20 August 2019
CBDT further enhances monetary limits for filing Departmental Appeals before Top-3 Appellate Forums in pursuit of litigation management –
A laudable pragmatic effort to mitigate the quantum of litigations and facilitate Ease of Doing Business in India
 
Central Board of Direct Taxes (CBDT), the apex policy-making body of the Income Tax Department, has issued Circular No. 17/2019 dated 08 August 2019 u/s 268A of the
Income Tax Act, 1961 as an amendment to Circular No. 3/2018[1] dated 11 July 2018 making a further upward revision to the monetary limits for filing appeals before the Income Tax Appellate Tribunal (ITAT), High Court, and Supreme Court, by the Tax Department (Government of India).
 
Revision in Monetary limits
  • The Appeals/ Special Leave Petitions (SLP’s) shall not be filed by the Tax Department in cases where the ‘tax effect’ does not exceed the revised monetary limits specified below
    Appeals/SLPs in Income Tax Matters Current monetary limits (in INR) Revised monetary limits (in INR)
    Appellate Tribunal  2,000,000 5,000,000
    High Court 5,000,000 10,000,000
    Supreme Court 10,000,000 20,000,000
  • The term ‘tax effect’ shall be tax including applicable surcharge & cess and excluding any interest thereon.
  • Monetary limit applicable to Cross objections as well before the Tribunal.
Other Points
  1. Parity in applicability of monetary limits for filing appeals against Composite Appellate order vis-à-vis year-wise Separate Orders 
    • The circular explicitly resolves the anomaly in applicability of monetary limits where a disputed issue arises in multiple years in the case of the same assessee.
    • Consequently, henceforward appeals for only those assessment years, wherein individual tax effect for that year exceeds the aforesaid prescribed threshold can be preferred by the Department even in case of recurring disputed issues.
    • Further, even in case of combined single Appellate order involving common issues for multiple years, monetary limits would be applicable pari-passu individually year-wise.
       
  2. Retrospective applicability
    • Para 4 of the Circular 17/2019 states that the modifications shall come into effect from the date of issuance of the circular.
    • However, on a close perusal of the circular, it can be seen that this circular does not supersede Circular No. 03/2018. In fact, at para 2 it is stated that as a step towards further management of litigation, the board has decided to enhance the monetary limits of filing appeals, and to bring parity in filing appeals in scenarios where separate orders are passed by higher appellant authorities, the board has substituted the para 5 of the earlier circular of 2018. Thus, it can be said that this circular is not a standalone circular but is to be read along with Circular No. 03/2018. It can thus be said that the revised monetary limits ought to be applicable in the same manner, from the effective date as stated in Circular 3 itself.
    • The said view is reiterated by the ratio of the judgment of Hon’ble Ahmedabad Tribunal[2] wherein 628 Departmental appeals have been dismissed as withdrawn by retrospective application of Circular 17/2019. The Hon’ble Apex Court[3] also has dismissed the department’s SLP, citing low tax effect applying the recent circular.

[1]For detailed analysis on Circular No. 3/2018 refer to our alert dated 30 July 2018
[2] ITO v. Dinesh Madhavlal Patel & 627 others [TS-469-ITAT-2019(Ahd)]
[3] DCIT v. MSEB Holding Co. Ltd. [TS-478-SC-2019]
SKP's Comments
This initiative undertaken by CBDT is a good start towards creating a prudent litigation framework which reduces protracted taxpayer agony and uncertainty. India is slowly and steadily progressing towards becoming a taxpayer-friendly jurisdiction, thereby providing impetus to foreign investment and ease of business in its true sense. This will also help in further improving India’s ranking in the World Bank’s Ease of Doing Business report. 
Clarity on the retrospective application of the circular would signify a pleasant departure from conventional taxpayer-averse legacy practices. 
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