Facts of the Case

The Revenue (Principal Commissioner of Income Tax-5) filed appeals before the Delhi High Court against the respondent, Kronos Solutions India Pvt. Ltd. The appeals involved certain substantial questions of law under the Income Tax Act.

During the hearing, it was stated on behalf of the Revenue that the tax effect involved in the present appeals was below Rs. 50 lakhs, which is the monetary threshold prescribed under CBDT Circular No. 3/2018 for filing appeals before the High Court.

Issues Involved

  1. Whether the High Court should adjudicate the substantial questions of law when the tax effect is below the prescribed monetary limit under CBDT Circular No. 3/2018.
  2. Whether such appeals are maintainable in light of the binding CBDT circular

Petitioner’s Arguments (Revenue)

  • The Revenue initially filed the appeal raising substantial questions of law.
  • However, during proceedings, it was conceded that:
    • The tax effect in the appeal is below Rs. 50 lakhs.
    • As per CBDT Circular No. 3/2018, such appeals are not required to be pursued.

Respondent’s Arguments (Assessee)

  • The respondent supported dismissal of the appeal in light of:
    • The binding nature of CBDT Circular No. 3/2018.
    • The low tax effect, making the appeal non-maintainable.

Court’s Findings / Order

  • The Delhi High Court noted the submission of the Revenue regarding the low tax effect.
  • The Court held that:
    • In view of CBDT Circular No. 3/2018, the substantial question of law need not be answered.
  • Final Order:
    • The appeals were disposed of without answering the substantial questions of law.
    • The questions of law were kept open for future consideration in appropriate cases.

Important Clarification

  • The dismissal of the appeal:
    • Does not decide the merits of the case.
    • Leaves the question of law open.
  • This ensures that:
    • The same legal issue can be raised in future cases where the tax effect exceeds the prescribed limit.

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

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