and tax liability through the liquidator. The courts are already overburdened. Thus while dealing with such matters it has to be seen whether keeping such matters alive would serve any purpose. If such matters continue to remain on board they would rather block other deserving matters. There is no purpose of flogging a dead horse. We are of the view that there is no purpose in keeping this matter alive. Hence in view of peculiar facts and circumstances the report filed by the department and the order passed by the Apex Court we dispose of the present appeal leaving the question of law open to be decided in an appropriate case.

Summary

Issues:
1. Appeal against order passed by ITAT regarding assessment year 2003-2004.
2. Disallowance of indexation benefit and long-term capital gains.
3. Jurisdiction of the court in light of the company being in liquidation.

Analysis:
1. The Principal Commissioner of Income Tax filed an appeal against the order passed by the Income Tax Appellate Tribunal (ITAT) concerning the assessment year 2003-2004. The Assessee had initially declared a loss, which was scrutinized by the Assessing Officer. The AO enhanced the book profit under Section 10A of the Income Tax Act and made disallowances against long-term capital gains. The CIT (A) allowed the appeal in part, leading to cross-appeals by both the Assessee and the department before the ITAT. The ITAT dismissed the Revenue's appeal and allowed the Assessee's appeal, prompting the Principal Commissioner to approach the High Court.

2. The High Court considered the circumstances of the case, where the respondent company was in liquidation and financially non-viable. Referring to a Supreme Court order in a similar case, the High Court noted that even if the Revenue were to succeed, the Official Liquidator would not be able to pay the tax amount due. Given the impracticality of recovery and the burden on the courts, the High Court decided to dispose of the appeal, leaving the question of law open for future cases. The court emphasized the need to prioritize cases efficiently and not prolong matters that serve no practical purpose.

3. In response to the High Court's direction, the Revenue filed a letter indicating their willingness to pursue the appeals but also acknowledging the futility of recovery due to the company's liquidation status. The Deputy Commissioner of Income Tax expressed the department's desire to pursue the appeals while suggesting that any refunds, if granted, should not be admissible in line with the Supreme Court's decision in a similar case. Ultimately, the High Court, considering the peculiar circumstances and the practical implications, disposed of the appeal and pending applications, recognizing the lack of purpose in continuing the matter due to the company's liquidation status and inability to pay the tax liabilities.