Low tax effect bars departmental appeal; labour expense disallowance trimmed to an estimated 5% for partial relief.

Revenue's departmental appeal was found not maintainable because the tax effect was below the CBDT monetary limit for filing appeals, and the instruction was applied to pending matters as well, so the appeal was dismissed without a merits ruling. On the labour expense dispute, the claimed expenditure was considered not fully verifiable, but the original disallowance was viewed as excessive; the disallowance was therefore restricted on an estimated basis to 5% of the claimed amount, giving the assessee partial relief.

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Issues: (i) Whether the departmental appeal was maintainable in view of CBDT Instruction No. 5/2014 prescribing a monetary limit for filing appeals; (ii) Whether the disallowance of labour expenses was to be sustained in full or reduced on estimation.

Issue (i): Whether the departmental appeal was maintainable in view of CBDT Instruction No. 5/2014 prescribing a monetary limit for filing appeals.

Analysis: The tax effect in the Revenue's appeal was below the monetary limit prescribed for appeals before the Tribunal. The instruction was treated as applicable to pending appeals as well, and the appeal was therefore not fit for adjudication on merits.

Conclusion: The Revenue's appeal was held to be not maintainable and was dismissed on the ground of low tax effect.

Issue (ii): Whether the disallowance of labour expenses was to be sustained in full or reduced on estimation.

Analysis: The labour expenditure claimed in relation to the project was not fully verifiable, but the disallowance made by the Assessing Officer was considered excessive. The appellate disallowance was restricted further on a percentage basis having regard to the facts and circumstances.

Conclusion: The disallowance of labour expenses was reduced to 5% of the claimed expenditure, resulting in relief to the assessee.

Final Conclusion: The Revenue's challenge failed for want of maintainability, while the assessee obtained partial relief by reduction of the disallowance.

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