2019 (11) TMI 1308 - HC - Income Tax

Maintainability of tax appeal - tax effect - whether tax effect means the difference between the tax on the total income assessed i.e. assessed by the AO and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed? - HELD THAT - Since the ITAT has deleted the additions made by the Assessing Officer, not only in respect of the advances received towards AMC, but in respect of other advances received by the assessee towards supply and installation of lifts and modernisation of lifts, the tax effect would have to be computed cumulatively and, therefore, appeals against the orders passed by the Tribunal both in the appeal preferred by the assessee, as well as the appeal preferred by the revenue would be maintainable. She also submits that merely because the appellant had preferred separate appeals in terms of Section 260A in relation to a different ITA preferred by the respondent, it does not mean that the tax effect has to be examined ITA wise only. We find merit in this submission of Ms. Malhotra. Since no cross objections have been preferred in the present case, before the Tribunal, in our view paragraph 12 is of no relevance since these cases are squarely covered by paragraph 4 of the said circular. Revenue is aggrieved by deletion of all the additions, as aforesaid. Therefore, the cumulative value of the tax effect would have to be computed in terms of paragraph 4 of the Circular. The submission of learned counsel for the respondent assessee is rejected.

Summary

Issues:
1. Applicability of Circular No. 3/2018 for withdrawal of appeals due to tax effect below ?1 crore.
2. Assessment of tax effect for appeals against orders related to advance for Annual Maintenance Charges (AMC).
3. Interpretation of 'tax effect' as per Circular No. 3/2018 for computing cumulative tax effect.
4. Relevance of cross objections and applicability of Circular provisions in absence of cross objections.

Analysis:
1. The appeals were contested based on the submission that the tax effect was below ?1 crore, invoking Circular No. 3/2018. The respondent argued for withdrawal of appeals by the revenue department in line with the circular's provisions.

2. The appeals pertained to orders by the Tribunal on additions concerning advance for AMC for different assessment years. While the CIT (A) allowed certain appeals related to advances for lifts and modernization, the revenue appealed against these decisions, leading to the current appeals.

3. The definition of 'tax effect' as per Circular No. 3/2018 was crucial in determining the maintainability of the appeals. The tax effect was explained as the variance between the tax on total income assessed and the tax if the income was reduced by the disputed amount. The cumulative tax effect was emphasized due to the deletion of additions by the ITAT for various advances, not limited to AMC.

4. The relevance of cross objections and the interpretation of Circular provisions were deliberated. As no cross objections were filed, the focus shifted to paragraph 4 of the circular, emphasizing the cumulative tax effect for all disputed issues. The argument that separate appeals do not alter the assessment of tax effect was upheld.

In conclusion, the court rejected the respondent's submission, emphasizing the computation of cumulative tax effect as per Circular No. 3/2018. The case was listed for further hearing on 17.03.2020.