Ita/1377/2009 Of The Commissioner Of Income Tax, Cochin v. M/S.tata Ceramics Ltd., Kochi

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 8TH DAY OF JUNE 2018 / 18TH JYAISHTA, 1940 ITA.No. 1377 of 2009 ----------------------- AGAINST THE ORDER IN ITA 644/2005 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 26-02-2008 APPELLANT(S)/APPELLANT/APPELLANT: -------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT: -------------------------- M/S.TATA CERAMICS LTD.,KOCHI. R BY ADV. SRI.E.K.NANDAKUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 08-06-2018,ALONG WITH ITA NO. 1393/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 1377/2009 APPENDIX ---------- APPELLANT'S ANNEXURES: ANNEXURE A: COPY OF ORDER UNDER SECTION 143(3) R.W.S 147 DATED 21.03.2002FOR THE ASSESSMENT YEAR 1996-97FOR THE ASSESSMENT YEAR 1996-97 ANNEXURE B: COPY OF ORDER DATED 11.03.2005 OF THE COMMISSIONER OF INCOME TAX (APPEALS)INCOME TAX (APPEALS) ANNEXURE C: COPY OF THE ORDER DT 26.02.2008 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA NO 644/COCH/2005COCHIN BENCH IN ITA NO 644/COCH/2005 ANNEXURE D: COPY OF INSTRUCTION NO. 2/05 DT 24.10.2005 RESPONDENTS ANNEXURES: NIL TRUE COPY P.A TO JUDGE K. VINOD CHANDRAN & ASHOK MENON, JJ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T Appeal Nos. 1377 of 2009 &1393 of 2009 - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 08[th] day of June, 2018 J U D G M E N T Vinod Chandran, J The question arises as to whether the assessee wasentitled to claim the benefit under Section 35AB of the IncomeTax Act, 1961 which according to the Department could beclaimed only from the commencement of the business.However, the questions of law raised is on the question ofapplicability of the monitory limit, in filing appeals; when thesubject matter of the questions of law raised have a cascadingeffect in the general application of the Income Tax Act and thequestion also is one which arises periodically in the case of otherassessees too. This is so since the Tribunal relied on a Circular to ITA Nos.1377/2009 & 1393/2009 reject the appeals without consideration on merits. The questions of law framed are as follows: “1. Whether, on the facts and in the circumstances of the case and also in the light of the decision reported in 286 ITR 1 should not the Tribunal have decided the case on merits? 2. Whether, on the facts and in the circumstances of the case do the circulars and 276 ITR 519 relied on by the Tribunal haveapplication to the facts of the case? 2. The learned Counsel appearing for the Revenue has placed before us a decision dated 31.10.2017 in ITA 70/2014 wherein a Division Bench of this Court directed another appeal tobe considered on merits despite the CBDT directions on ITA Nos.1377/2009 & 1393/2009 ITA Nos.1377/2009 & 1393/2009 reject the appeals without consideration on merits. The questions of law framed are as follows: “1. Whether, on the facts and in the circumstances of the case and also in the light of the decision reported in 286 ITR 1 should not the Tribunal have decided the case on merits? 2. Whether, on the facts and in the circumstances of the case do the circulars and 276 ITR 519 relied on by the Tribunal haveapplication to the facts of the case? 2. The learned Counsel appearing for the Revenue has placed before us a decision dated 31.10.2017 in ITA 70/2014 wherein a Division Bench of this Court directed another appeal tobe considered on merits despite the CBDT directions on ITA Nos.1377/2009 & 1393/2009 mornitory limit standing against the filing of the said appeal. Inthe present case, the issue is as to whether 1/6[th] amount paid bythe assessee for know-how for the purpose of setting up ofmodern plant is allowable under Section 35AB when theassesseee had not commenced business in the relevantassessment year. The First Appellate Authority had found thatthe expenses, being incurred for the purpose of know-how,definitely, the same is allowable. The Tribunal refused toentertain the appeal relying on the circular of the CBDTrestraining the Department from filing appeals where the taxeffect is less than Rs.2 lakhs. It was found that the circular appliesequally to old cases and new cases. The learned Counselappearing for the assessee also submits that the tax effect, in thesubject year and the succeeding years was NIL for reason of theassessee having continuosly suffered loss in all the years. There ITA Nos.1377/2009 & 1393/2009 ::4:: can be no cascading effect atleast in the case of the assessee. In such circumstances, we are of the opinion that the questionof lawarising from the First Appellate Authority's order can be left openfor consideration in an appropriate case. The Income Tax Appeals would stand rejectedanswering the questions raised against the Revenue and in favourof the assessee finding that the appeal before the Tribunal wasnot maintainable. No order as to costs. Sd/-K. Vinod Chandran, Judge Sd/-Ashok Menon, Judge jma