Case Law Details
PCIT Vs K.B. Capital Markets PVT. Limited (Calcutta High Court)
Introduction: In a noteworthy decision, the Calcutta High Court has dismissed an appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961. The appeal, directed against an order of the Income Tax Appellate Tribunal, “B” Bench, Kolkata, pertained to the assessment year 2009-10. The pivotal reason for the dismissal was that the tax effect for the relevant assessment year fell below the threshold limit set by the CBDT Circular.
Background: The case centered around an appeal filed by the Revenue against the order passed by the Income Tax Appellate Tribunal (“Tribunal”) for the assessment year 2009-10. The appeal was made under Section 260A of the Income Tax Act, 1961. However, a critical factor in this case was the tax effect, which played a decisive role in the court’s ruling.
Tax Effect Threshold: The court considered the Income Tax Computation Form appended to the assessment order. According to this form, the total income computed for the assessment year in question amounted to Rs. 1,04,65,829/-. The tax payable as per the assessing officer’s order was approximately Rs. 35 lakhs.
Appeal Dismissal: The key factor leading to the dismissal of the Revenue’s appeal was the observation that the tax effect for the assessment year in question fell below the threshold limit established by the Central Board of Direct Taxes (CBDT) Circular. This threshold limit serves as a criterion for determining whether appeals should be pursued based on the tax impact involved.
In this case, given that the tax effect did not meet the threshold limit, the court ruled that the appeal could not be pursued by the Revenue on the grounds of low tax effect. Consequently, the appeal was dismissed.
The court also noted that the dismissal of the appeal was solely due to the low tax effect and did not delve into the substantial questions of law raised by the Revenue.
Conclusion: The Calcutta High Court’s ruling in the case of “PCIT Vs K.B. Capital Markets Pvt. Ltd.” underscores the significance of the tax effect threshold established by the CBDT Circular. When the tax effect for a specific assessment year falls below this threshold, it may lead to the dismissal of appeals by the Revenue. In this case, the court dismissed the appeal due to the low tax effect, emphasizing the adherence to the CBDT Circular’s guidelines in determining the pursuit of such appeals. The substantial questions of law in the appeal were left open for future consideration
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court : This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 3rd May, 2017 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata (Tribunal) in ITA No.1302/Kol/2014 for the assessment year 2009-10.
The revenue has raised the following substantial questions of law for consideration :
a) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, “B” Bench Kolkata, erred in law in holding that income of brokerage from dealing in shares in client account were to be allowed to the set off against speculation loss treated under Section 73 of the Income Tax Act, 1961 of Rs.5,12,35,594/- without considering the fact that speculation loss can only be set off against speculation profit?
b) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, “B” Bench Kolkata, erred in law in holding that the profit out of sale of shares to be treated as Long Term Capital Gain of Rs.97,51,280/- Short Term Capital Gain of Rs.1,48,40,879/- instead of normal business income without considering the fact that frequency of transaction, non-maintenance of separate demat account of investment and for trading suggests that sale of shares are normal business income in nature?
c) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, “B” Bench Kolkata, erred in law in holding that the disallowance of interest expenditure ought to have been made under Rule 8D(2)(ii) of the Income Tax Rules, 1962?
d) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, “B” Bench Kolkata, erred in law in holding that only dividend yielding investment are to be taken into account while calculating the disallowance under Section 14A of the Income Tax Act, 1961 and the disallowance made of total Rs.59,30,273/- was not correct, without considering the fact that as per provision of Rule 8D of the Income Tax Rules, 1962 all the investments as well stock in trade are to be considered for computing disallowance?
We have heard Mr. Debasish Chowdhury, learned counsel for the appellant/revenue and Mr. R. K. Murarka, learned senior counsel, duly assisted by Ms. Sutapa Roy Choudhury and Ms. Aratrika Roy, learned counsel appearing for the respondent/assessee.
Learned senior counsel appearing for the respondent/assessee submitted that the tax effect for the assessment year under consideration is below the threshold limit fixed by the CBDT Circular. In this regard, our attention was drawn to the Income Tax Computation Form appended to the assessment order from which we find that the total income computed is Rs. 1,04,65,829/- and the tax payable thereon in terms of the order of the assessing officer is nearly Rs. 35 lacs. Therefore, the appeal cannot be pursued by the revenue on the ground of low tax effect. Accordingly, the appeal stands dismissed.
Consequently, substantial questions of law are left open.
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