IN HIGH COURT OF JUDICATURE AT MADRAS DATE : 17.02.2015 CORAM HONOURABLE MR. JUSTICE R.SUDHAKAR AND HONOURABLE MR. JUSTICE R.KARUPPIAH T.C.A. NO. 1109 OF 2007 Commissioner of Income Tax Chennai. .. Appellant - Vs - M/s. Samrat Towers Consultants Pvt. Ltd. No.28, Soliappa Street Mylapore, Chennai 600 004. .. Respondent Appeal filed under Section 260-A of Income Tax Act against order dated 16.2.07 passed by Income Tax Appellate Tribunal, 'C' Bench, Chennai, made in ITA No.2603/Mds/2004. For Appellant : Mr. J.Narayanaswamy For Respondent : Mr. Philip George JUDGMENT (DELIVERED BY R.SUDHAKAR, J.) Aggrieved by order passed by Tribunal in allowing appeal filed by assessee, Revenue/appellant is before this Court by filing present appeal. This Court, vide order dated 27.08.2007, while admitting 2 appeal, framed following substantial questions of law for consideration :- i) Whether in facts and circumstances of case, Tribunal was right in holding that revision made by CIT under Section 263 is bad in law? ii) Whether in facts and circumstances of case, Tribunal was right in allowing deduction under Section 80-) in respect of tower testing activity, etc.? 2. respondent/assessee is company engaged in business of designing and transmission microwave towers used in power sectors, telecommunication and mobile phone operations. assessee, in course of assessment for assessment year 2002-2003, claimed deductions under Section 80-O of Income Tax Act in respect of tower testing activities, which assesses characterized as 'design'. assessment was accepted and assessing officer allowed said deduction on net income. However, said assessment was revised by Commissioner of Income Tax under Section 263 of Income Tax Act, as Commissioner of Income Tax was of view that the income, from nature of business activities as shown by assessee, was not eligible for deduction under Section 80-O of Income Tax Act. 3 3. Aggrieved by said order of Commissioner of Income Tax, assessee preferred appeal to Tribunal. Tribunal, following its own earlier order in case of Ontrack Systems Ltd. - Vs ACIT (ITA No.442/Mds/2004), allowed appeal. Tribunal, with regard to order under Section 263 of Act, relying on decision of Supreme Court in case of Malabar Industrial Co. Vs CIT (2000 (243) ITR 83 (SC)), allowed appeal in favour of assessee holding that order passed by Commissioner under Section 263 of Act is bad in law. For better clarity, relevant portion of order of Tribunal is extracted hereinbelow :- 5. only issue is whether assessee's work pertains to use of drawing and designing or it is related work for construction of Microwave Towers. Even CIT in his order in para 4.3. (i) has stated that As per these invoices, it has drawn design as per requirements of owners and handed over them for further execution and categorically held that assessee has drawn design as per requirement of owners, but whether this will take away requirement of Section 80-O or not. In similar facts in case of Ontrack Systems Ltd. - Vs ACIT, Chennai Bench of Tribunal, in I.T.A. No.442/Mds/2004 by order dated 13th October, 2006, in which one of us, namely, Judicial Member is party, while dealing issue of drawing of website, has held as under :- It is seen that this development work is highly specialized work which includes state-of-the-art 4 programming, technical writing, imaging and animation skills having original ideas, artistic as well as intuitive. In view of above technical aspects, this development work involved in creation of web portal www.city4u.com is highly creative and challenging task and in no circumstances, same can be equated to data entry jobs where prime focus is to digitize given content from paper into text/image format without introducing any changes to content. In view of this, we hold that creation of website is designing within definition of word 'design' for purpose of claiming of deduction under Sec. 80-O of Act. Accordingly, we allow claim of Assessee and orders of lower authorities are set aside. Once it is held that assessee is carrying out design and design is for use of outside India, then receipts will be treated to be falling under Section 80-O and accordingly, assessee is entitled to deduction under Section 80-O. 6. We feel that assessment order passed by Assessing Officer where he has taken view that assessee is entitled for deduction under Section 80-O is neither erroneous nor prejudicial to interest of Revenue. Even on merits, assessee is in business of designing as narrated above and order of Assessing Officer is not erroneous. Even otherwise, twin conditions as enumerated by Hon'ble Apex Court in case of Malabar Industrial Co. Ltd. - Vs CIT (2000 (243) ITR 83 (SC)) have not been satisfied. In view of facts and circumstances, we feel that reviewing under Section 263 by CIT is bade in law and 5 same is quashed. Aggrieved by said order of Tribunal, appellant/Department is before this Court by filing present appeal. 4. Learned counsel appearing for respondent/assessee, raised preliminary objection as to maintainability of case of appellant by submitting that as per Instruction No.1979 dated 27.3.2000 read with Instruction No.2 of 2005 dated 24.10.2005, for preferring tax case appeal, monetary limit is fixed and only if tax effect exceeds Rs.4 Lakhs, appeal can be filed in respect of single cases and in respect of group cases, each case should individually satisfy monetary limits and, therefore, cumulative tax effect cannot be taken into consideration. It is submission of learned counsel for assessee/respondent that assessee does not fall within any of exceptions provided in instruction mandating department to prefer appeal. Therefore, learned counsel for assessee submits that present appeal is not maintainable. 5. Heard learned standing counsel appearing for appellant/Department and learned counsel appearing for respondent/assessee and perused materials available on record. 6 6. Even though these appeals were admitted on questions of law, referred supra, we are not inclined to entertain these appeals in view of preliminary objection made by learned counsel for respondent that monetary limit to prefer appeal is pegged at Rs.4,00,000/- by Central Board of Direct Taxes vide Instruction No.2 of 2005, dated 24.10.2005 read with Instruction No.5 of 2007, dated 16.7.2007. 7. In case on hand, tax liability pertains to additions made by Assessing Officer on account of tower testing activities, which were characterized as 'design'. preliminary objection of assessee and tax liability under above heads is as under: Preliminary objection on maintainability of Department's Tax Case Appeal: Instruction No.1979 dated 27.03.2000 read with Instruction No.2 of 2005 dated 24.10.2005 fixed monetary limit to prefer Tax Case Appeal only if tax effect exceeds Rs.4 Lakhs for each case taken singly, i.e., in group cases, each case should individually satisfy monetary limits and therefore cumulative tax effect cannot be taken into consideration. Assessee submits that Assessee does not fall within any of exceptions provided in instruction mandating department to prefer appeal. total tax effect excluding interest is as follows: Disputed Issue Amount in Working Tax Effect in Rs. Rs. Deduction u/s 80-O 340966 Tax @ 35% 1,19,338 7 1,21,725 SC @ 2% 2,387 8. learned counsel appearing for assessee also pleaded that case of assessee does not fall within exceptions specified in Instruction No.1979 issued by Central Board of Direct Taxes on 27.3.2000, where irrespective of revenue effect matter should be contested by Department. relevant portion of said instruction reads as under: 3. Adverse judgments relating to following should be contested irrespective of revenue effect: (i) Where Revenue audit objection in case has been accepted by Department. (ii) Where Board s order, notification, instruction or circular is subject-matter of adverse order. (iii) Where prosecution proceedings are contemplated against assessee. (iv) Where constitutional validity of provisions of Act are under challenge. 9. learned Standing Counsel for Revenue is not disputing fact that tax effect in present case is less than Rs.4 Lakhs and that assessee's case does not fall within exceptions specified in Instruction No.1979, dated 27.3.2000. 10. It is brought to notice of this Court that in earlier decision in 8 Commissioner of Income Tax, Salem Vs Dr. C.T.Kiruba (T.C. (A) Nos.1011 & 1012 of 2007 dated 19.1.2015), in similar set of facts, this Court has dismissed appeal filed by Department as not maintainable. 11. Considering circulars issued by Central Board of Direct Taxes and tax effect involved in case on hand, this Court is not inclined to entertain this appeal. Accordingly, without going into merits of questions of law formulated and in light of earlier decision of this Court in Dr.C.T.Kiruba's case (supra), this appeal is dismissed as not maintainable. However, there shall be no order as to costs. (R.S.J.) (R.K.J.) 17.02.2015 Index : Yes/No Internet : Yes/No GLN 9 To 1. Commissioner of Income Tax Chennai. 2. Income Tax Appellate Tribunal 'C' Bench, Chennai. 10 R.SUDHAKAR, J. AND R.KARUPPIAH, J. GLN T.C.A. NO. 1109 OF 2007 17.02.2015 Commissioner of Income-tax, Chennai v. M/s. Samrat Towers Consultants Pvt. Ltd