The Karnataka High Court has dismissed an Income Tax appeal filed by the Principal Commissioner of Income Tax due to the tax effect being below the Rs.1 Crore threshold. However, the court left the door open for the appeal’s revival, acknowledging that the case could be reconsidered if it falls within the exceptions outlined in the Central Board of Direct Taxes ( CBDT ) Circular No.17/2019.
The appeal was brought by the Principal Commissioner of Income Tax-VI and the Deputy Commissioner of Income Tax challenging an appellate order regarding the assessment year 2010-11 involving M/s. Stanley Black & Decker India Ltd.
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The appellant revenue, represented by Sri. E.I. Sanmathi sought to overturn the previous decision despite the dispute involving an amount below Rs.1 Crore, arguing that certain exceptions to the CBDT Circular might be applicable, thus justifying a review of the case.
The respondent, Stanley Black & Decker India Ltd., represented by Sri. T. Suryanarayana contended that the appeal should be dismissed because the tax effect was below Rs.1 Crore, in accordance with CBDT Circular No.17/2019.
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They argued that the Circular is binding on the revenue, making the continuation of the appeal inappropriate under the prescribed guidelines.
The CBDT Circular No.17/2019 sets a threshold for tax disputes, generally preventing the revenue from pursuing appeals where the tax effect is less than Rs.1 Crore. This policy is part of a broader effort by the government to reduce the backlog of tax litigation and to focus resources on cases with higher financial implications. By setting this limit, the CBDT aims to ensure that only substantial cases reach the courts, thereby optimising judicial efficiency.
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The Karnataka High Court acknowledged the binding nature of the CBDT Circular, which effectively precludes appeals with a tax effect under Rs.1 Crore. Consequently, the court dismissed the revenue’s appeal on these grounds. However, the bench did not entirely close the door on the matter. Recognising the possibility of exceptional circumstances, the bench granted the revenue the liberty to revive the appeal if they can demonstrate that the case falls within the specific exceptions provided in the Circular. This decision recognises the need for flexibility in exceptional cases.
The court’s willingness to allow the revival of the appeal highlights the importance of ensuring that significant issues are not dismissed purely on procedural grounds when there might be a legitimate cause for reconsideration.
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While the department is generally expected to refrain from appealing cases with low tax effects, the provision for exceptions allows them to argue for a review in extraordinary situations.
This judgment highlights a balanced approach by the Karnataka High Court, which seeks to enforce procedural norms while maintaining fairness in cases that may merit further consideration. By allowing the possibility of a revival, the court ensures that the legal process remains both efficient and just, providing an avenue for significant cases to be heard, even when they initially appear to fall outside the usual parameters.
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In conclusion, the Karnataka High Court dismissed the Income Tax appeal due to the low tax effect but it also recognised the potential for exceptional circumstances to warrant a review, thus allowing the revenue the option to revive the appeal if justified under the CBDT Circular’s exceptions.
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