Revenue's Appeal Dismissed on Interest Disallowance Deletion for AY 2003-04

The Tribunal dismissed the revenue's appeal challenging the deletion of interest disallowance under section 36(1)(iii) for the assessment year 2003-04. The tax effect was less than Rs. 20.00 lakhs, falling below the threshold set by Circular No.3/2018 issued by the CBDT. The revenue was given the opportunity to file a miscellaneous application if it could demonstrate that the appeal fell within the exceptions outlined in the Circular. The appeal was summarily dismissed on 17.7.2018.

---

---

Issues involved: Appeal challenging order deleting interest disallowance under section 36(1)(iii) of the Act for assessment year 2003-04. Tax effect less than Rs. 20.00 lakhs. Application of Circular No.3/2018 by CBDT regarding appeal eligibility based on tax effect.

Issue 1: Interest disallowance under section 36(1)(iii) of the Act
The revenue filed an appeal against the order of Ld CIT(A)-2, Mumbai, deleting interest disallowance of Rs. 52.03 lakhs under section 36(1)(iii) for the assessment year 2003-04. The revenue was aggrieved by the decision of Ld CIT(A) in this regard.

Issue 2: Tax effect and Circular No.3/2018 by CBDT
During the hearing, it was noted that the quantum in dispute was Rs. 52.03 lakhs, with a tax effect less than Rs. 20.00 lakhs. The CBDT had issued Circular No.3/2018, which stated that the revenue cannot pursue an appeal if the tax effect is Rs. 20.00 lakhs or less, unless falling under specified exceptions. The Ld D.R. sought time to obtain a certificate confirming that the grounds of appeal did not fall under any exceptions, but could not provide evidence to support this.

Analysis:
The Tribunal observed that the tax effect involved in the appeal was less than Rs. 20.00 lakhs, and the issue did not appear to fall under any exceptions specified in Circular No.3/2018. Consequently, the appeal of the revenue was dismissed summarily. However, the revenue was granted the liberty to file a miscellaneous application if it could establish that the issue contested in the appeal fell within the exceptions outlined in the Circular.

Conclusion:
The Tribunal, considering the tax effect and the provisions of Circular No.3/2018, dismissed the revenue's appeal regarding the interest disallowance under section 36(1)(iii) for the assessment year 2003-04. The order was pronounced on 17.7.2018, and the revenue was given the option to seek a recall of the order if the issue contested was found to fall within the exceptions specified in the Circular.

---