TaxTMI 
TaxTMI 
2024 (12) TMI 717
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....ing services rendered outside are not liable for deduction of TDS by the assessee? In Income Tax Appeal No. 49/2014: (A) Whether on the facts and circumstances of the case, the learned ITAT is correct in holding that the AO should pass speaking order giving finding that the value of stock will be allowed as deduction when the same is returned to the party as per family settlement? (B) Whether on the facts and circumstances of the case, the learned ITAT is right in holding that the payments made by the assessee towards sales and marketing services rendered outside India are not liable for deduction of TDS by the assessee? 2. A perusal of the averments made in paragraph 9 of the memo of appeals in the respective income tax appeals reveals that according to the Revenue the tax effect involved in these appeals is Rs. 1,99,09,905/- and Rs. 1,97,10,369/- respectively. The Revenue contended that in view of clause 3.1.l of Circular No.5 of 2024 dated 15.03.2024 even though monetary threshold was not crossed, the appeal could be prosecuted. 3. Mr Percy Pardiwala, learned Senior Advocate for the respondent-assessee submitted that when the appeals were filed in May 2014, the monetary ....
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....2019 the monetary limits were further enhanced. Thereafter, on 15.03.2024 Circular No. 5 of 2024 superseded the earlier Circulars/Instructions and specified fresh monetary limits in paragraph No. 4. Further, the scope of the exceptions was considerably enhanced. Paragraph 3.1 sets out the circumstances in which the requirement to withdraw the appeal on account of the tax effect was lower than the monetary limits was inapplicable. 8. Ms Amira Razaq, learned counsel for the appellant-Revenue submitted that the CBDT has from time time issued instructions, circulars and directions regulating the filing of appeals on behalf of the Department, the tax effects and the exceptional cases in which monetary limits will not apply. In time, by Finance Act 18 of 2008, Section 268A was introduced into the Income Tax Act 1961. The said Section 268A reads as follows:- "[Filing of appeal or application for reference by income-tax authority. [Inserted by Act 18 of 2008, Section 51 (w.r.e.f. 1.4.1999).] (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing....
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.... has been held to be constitutionally invalid, or b. Where any order, notification, instruction or circular of the Board or the Government has been held to be illegal or ultra vires the Act or otherwise constitutionally invalid, or c. Where the assessment is based on information in respect of any offence alleged to have been committed under any other law received from any of the law enforcement or intelligence agencies such as CBI, ED, DRI, SFIO, NIA, NCB, DGGI, state law enforcement agencies such as State Police, State Vigilance Bureau, State Anti-Corruption Bureau, State Excise Department, State Sales/Commercial Taxes or GST Department, or d. Where the case is one in which prosecution has been filed by the Department in the relevant case and the trial is pending in any Court or conviction order has been passed and the same has not been compounded, or e. Where strictures/adverse comments have been passed and/or cost has been levied against the Department of Revenue, CBDT or their officers, or f. Where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under sections 10(23C), 12A/12AA/12AB of the Act, order passe....
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....ppeals before Supreme Court have been specified. Further, exceptions to the monetary limits were also specified vide paras 3.1 and 3.2 of the said Circular. 2. As a step towards management of litigation, it has been decided by the Board to revise the monetary limits for filing of appeals in Income-tax cases as stated in Para 4.1 of the aforementioned Circular as follows: Sl. No. Appeals/SLP in Income-tax matters Monetary Limit (Tax effect in Rs.) 1. Before Income Tax Appellate Tribunal 60 lakh 2. Before High Court 2 crore 3. Before Supreme Court 5 crore 3. Monetary limits given in paragraph 2 above with regard to filing appeal/SLP shall be applicable to all cases including those relating to TDS/TCS under the Income-tax Act, 1961 with exceptions as per paras 3.1 and 3.2 of Circular No 5/2024, dated 15-3-2024, where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits. 4. It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. The officers concerned shall ....
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.... of the institution of the appeals (i.e. Instruction 3/2011 and 5/2014) ought to be considered, Ms Razaq urged that the submission is misconceived for the following reasons:- i) The Board's Instructions no 3/2011 admittedly stand superceded by the subsequent Circulars. The Circulars no. 5/2024 and 9/2024 presently hold the field and govern the subject matter of filing appeals by the Departmental authorities. ii) Without prejudice to the above, apart from the exceptions contained at para 8 of the said Instruction 3/2011 (which are referred to by the assessee in its written submissions), the said Instruction 3/2011 at para 5 had introduced another exception to the monetary limits as follows: "...However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such assessment years even if the 'tax effect' is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which 'tax effect' exceeds the monetary limit prescribed." iii) The present a....
