The Commissioner Of Income Tax-Ii,Coimbatore v. M/S.pricol Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.11.2018 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case Appeal No.134 of 2011 The Commissioner of Income Tax-II,Coimbatore. ...Appellant -vs- M/s.Pricol Limited,No.1087-A, Avanashi Road,Coimbatore – 641 037. ...Respondent Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 (for brevity 'the Act') against the order of theIncome Tax Appellate Tribunal Chennai 'D' Bench, dated08.10.2010 in ITA No.1088/Mds/2010, for the Assessment year2002-03 against the order of the Commissioner of Income Tax(appeals)I, Coimbatore in Appeal No. 283/09-10 dated 21.04.2010. Against the order of the Assistant Commissioner of IncomeTax Company Circle IV(!) Coimbatore in PAN. No. dated31.10.2009.For Appellant:Mr.T.R.Senthil Kumar For Respondent :No appearance JUDGMENT [Judgement of the Court was delivered by T.S.Sivagnanam, J.] This Tax Case Appeal by the Revenue is filed underSection 260A of the Income Tax Act, 1961 against the order ofthe Income Tax Appellate Tribunal Chennai 'D' Bench, dated08.10.2010 in ITA No.1088/Mds/2010, for the Assessment year2002-03. 2.Heard Mr.T.R.Senthil Kumar, learned Counsel for theappellant/Revenue. https://hcservices.ecourts.gov.in/hcservices/ 3.This Appeal has been admitted on 05.04.2011, on thefollowing Substantial Questions of Law: "(i) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in holding that anamount of Rs.20,40,000/- being the provisionfor service weightage of the employees to bepaid at the time of retirement is an allowablededuction? (ii) Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in notconsidering that the amount paid to serviceweightage is neither a gratuity, nor a paymentto any welfare fund and at the best only aprovision in the nature of a ContingentLiability and therefore to be disallowed? (iii) Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in not consideringSection 40A(9) while dealing with serviceweightage as it prohibits any payments towardssetting up of any funds or trust etc., exceptfor the purpose of recognized Provident Fund orApprovedGratuityFundorApprovedSuperannuation Fund, or if required by any law? (iv) Whether on the facts and in thecircumstances of the case the Income TaxAppellate Tribunal was right in not consideringSection 40A(10) which is an exception toSection 40A(9) in allowing the serviceweightage especially when the service weightagedoes not fall within the exemption categoriesof Superannuation Fund, Gratuity Fund orWelfare Fund?” 4.We have perused the order of Assessment as well as theOrder passed by the Commissioner of Income Tax and we find thatthe tax effect in this appeal is lesser than the threshold limitmentioned in Circular No.3 of 2018, dated 11.07.2018, issued bythe Central Board of Direct Taxes, which fixes the monetarylimit as Rs.50,00,000/- for the Department to pursue the matter.Furthermore, the Revenue has not been able to point out anydistinguishing features, by which the Circular No.3 of 2018,dated 11.07.2018, cannot be applied. 5.Thus, for the above reasons, the Revenue cannot pursuethis Appeal in view of the low tax effect. Hence, the Appeal isdismissed and the Substantial Questions of Law, framed forconsideration, are left open. No costs. The Revenue is atliberty to seek for restoration of appeal, if at a later pointof time, it is found that the tax effect is above the thresholdlimit. 5.Thus, for the above reasons, the Revenue cannot pursuethis Appeal in view of the low tax effect. Hence, the Appeal isdismissed and the Substantial Questions of Law, framed forconsideration, are left open. No costs. The Revenue is atliberty to seek for restoration of appeal, if at a later pointof time, it is found that the tax effect is above the thresholdlimit. s/d- Assistant Registrar(CO) True Copy Sub-Assistant RegistrarTo1. The Income Tax Appellate Tribunal Madras 'D' Bench.2. The Commissioner of Income Tax (appeals)I, Coimbatore.3. The Assistant Commissioner of Income Tax Company Circle IV(1), Coimbatore.+1 CC to Mr.T.R.Senthil Kumar, Advocate sr 81235.T.C.A.No.134 of 2011SVN(CO)SP(31/12/2018)