Principal Commissioner Of Income Tax 2 v. M/S. Foxteq Services India Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 05.12.2019 Principal Commissioner of Income Tax 2,No.121, Mahatma Gandhi Road,Chennai 600 034. ..Appellant/RespondentVs. M/s. Foxteq Services India Pvt. Ltd.,No.28 (NP), Thiru Vi Ka Industrial Estate,Guindy, Chennai – 600 032... Respondent/Appellant Prayer:Appeal under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Madras'D' Bench dated 01.09.2016 in ITA No. 174/Mds/2016, against theorder of Assistant Commissioner of Income Tax, Chennai dated26/12/15/2011-12 and against the order of Joint Commissioner ofIncome Tax, Chennai, Dt.21/1/15 in F.N.F-113/TPO-1/A.Y.2011-12. This Tax Case Appeal has been preferred by the Revenueagainst the order dated 01.09.2016 passed in ITA.No.174/Mds/2016on the file of the Income Tax Appellate Tribunal, Madras 'D'Bench for the assessment year 2011-2012. 2.The respondent/assessee, is a private limited companyengaged in the business of sale and service of computer relatedaccessories and spares. For the assessment year 2011-2012, theReturn of Income was filed by the assessee declaring total 1 https://hcservices.ecourts.gov.in/hcservices/ income of Rs.77,59,380/-. During the said year, as theassessee's international transactions exceeded Rs.15 crores withits Associated Enterprises, the case was referred to TransferPricing Officer (TPO) to determine the Arms Length Price (ALP)of the international transactions claimed by the assessee. Inthe order passed under Section 92CA(3) dated 21.01.2015, the TPOhad made adjustments while determining the arm's length but hadnot made any adjustment in the working capital. Aggrievedagainst the TPO's order and the draft assessment order, theassessee filed objection before the Dispute Resolution panel(DRP). The DRP held that there are no valid reasons tointerfere with the finding of TPO and draft assessment order anddirected the Assessing Officer to pass final assessment orderaccordingly. 3.Aggrieved by the final assessment order of theAssessing Officer, the assessee filed an appeal before theIncome Tax Appellate Tribunal. The Appellate Tribunal,observing that the matter needs to be reconsidered, set asidethe orders of the lower authorities and remitted the matter backto the file of the Assessing Officer. The Appellate Tribunalfurther directed that the Assessing Officer shall refer thematter once again to the TPO and the TPO shall re-examine thematter afresh in the light of the objections that may be filedby the assessee and thereafter decide the same in accordancewith law. The Appellate Tribunal had also made clear it thatthe TPO and DRP shall dispose each and every aspect raised bythe assessee and dispose of the objections filed by the assesseeby a speaking order and that the order of the DRP shall containthe reasons for conclusion reached in the order. Against theorder of the Appellate Tribunal only, the present appeal hasbeen filed by the Revenue. 4.The appeal is admitted on the following substantialquestion of law : “Whether the Tribunal was justified in allowingthe claim for working capital adjustment when theassessee has not demonstrated the need for the same?” 5.Mr.Karthik Ranganathan, learned Senior Standing Counselappearing on behalf of the appellant would submit that the taxeffect in this case is less than Rs.1 crore and is covered byCircular No.17/2019 dated 08.08.2019 issued by the Director,Central Board of Direct Taxes, Department of Revenue, Ministryof Finance, Government of India, Delhi. As per the saidcircular, the monetary limit to file an appeal before the HighCourt is fixed at Rs.1 crore. In this case, tax effect is lessthan Rs.1 crore and therefore, the case has to be dismissed. 6.This Court perused the circular dated 08.08.2019 andParagraph No.2 of the said Circular, which prescribes monetarylimit for filing appeal is usefully extracted as follows: 5.Mr.Karthik Ranganathan, learned Senior Standing Counselappearing on behalf of the appellant would submit that the taxeffect in this case is less than Rs.1 crore and is covered byCircular No.17/2019 dated 08.08.2019 issued by the Director,Central Board of Direct Taxes, Department of Revenue, Ministryof Finance, Government of India, Delhi. As per the saidcircular, the monetary limit to file an appeal before the HighCourt is fixed at Rs.1 crore. In this case, tax effect is lessthan Rs.1 crore and therefore, the case has to be dismissed. 6.This Court perused the circular dated 08.08.2019 andParagraph No.2 of the said Circular, which prescribes monetarylimit for filing appeal is usefully extracted as follows: 2.As a step towards further management oflitigation, it has been decided by the Board thatmonetary limits for filing of appeals in income-taxcases be enhanced further through amendment in Para 3of the Circular mentioned above and accordingly, thetable for monetary limits specified in Para 3 of theCircular shall read as follows: 7.In view of the submissions made by the learned SeniorStanding counsel appearing on behalf of the appellant and alsoin view of the Circular No.17/2019 dated 08.08.2019 issued bythe Director, Central Board of Direct Taxes, Delhi, the Tax CaseAppeal is dismissed on account of tax effect. However, thesubstantial question of law framed is left open. In the eventthe tax effect is above the limit fixed in the said circular,liberty is granted to the Revenue to make a mention to thisCourt to restore the appeal to be heard and decided on merits.No costs. Sd/- Assistant Registrar(CCC) Sub Assistant Registrar 1.The Income Tax Appellate Tribunal, Chennai 'D' Bench. 2.The Principal Commissioner of Income Tax-2, No.121, Mahatma Gandhi Road, Chennai. 3.The Joint Commissioner of Income Tax, Transfer Pricing Officer-1, Chennai. 4.The Assistant Commissioner of Income Tax, Corporate Circle-2(1), Chennai. Corporate Circle-2(1), Chennai. T.C.A. No. 490 of 2018 SJ(CO)CB(10/01/2020)