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.... on the date of issuance of the said Circular 5/2024, the present appeals were well within the monetary limit specified and thus maintainable. 19. Learned counsel for the Revenue submitted that the import of the submissions of the assessee would be that from the cut off date (i.e. Circular 9/2024 dated 17.09.2024) all pending appeals falling below the monetary limits regardless of the exceptions in clauses 3.1 and 3.2 of Circular 5/2024, ought to be withdrawn. It thus attempts to bifurcate the availability of the benefit of the exceptions to the Revenue between pending appeals and future appeals on such cut off date. This would mean that while pending appeals raising the same points of law are to be withdrawn, future appeals based on the same exceptions are maintainable. This would result in an anomalous situation, whereby appeals to be filed by the Department in future will stand saved regardless of tax effect in case of the exceptions carved out in Circular 5/2024 but not those filed prior thereto. This would also involve reading words into para 5 of the said Circular 9/2024 which discloses an intention to cover all modifications introduced by the Circulars 5/2024 and 9/2024 and....
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.... to repeal and replace the previous notifications by new notifications. " In the case of Calcutta Municipal Corporation v. Pawan Kumar Saraf and another, reported in (1999) 2 SCC-400, the apex Court observed that when Section 13 (3) says that the certificate of Director, CEL shall supersede the report, it means that the report would stand annulled or obliterated. The word "supersede" in law means "obliterate, set aside, annul, replace, make void or inefficacious or useless, repeal". 22. Ms Razaq therefore submitted that the Circulars 5/2024 read with 9/2024 replace all earlier Circulars referred to therein with all legal consequences. The same shall apply to future as well as pending appeals as apparent from a literal reading of the said Circulars (para 5 of Circular 9/2024). The Circulars when read together are sufficiently clear and unambiguous and do not leave any room for reading in any words or confining their scope and import only to the monetary limits while excluding the exceptions carved out in respect of pending appeals. Hence just as the monetary limits are to be applied to pending appeals, so also the benefit of the exceptions carved out in paras 3.1 and 3.2 of Circul....
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...., for the reasons hereafter mentioned we are also inclined to take a view that the present tax appeals deserve to be dismissed as withdrawn. We do not find favour in the submission of the learned counsel for the Revenue that in view of the exceptions, though the monetary threshold was not crossed, the appeal/s could be prosecuted. 26. Para 5.1 of the Circular No. 5/2024 sets out how the tax effect will be calculated in case of appeals filed in the regular assessment order, the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed. 27. Para 5.4 sets out the manner of calculating the tax effect of cases involving TDS/TCS and it is provided that the cumulative effect of all orders passed for an assessment year of a deductor shall be taken into account and shall include interest under Section 201 (1A) of the Act. Paragraph 10 of the said instruction makes it abundantly clear that such Circular will apply to SLPs/appeals to be filed henceforth before the Supreme Court/High Courts/Tribunals and hence would apply o....
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....in any event, the language of Para 10 makes it abundantly clear that such was the intention. In fact whenever the Board has enhanced the scope of the exception, it has always made it prospective. However, when it comes to increasing the monetary limits, the Board, having regard to the avowed objects of reducing litigation, has made it explicitly clear both in Circular No. 9 of 2024 as well as in Circular No. 3 of 2018 that the enhanced monetary limits will apply even in respect of all pending appeals. We are therefore of the view that having regard to the Circulars, the present appeals must be dismissed as withdrawn and the Revenue cannot prosecute the appeals by relying upon any exception created in para 3.1(l) of the Circular dated 15.03.2024 which by virtue of para 10 is to be applied only to appeals to be filed henceforth. The argument of the Revenue that both the Circulars dated 15.03.2024 and 17.09.2024 have to be read in a holistic manner and both must be given retrospective effect is contrary to the plain terms of the said Circulars. 31. In any event, in our opinion the Revenue's case does not fall in the exception carved out in para 3.1(l) of the Circular dated 15.03.2024....
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.... learned Senior Advocate for the assessee appealed to us. Learned Senior Advocate submitted that for example, say in the case of an assessee, it incurred an expenditure of Rs. 20/- which it claims as a deduction and returns a total income of Rs. 100/-. If the expenditure so claimed is disallowed, by invoking section 40 (a) (i) for a failure to deduct tax at source, then, the assessee would be assessed on an income of Rs. 120/-. If the prevalent rate of tax is 30%, the tax effect would be calculated by applying the rate of 30% on Rs. 120/- i.e. Rs.36 and subtracting from it the tax on the total income returned of Rs. 100/- i.e. Rs.30/- and, accordingly, the amount of Rs. 6/- would be determined to be the tax effect. On the other hand, in the case of a litigation pertaining to TDS, suppose on the aforesaid payment of Rs. 20/- tax at the rate of 15% would have to be deducted, then, in terms of clause 5.4 of the 15.03.2024 circular the tax effect would be calculated at Rs. 3/-. We find force in the submissions of the learned Senior Advocate that this is indicative of the fact that what is covered by para 3.1.l are cases springing out of a litigation from orders passed under section 201....