Principal Commissioner Of Income Tax 2 v. M/S.harita Seating Systems Ltd.,Jayalakshmi Estates,29, (Old

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.08.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.291 and 292 of 2017andC.M.P.No.8566 of 2017 Principal Commissioner of Income Tax 2,No.121, Mahatma Gandhi Road,Chennai-600 034... Appellant in both Appeals -vs- M/s.Harita Seating Systems Ltd.,Jayalakshmi Estates,29, (Old No.8), Haddows Road,Chennai-600 006.PAN: AAA CH 2492 N.. Respondent in both Appeals Appeals under Section 260A of the Income-tax Act, 1961,against the common order dated 29.07.2016, made inI.T.A.Nos.2857 & 2970/Mds/2014 on the file of the Income TaxAppellate Tribunal 'A' Bench, Chennai for the assessment year2010-11, against the order dated 31.07.2014 made inITA.NO.1642/2013-2014 by the Commissioner of Income Tax(Appeals)-II, Chennai against the Assessment order dated01.03.2013 passed by the Deputy Commissioner of Income Tax,Company Circle II(2), Chennai in PAN/GIR.NO. . For Appellant :Mr.Karthik Ranganathan,(In both Appeals) Senior Standing Counsel assisted by Mr.S.Rajesh,For Respondent :Mr.R.Venkatanarayana(In both Appeals)For M/s.Subbaraya Aiyar, Padmanabhan 1/4 COMMON JUDGMENT (Delivered by T.S.Sivagnanam, J.) These appeals filed by the Revenue under Section 260A of theIncome-tax Act, 1961 are directed against the common order dated29.07.2016, made in I.T.A.Nos.2857 & 2970/Mds/2014 on the fileof the Income Tax Appellate Tribunal 'A' Bench, Chennai for theassessment year 2010-11. 2.The appeals have been admitted on 21.08.2017, on the following substantial questions of law:-“(i) Whether on the facts and circumstances ofthe case and in law, Tribunal was right andjustified in holding that capital gains ontransfer of Bangalore and Pune units is long termcapital gains when such assets are not long termcapital assets in view of Section 2(29A) read withSection 2(42A) of the Income Tax Act, 1961 sincenot held for more than 36 months and whether suchorder of ITAT contrary to the express provisionscontained in the proviso to Section 50B(1) of theIncome Tax Act, 1961 makes the order legallyuntenable? (ii) Whether on the facts and circumstances ofthe case and in law, Tribunal was right andjustified in deleting the disallowance underSection 14A of the Income Tax Act, 1961 holdingthat free funds in the form of reserves andsurplus held by the assessee is more than theinvestment made in assets yielding exempt income,when the assessee was maintaining mixed bag offunds and failed to substantiate that suchinvestment in assets yielding exempt income areout of interest free funds?(iii) Whether on the facts and circumstances ofthe case and in law, Tribunal erred in notfollowing the ratio laid down by the Apex Court inOrient Trading Co. Ltd. vs. CIT (224 ITR 371) soas to arrive at the market value of partconsideration received in kind i.e., shares of HFLand whether as a result of such non appreciationof binding order of the Apex Court made theimpugned order perverse both on facts and in law?and 2/4 (iv) Whether on the facts and circumstances ofthe case and in law, Tribunal was correct andjustified in deleting the addition on account ofdisallowance under Section 14A of the Income TaxAct, 1961 made to book profits computed underSection 115JB of the Income Tax Act, 1961 beingexpenditure incurred to earn exempt income eventhough Clause (f) of Expl. 1 to Section 115JB ofthe Income Tax Act, 1961 specifically provides forit?” 3.Heard Mr.Karthik Ranganathan, learned Senior StandingCounsel assisted by Mr.S.Rajesh, learned Standing Counsel forthe appellant – and Mr.R.Venkatanarayana, learned counsel, forM/s.Subbaraya Aiyar, Padmanabhan & Ramamani, for the respondent. 2/4 (iv) Whether on the facts and circumstances ofthe case and in law, Tribunal was correct andjustified in deleting the addition on account ofdisallowance under Section 14A of the Income TaxAct, 1961 made to book profits computed underSection 115JB of the Income Tax Act, 1961 beingexpenditure incurred to earn exempt income eventhough Clause (f) of Expl. 1 to Section 115JB ofthe Income Tax Act, 1961 specifically provides forit?” 3.Heard Mr.Karthik Ranganathan, learned Senior StandingCounsel assisted by Mr.S.Rajesh, learned Standing Counsel forthe appellant – and Mr.R.Venkatanarayana, learned counsel, forM/s.Subbaraya Aiyar, Padmanabhan & Ramamani, for the respondent. 4.The learned Senior Standing Counsel for the appellantsubmits that the above appeals are not pursued by the Revenue onaccount of the low tax effect in terms of Circular No.17/2019,dated 08.08.2019 issued by the Central Board of Direct Taxes. Bythe said Circular, the monetary limit for filing or pursuing anappeal before the High Court has been increased to Rs.1 Crore.It is further submitted that the tax effect in this case is lessthan the threshold limit. 5.In the light of the said submissions, the above tax caseappeals are dismissed on account of the low tax effect. Thesubstantial questions of law framed are left open. In the eventthe tax effect is above the threshold limit fixed in the saidcircular, liberty is granted to the Revenue to make a mention tothis Court to restore the appeals to be heard and decided onmerits. No costs. Consequently, connected miscellaneouspetition is closed. (abr) Sd/- Assistant Registrar(CS III)//True Copy// Sub Assistant Registrar 3/4 https://hcservices.ecourts.gov.in/hcservices/ To 1.The Principal Commissioner of Income Tax,121, Mahatma Gandhi Road, Chennai-34. 2.The Income Tax Appellate Tribunal 'A' Bench, Chennai. 3.The Commissioner of Income Tax(Appeals II)Chennai. 4.The Deputy Commissioner of Income Tax,Company Circle II(2),Chennai. +1cc to M/s.Subbaraya Aiyar, Advocate sr.75141 T.C.A.Nos.291 and 292 of 2017 gjii(co)nr 11/11/2019 4/4