CIT-International Taxation -3 Vs SIS Live (Delhi High Court)
An appeal filed by the tax authorities, ITA No. 173/2024, has been dismissed by the Income Tax Appellate Tribunal on the grounds of “low tax effect,” adhering to recent directives from the Central Board of Direct Taxes (CBDT). The ruling aligns with the government’s policy to reduce litigation in cases involving minor financial implications for the exchequer.
The assessee, who was the respondent in this appeal, had moved an application requesting its dismissal. Their argument was rooted in CBDT Circular No. 09/2024, dated September 17, 2024, and CBDT Circular No. 05/2024, dated March 15, 2024. These circulars mandate a minimum tax effect of ₹2 crores for appeals to be pursued before the High Courts.
The assessee’s submission included a detailed computation showing a tax effect of ₹1,13,33,599/-. This figure was arrived at by considering a notional addition of ₹3,80,62,759/-, which represented the conversion of a reported loss of ₹2,80,50,853/- into an income of ₹1,00,11,906/-. The calculation incorporated tax at 30% on a portion of the notional addition and 15% on interest income, along with applicable surcharge and cess. The Revenue did not dispute the accuracy of this specific calculation.
However, the Revenue countered, asserting that the overall tax effect should be higher. Their contention stemmed from an observation made by the Assessing Officer (AO) in the assessment order, suggesting that losses from earlier assessment years could not be carried forward. The Revenue argued that the tax implications of these disallowed prior-year losses should be included in the total tax effect, which they believed would then exceed the ₹2 crore threshold.
