Facts of the Case

The appeal was filed by the Revenue (Principal Commissioner of Income Tax–5) under Section 260A of the Income Tax Act before the Delhi High Court against Kronos Solutions India Pvt. Ltd.

During the hearing, counsel for the Revenue submitted that the tax effect involved in the appeal was below ₹50 lakhs, which falls below the monetary threshold prescribed by CBDT Circular No. 3/2018 dated 11.07.2018.

Issues Involved

  1. Whether the High Court should adjudicate the substantial question of law when the tax effect is below the prescribed monetary limit?
  2. Applicability of CBDT Circular No. 3/2018 to pending appeals.

Petitioner’s (Revenue) Arguments

  • The Revenue initially filed the appeal raising substantial questions of law.
  • However, it was conceded that the tax effect in the present case is below ₹50 lakhs, making the appeal not maintainable in light of the CBDT circular.

Respondent’s Arguments

  • The respondent relied on the CBDT Circular prescribing monetary limits for filing appeals.
  • It was implied that the appeal should not be entertained due to low tax effect.

Court’s Findings / Order

  • The Delhi High Court noted that the tax effect is below ₹50 lakhs, which is the threshold limit as per CBDT Circular No. 3/2018.
  • Accordingly, the Court held that:
    • The substantial question of law need not be answered.
    • The appeal is disposed of without adjudicating the merits, leaving the question of law open.

Important Clarification

  • The dismissal of the appeal is not on merits, but purely on account of low tax effect.
  • The substantial questions of law remain open and can be considered in appropriate cases where the tax effect exceeds the prescribed limit.

Sections Involved

  • Section 260A – Appeal to High Court (Income Tax Act, 1961)
  • CBDT Circular No. 3/2018 dated 11.07.2018 – Monetary limits for filing appeals

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8314-DB/SKN30072018ITA4952018_152124.pdf

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