The Commissioner Of Income Tax - International Taxation -3 v. Sis Live

$~2 *IN THE HIGH COURT OF DELHI AT NEW DELHI %Date of Decision : 07.05.2025 +ITA 172/2024 THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantThrough:Mr Anant Mann, JSC.versus SIS LIVE.....Respondent Through:Mr P.Roy Chaudhuri with Mr RishiBhatnagar and Mr Rishabh Gaur,Advocates.Bhatnagar and Mr Rishabh Gaur,Advocates. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIA VIBHU BAKHRU, J. (ORAL) CM APPL. 8661/2025 1.The respondent has filed the present application, inter alia, praying asunder: “Allow the present application and dismiss the present appeal,being ITA No. 172/2024 on the ground of low tax effect as perCBDT Circular No. 09/2024 dated 17.09.2024 read with CBDTCircular No. 05/2024 dated 15.03.2024.” 2.The Assessee has also placed on record the computation of tax effectin the present case, which indicates that it is below the threshold limit of ₹2 crores as stipulated in Circular No.5 of 2024 dated 15.03.2024 as modifiedby the Circular No.9 of 2024 dated 17.09.2024 issued by Central Board of Direct Taxes . In terms of the said circular, the threshold tax limitfor appealing before this court was stipulated as ₹2 crores. The Assessee has set out a tabular statement computing the tax effect in the present case as₹1,71,19,532/-. Paragraph 5 of the present application that includes the said tabular statement is set out below: “5. That in the present case, the loss of Rs.45408852.00 has beenconverted into profit/income of Rs.9106616.00. Therefore, thenotional addition comes to Rs.54515468.00 (45408852.00 + 9106616.00). The tax effect on Rs.54515468.00 for the relevantAssessment Year is Rs.17119532.00 the calculation of which isshown below: ” 3. There is no cavil with the calculation as set out by the Assessee. However, according to the Revenue the tax effect in the present case wouldbe higher as the AO had also observed that the losses of earlier years cannotbe permitted to be brought forward. Thus, the Revenue contends that the taxon the losses, which were assessed in the assessment years prior toAssessment Year 2018-19 must also be taken into account todetermine the overall tax effect. 4.The learned counsel appearing for the Revenue has referred paragraph5.1 of the Circular, which provides for the manner in computing the taxeffect to ascertain whether the same exceeds the threshold as specified in thesaid circular. We consider it apposite to set out the said paragraph 5.1 of theCBDT’s Circular: “5.1For this purpose, ‘tax effect’ means the differencebetween the tax on the total income assessed and the tax thatwould have been chargeable had such total income been reducedby the amount of income in respect of the issues against whichappeal is intended to be filed (hereinafter referred to as ‘disputedissues’). Further, ‘tax effect’ shall be tax including applicablesurcharge and cess.However, the tax will not include anyinterest thereon, except where chargeability of interest itself is indispute. In case the chargeability of interest is the issue underdispute, the amount of interest shall be the tax effect. In caseswhere returned loss is reduced or assessed as income, the taxeffect would include notional tax on disputed additions. In caseof penalty orders, the tax effect will mean quantum of penaltydeleted or reduced in the order to be appealed against.” [emphasis added] 5.It would be necessary to refer to the assessment order for determiningthe tax effect in accordance with paragraph 5.1 of the said Circular asmentioned above. Paragraph 23 of the assessment order assessing the totalincome of the Assessee at ₹1,00,11,906/-. Paragraph 23 of the assessment Signature Not Verified order is set out below: “23. Pursuant to directions of Hon'ble DRP-2, New Delhi, theincome of the assessee is re-computed as below; ” [emphasis added] 5.It would be necessary to refer to the assessment order for determiningthe tax effect in accordance with paragraph 5.1 of the said Circular asmentioned above. Paragraph 23 of the assessment order assessing the totalincome of the Assessee at ₹1,00,11,906/-. Paragraph 23 of the assessment Signature Not Verified order is set out below: “23. Pursuant to directions of Hon'ble DRP-2, New Delhi, theincome of the assessee is re-computed as below; ” 6.In the present case, the Assessee had filed an income returning a loss,however, the AO had enhanced the income of the Assessee to reflect theassessed income at ₹1,00,11,906/-. Thus, the first step for calculating the tax effect would be to determine the quantum by which the returned loss isreduced. In the present case, the entire returned loss of ₹2,80,50,853/- has been wiped out by the additions made by the AO and further the AO hasassessed the income at ₹1,00,11,906/-. Thus, the total tax effect is to be determined on an amount of ₹3,80,62,759/- [₹2,80,50,853/- + ₹1,00,11,906/-]. Concededly, the tax effect on the said amount is less than the stipulatedlimit of ₹2 crores. 7.The contention that the losses assessed in the previous assessment years must also be taken into account as the carry forward of the same hasbeen disallowed is unmerited. We do not find the machinery to compute thetax effect as stated in paragraph 5.1 of the aforementioned Circularcontemplates taking into account the observations made by the AO in regardto the losses assessed in the previous years, which have been carriedforward.Thus, although the AO in the present case has noted that thebusiness losses of prior years amounting to ₹30,73,03,525/- are also required to be disallowed; the same does not require to be included for the purposesof computing the tax effect under paragraph 5.1 of the aforementionedCBDT’s Circular. 8.In the aforesaid event, the Revenue is required to accept the decisionof the Income Tax Tribunal which is the subject matter of appeal in thepresent petition as final. 9.The application is accordingly allowed.10.There is also no cavil that brought forward losses cannot bedisallowed without reopening of the assessments for prior years, which inthis case have attained finality. ITA 172/2024 and CM APPL. 15024/2024 11.In view of the above, the appeal is dismissed. Pending application isalso disposed of. VIBHU BAKHRU, J MAY 07, 2025/tr TEJAS KARIA, J Click here to check corrigendum, if anys