Income Tax Appellate Tribunal - Ahmedabad
Dcit, Central Circle-1(1),, Ahmedabad vs M/S. Oriental Prospecting Co., ... on 14 December, 2022
M.A. No.140/Ahd/2021
Assessment Year: 2012-13
Page 1 of 5
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH, AHMEDABAD
BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
M.A. No.140/Ahd/2021
(In IT(SS)A No.77/Ahd/2018)
Assessment Year: 2012-13
Dy. Commissioner of Income Tax, vs. M/s. Oriental Prospecting Co.,
Circle - 1(1), Ahmedabad. 19-20, Narayan Chambers,
3 rd Floor,
Ashram Road,
Ahmedabad.
[PAN - AAAFO 3112 D]
(Appellant) (Respondent)
Assessee by : Shri Mehul Thakkar, AR
Revenue by : Shri Rakesh Jha, Sr. DR
Date of hearing : 02.12.2022
Date of pronouncement : 14.12.2022
ORDER
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This Miscellaneous Application is filed by the Department in respect of order dated 15.06.2021 passed by the Tribunal.
2. The Ld. DR submitted that the aggregate tax effect in the present appeal is Rs.50,47,017/- which is more than the tax effect as per Circular No.17/2019 dated 08.08.2019. Therefore, the Ld. DR submitted that the matter may be recalled and the appeal be fixed for fresh hearing on merit.
3. The Ld. AR submitted written submissions dated 09.03.2021 which are reproduced herein below:-
"1. The hearing of the above matter was fixed today. During the course of hearing, the undersigned was instructed to file the computation of "tax effect" and the relevant argument on exclusion of "cess" while measuring tax effect.
2. Computation of tax effect in case of M/s. Oriental Prospecting Co.M.A. No.140/Ahd/2021
Assessment Year: 2012-13 Page 2 of 5 Tax on Total Income (assessed) [30% of 1,69,52,170] Rs. 50,85,651 Less: Tax on total income reduced by the amount of income in respect of which appeal is intended to be Rs. 1,85,634 filed i.e. Tax @30% on [Rs.1,69,52,170 les 1,63,33,390] Tax effect without including education cess Rs. 49,00,017
3. The above computation shows that tax effect is less than Rs.50,00,000/-
(a monetary limit fixed by the CBDT while filing an appeal by the Department on merits before Hon'ble ITAT)
4. However, if one includes education cess @ 3% (applicable for the firms for the A.Y. 2012-13) then "Tax effect" is worked at Rs. 50,47,017.
5. Therefore, the issue under consideration is whether cess is to be included while computing tax effect or not for deciding the monetary limit fixed by the CBDT while filing an appeal by the Department on merits.
6. The above issue has already been dealt with by the Hon'ble Hyderabad Bench of ITAT in case of The ITO, Ward 6(4), Hyderabad Vs. Sri P. Prasen Kumar, Hyderabad M.A. No.35/HYD/2017 wherein Hon'ble ITAT in para 5 of its order held as under:
"As far as inclusion of education cess is concerned, the same cannot be considered as part of tax, in view of Hon Jurisdictional High Court decision in the case of Srikakollu Subba Rao & Co., Vs. Union of India & others [173 ITR 708] wherein the Hon'ble Jurisdictional High Court held that market cess was not a tax and that the provisions of Section 43B had no application to market cess. This principle will also apply to the education cess levied, which is specifically considered by the Hon'ble Delhi High Court in the case of Dalmia Cement (Bharat) Ltd. Vs. CIT [357 ITR419]....."
7. However, CBDT issued circular No. 3/2018wherein para 4 of the circular, it has modified the definition of tax effect as compared to its earlier circular No. 21/2015 and specifically mentioned that the "tax effect" shall be tax including applicable surcharge and education cess.
8. It is respectfully submitted that the very objective of fixing various monetary limit was to reduce litigation and same can be inferred from the Subject mentioned in the circular no. 3/2018 which reads as under:
Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts M.A. No.140/Ahd/2021 Assessment Year: 2012-13 Page 3 of 5 and SLPs/appeals before Supreme Court-measures for reducing litigation-Reg.
