Case Law Details
ITO Vs Nanalayja Power Company Ltd. (ITAT Ahmedabad)
In ITO Vs Nanalayja Power Company Ltd., the ITAT Ahmedabad dismissed a Revenue appeal due to its non-maintainability under CBDT Circular No. 09/2024, which prescribes a monetary threshold of ₹60 lakhs for filing appeals before the Tribunal. The appeal pertained to an addition of ₹1.17 crore made by the Assessing Officer (AO) as “Income from Other Sources” under Section 56 of the Income Tax Act, 1961. This addition was based on the interest income earned by the company on temporarily parked project funds. However, the CIT(A) deleted the addition, treating the interest as capital in nature, related to project activities, and adjustable against capital work-in-progress (CWIP).
During the proceedings, the Departmental Representative (DR) acknowledged that the tax effect in the case was below the prescribed threshold, and no exceptions under the CBDT Circular were applicable. Consequently, the Tribunal concluded that the appeal was non-maintainable. This case highlights the enforcement of CBDT guidelines on low tax effect, ensuring efficient case management and judicial resource allocation.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal by the Revenue arises from the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as “CIT(A)”], dated 11/06/2024, for the Assessment Year (AY) 2014-15, wherein the CIT(A) deleted the addition of Rs.1,17,75,568/- made by the Assessing Officer [hereinafter referred to as “AO”] u/s.56 of the Act in the assessment order passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”], dated 27/11/2019.
Facts of the case:
2. The AO had reopened the assessment under Section 147 of the Act on the grounds that interest income of Rs.1,17,75,568/-, earned on temporarily parked project funds, had escaped assessment. During the reassessment proceedings, the AO concluded that this interest income was liable to tax under the head “Income from Other Sources,” relying on the principles laid down in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [(1997) 227 ITR 172 (SC)].
3. In appeal, the CIT(A) held that the interest income was capital in nature, directly related to the funds used for project purposes and, hence, should be adjusted against the capital work-in-progress (CWIP). The CIT(A) relied on precedents, such as, decision of Co-ordinate Bench in the case of Adani Power Ltd. reported at (2015) 155 ITD 239, distinguishing the facts from Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) and deleting the addition.
4. The Revenue’s primary ground before us is that the CIT(A) erred in deleting the addition made by the AO, treating the interest income as “Income from Other Sources” under Section 56 of the Act. Additionally, the Department sought leave to amend or add grounds before the final hearing, but no amendments were introduced.
5. During the course of the hearing, none appeared on behalf of assessee. The Departmental Representative (DR) confirmed that the tax effect in this appeal is below the threshold prescribed in Circular No. 09/2024, issued by the Central Board of Direct Taxes (CBDT) on 17th September 2024. The Circular raised the monetary limits for filing appeals before various appellate authorities, with the revised limit for appeals before the Income Tax Appellate Tribunal (ITAT) being Rs.60 lakhs.
5.1. The DR further submitted that the Assessing Officer had verified and confirmed that this appeal falls within the scope of the CBDT Circular on low tax effect, and no exceptions under Paragraph No. 3.1 or 3.2 of Circular No. 5/ 2024 were applicable.
6. In view of the CBDT Circular No. 09/2024, which prescribes a threshold of Rs.60 lakhs as the minimum tax effect for filing appeals before the ITAT, and given that the tax effect in this case is below this threshold, we find that the Revenue’s appeal is not maintainable.
6.1. In the absence of any exceptions as outlined in Circular No. 5/2024, we find that this appeal does not warrant further adjudication.
6.2. Based on the above facts and the confirmation by the DR and AO, the appeal filed by the Revenue is dismissed as non-maintainable in light of CBDT Circular No. 09/2024 on low tax effect.
7. In the result, the appeal of the Revenue stands dismissed.
Order pronounced in the Open Court on 12th November, 2024 at Ahmedabad.
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