The Calcutta High Court has rejected the appeal submitted by the Income Tax Department concerning low tax effects.
A two-member bench comprising Chief Justice T.S. Sivagnanam and Justice Ajay Kumar Gupta has noted that the aggregate tax was below Rs. 1 crore, which the Central Board of Direct Taxes (CBDT) sets the threshold limit.
The department/appellant questioned whether the Income Tax Appellate Tribunal (ITAT) made an error by applying the consistency rule without conducting TP proceedings for previous AYs and whether it failed to recognize the substantial difference in profitability between eligible and non-eligible units while allowing a deduction under Section 80IC.
The respondent/assessee argued that since the tax impact in the current case is under Rs. 1 crore which is Rs. 65,05,587, the department cannot continue with this appeal due to the low tax effect.
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The court observed that the deduction under Section 80IC, calculated at 30% of the profit, amounts to Rs. 2,13,11,566, in contrast to the assessee’s claimed amount of Rs. 4,10,25,466. Considering the figures would indeed result in a tax effect below the Rs. 1 crore threshold. However, the Commissioner of Income Tax (Appeals) order indicates the tax amount as Rs. 1,03,10,590.
The court established that the tax amount mentioned in CIT(A)’s decision, i.e., Rs. 1.03 crores, is a computational error.
The total tax liability is Rs. 80,05,462/-. Consequently, it is evident that the tax effect in this case falls below the threshold set by the CBDT. Therefore, the court concluded that the revenue cannot pursue this appeal.
| Case Title | M/S. Deepak Industries Ltd |
| Citation | ITAT/91/2023 |
| Date | 19.06.2023 |
| Counsel for Petitioner | Soumen Bhattacharjee |
| Counsel for Respondent | J.P. Khaitan, Mr. A.P. Agarwalla |
| Calcutta High Court | Read Order |