9. Therefore, the very action of CBDT to include education cess and surcharge while computing tax effect is in contradiction with the "Subject" for which the captioned circular was issued.
10. The term "tax effect" primarily refers to the effect of tax and the word "tax" as defined under section 2(43) of the Act does not include cess. This has also been held consistently by the other High Courts in addition to the Hon'ble Delhi High Court in case of Dalmia (supra) namely Bombay High Court in case of Sesa Goa Limited v. Joint Commissioner of Income-tax [2020] 117 taxmann.com 96 and Rajsthan High Court in case of Chambal Fertilizers and Chemical Ltd. v. CIT-Range(2), Kota.
11. Therefore, our respectful submission is that the Circular issued by the CBDT under section 119 of the Act cannot override the provisions of the Act and more particularly when the word "Tax" has been defined under section 2(43) of the Act. The effect of "Tax" as defined under the Act alone needs to be considered while measuring "Tax effect".
12. To substantiate the contention that the CBDT cannot override the provisions of the Act, your respondent rely on Gujarat Urban Co- operative Bank Federation V. Union of India 25 taxmann.com 82 (Guj)- Jurisdictional High Court wherein Para 6 of its order, Hon'ble High Court has observed as under:
"The Division Bench of this Court, in the case of Banque Nationale De Paris [1999] 237 ITR 158, has ruled out that CBDT cannot issue a circular under section 119 of the Act, which would override or detract from the provisions of the Income Tax Act,1961......"
13. In view of the above, it is respectfully submitted that the appeal filed by the Department may please he dismissed as the same does not have tax effect exceeding Rs.50 Lakh."
4. The Ld. AR further submitted that since there are decisions of Hon'ble Delhi High Court in the case of Dalmia Cement (Bharat) Limited vs. CIT, 357 ITR 419) and decision of Hon'ble Bombay High Court in the case of Sesa Goa Limited vs. Joint Commissioner of Income Tax (2020) 117 taxmann.com 96) that education cess should not be included in the tax amount. The tax effect comes below the threshold of Rs.50 lakhs and, therefore, the Tribunal rightly dismissed the ground of low tax effect as per Circular dated 08.08.2019.
M.A. No.140/Ahd/2021Assessment Year: 2012-13 Page 4 of 5
5. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that prior to the Circular no.17/2019 dated 08.08.2019 in respect of earlier Circular No.3/2018 specifically mentioned that the tax effect shall be taxed including applicable surcharge and education cess. Circular no.17/2019 dated 08.08.2019 has not give any specific clarification that the surcharge on education cess is not included in calculating tax effect. Thus, the contention of the Ld. AR that as per the decision of Hon'ble Delhi High Court in the case of Dalmia Cement and Hon'ble Bombay High Court in the case of Sesa Goa Limited, the element of education cess should not be taken into account while calculating the tax effect does not survive. After perusal of order dated 15.06.2021 passed by the Tribunal, it was categorically seen that the element of surcharge on education cess was not taken into account while calculating the tax effect by the Tribunal despite the same has been pointed out by the assessee at the time of hearing of the appeal. Therefore, there is a mistake apparent on record and we are recalling the order dated 15.06.2021 passed by the Tribunal. The Registry is directed to place the appeal being IT(SS)A No.77/Ahd/2018 for fresh hearing on merit on 25.01.2023.
6. In the result, the Miscellaneous Application filed by the Revenue is allowed.
Order pronounced in the open Court on this 14th day of December, 2022.
Sd/- Sd/-
(WASEEM AHMED) (SUCHITRA KAMBLE)
Accountant Member Judicial Member
Ahmedabad, the 14 th day of December, 2022
PBN/*
Copies to: (1) The appellant
(2) The respondent
(3) CIT
(4) CIT(A)
(5) Departmental Representative
(6) Guard File
M.A. No.140/Ahd/2021
Assessment Year: 2012-13
Page 5 of 5
By order
UE COPY
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad