The Karnataka High Court has dismissed seven Income Tax Department appeals involving Infosys Technologies Ltd. and Wipro Ltd. after the department acknowledged that the tax effect was below the monetary limit prescribed by the Central Board of Direct Taxes (CBDT).
A Division Bench of Justice R. Devdas and Justice K. Manmadha Rao accepted the Revenue’s request to withdraw the appeals in view of CBDT Circular No. 9/2024 dated September 17, 2024. Since the appeals had been filed by the department and their value was below the threshold fixed under the CBDT circular, they were not maintainable.
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“Since the value of these appeals are below the prescribed monetary limits, the appeals will not be maintainable,” the Bench observed while permitting the Revenue to withdraw the proceedings.
The common order covered seven income-tax appeals filed under Section 260A of the Income Tax Act, 1961. Four of the appeals concerned Infosys Technologies Ltd., while the remaining three involved Wipro Ltd.
The Infosys matters related to Assessment Years 2000-01, 2001-02, 2002-03 and 2003-04. The Revenue had challenged separate orders passed by the Bengaluru Bench of the Income Tax Appellate Tribunal on November 11, 2005.
The Wipro appeals concerned Assessment Years 2001-02, 2002-03 and 2003-04. These arose from orders passed by the Tribunal on December 30, 2005.
The appeals were instituted by the Commissioner of Income Tax (International Taxation) and the Income Tax Officer, International Taxation, Bengaluru. The Department had sought reversal of the Tribunal’s decisions and restoration of the orders passed by the Income Tax Officer.
When the connected appeals came up for hearing, counsel representing the Income Tax Department filed a memo stating that the cases fell below the monetary threshold prescribed in CBDT Circular No. 9/2024.
On this basis, the Revenue submitted that the appeals were no longer maintainable and requested the High Court to dismiss them as withdrawn.
CBDT monetary-limit circulars regulate the filing and continuation of departmental appeals based on the tax effect involved. Their purpose is to reduce low-value tax litigation and enable the Department to concentrate its resources on cases involving larger revenue implications or specified exceptions.
The High Court noted that the Department itself was seeking withdrawal of the appeals at its own risk after accepting that the monetary-limit policy applied to the cases.
Counsel appearing for Wipro Ltd. opposed the proposed withdrawal and requested the Court to decide the disputes on their merits.
It was argued that similar questions had arisen in other proceedings where decisions were adverse to Wipro and that the company had already filed appeals against those rulings. The apprehension was that if the Revenue’s present appeals were merely withdrawn, it might attempt to rely on favourable decisions rendered in other cases while avoiding an adjudication in the connected Wipro matters.
The Revenue responded by relying on Clause 7 of CBDT Circular No. 9/2024. It submitted that the clause protected the respondents’ interests and that withdrawal of the present appeals would not permit the Department to take advantage of decisions that might be rendered in other maintainable appeals.
In other words, according to the Revenue, withdrawal because of a low tax effect could not be treated as a determination of the underlying legal questions or used to prejudice the assessees in other proceedings.
The High Court found no reason to compel the department to continue appeals that were not maintainable under the CBDT’s monetary-limit circular.
Addressing Wipro’s concern, the Bench observed that the company had reportedly filed appeals in other matters involving similar questions. Those legal issues could therefore be raised and argued in the proceedings instituted by the company itself.
The Court accordingly accepted the memo submitted by the Income Tax Department and dismissed all seven appeals as withdrawn.
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