CIT- International Taxation -3 Vs Sis Live (Delhi High Court)
In a significant ruling, the Delhi High Court has clarified that losses from previous assessment years are not to be included when computing the “tax effect” for determining whether an appeal falls within the monetary limits set by Central Board of Direct Taxes (CBDT) circulars. This decision came in the case of CIT- International Taxation -3 vs Sis Live, where the assessee successfully argued for the dismissal of the Income Tax Department’s appeal due to a low tax effect.
The respondent-assessee, Sis Live, filed an application praying for the dismissal of the Income Tax Appeal (ITA) No. 172/2024, citing that the tax effect in the case was below the threshold of ₹2 crore stipulated in CBDT Circular No. 05/2024 dated March 15, 2024, as modified by Circular No. 09/2024 dated September 17, 2024. The assessee submitted a detailed calculation showing a total tax effect of ₹1,71,19,532, which is below the prescribed limit for appeals before the High Court.
The Income Tax Department, represented by the Commissioner of Income Tax – International Taxation -3, did not dispute the assessee’s direct calculation of the tax effect on the current year’s income. However, the Revenue contended that the tax effect should be considered higher. Their argument was based on an observation made by the Assessing Officer (AO) in the assessment order, which stated that losses from earlier assessment years could not be permitted to be brought forward. Consequently, the Revenue argued that the “notional tax” on these disallowed carried forward losses should also be factored into the tax effect calculation, which would push the total above the ₹2 crore threshold.
