Calcutta High Court Dismisses Income Tax Dept’s Appeal On The Ground Of Low Tax Effect

The Calcutta High Court has dismissed the appeal filed by the Income Tax Department on the ground of low tax effects.

The bench of Chief Justice T.S. Sivagnanam and Justice Ajay Kumar Gupta has observed that the total tax was less than Rs. 1 crore, which is the threshold limit fixed by the Central Board of Direct Taxes (CBDT).

The department/appellant has raised the issue of whether ITAT erred in applying the rule of consistency when TP proceedings were not undertaken for earlier AYs and whether ITAT failed to appreciate the extraordinary difference in profitability between eligible and non-eligible units while allowing deduction under Section 80IC.

The respondent/assessee submitted that the tax effect in the instant case is less than Rs. 1 crore, that is, Rs. 65,05,587, and therefore the department cannot pursue this appeal on the ground of low tax effect.

The court noted that the deduction under Section 80IC at 30% of the profit is Rs. 2,13,11,566 as against the claim of the assessee of Rs. 4,10,25,466. If this is taken, the tax effect will be less than the threshold limit of Rs. 1 crore. However, on perusal of the order passed by the Commissioner of Income Tax (Appeals), the tax amount is mentioned as Rs. 1,03,10,590.

The court determined that the tax amount, which is stated in CIT (A)'s ruling as Rs. 1.03 crores, is an error in computation.

"The total tax is Rs. 80,05,462/-. Thus, it is clear that the tax effect in the instant case is less than the threshold limit fixed by the CBDT. Hence, the revenue cannot pursue this appeal," the court said.

Case Title: Principal Commissioner Of Income Tax-2, Kolkata -Versus- M/S. Deepak Industries Ltd.

Case No.: ITAT/91/2023

Date: 19/06/2023

Counsel For Appellant: Soumen Bhattacharjee

Counsel For Respondent: J.P. Khaitan

Click Here To Read The Order