Quatrro Global Services vs ACIT: Tax Effect and Circular Exemptions Dispute

Quatrro Global Services vs ACIT: Tax Effect and Circular Exemptions Dispute

Case Number: ITA 6621/DEL/2019

Appellant: ACIT Circle-20(2), New Delhi

Respondent: Quatrro Global Services Pvt. Ltd., Gurgaon

Assessment Year: 2011-12

Case Filed On: 2019-08-08

Order Type: Final Tribunal Order

Date of Order: 2022-06-22

Pronounced On: 2022-06-22

Introduction

The case of Quatrro Global Services Pvt. Ltd. vs ACIT revolves around the applicability of the tax effect threshold and the exceptions outlined in CBDT Circulars No. 17/2019 and 03/2018. This dispute, which came before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, highlights the Revenue’s attempt to appeal despite the prescribed monetary limits, raising questions about the maintainability of such appeals under the stated circulars.

Background

Quatrro Global Services Pvt. Ltd., previously known as Scope E-Knowledge Pvt. Ltd., is a Gurgaon-based company that was subject to an assessment for the year 2011-12. The Assistant Commissioner of Income Tax (ACIT), Circle-20(2), New Delhi, representing the Revenue, filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-7, New Delhi, dated 13.05.2019. The appeal was filed before the ITAT, but the primary issue was whether the appeal was maintainable given the tax effect involved and the relevant CBDT circulars.

Legal Issues

The central legal issue in this case was whether the appeal filed by the Revenue was maintainable under the guidelines set forth in CBDT Circular No. 17/2019, which prescribes a monetary threshold of Rs. 50 lakhs for appeals. The circular, along with its predecessor, Circular No. 03/2018, also outlines specific exceptions where appeals may still be filed even if the tax effect is below the prescribed limit. The question before the ITAT was whether the Revenue’s appeal met any of these exceptions or if it should be dismissed based on the monetary limit.

Arguments Presented

Respondent’s Arguments:

The respondent, Quatrro Global Services Pvt. Ltd., argued that the tax effect involved in the appeal was below the Rs. 50 lakhs threshold set by the CBDT Circular No. 17/2019. They contended that the appeal did not fall under any of the exceptions mentioned in the circular, making it non-maintainable. The respondent cited the circular and the CBDT clarification dated 20th August 2019, which stated that the revised monetary limits are applicable to all pending appeals, cross-objections, and references.

Appellant’s Arguments:

The appellant, represented by the Departmental Representative (DR), Shri T. Kipgen, did not refute the claim made by the respondent regarding the tax effect. The DR acknowledged that the tax effect involved was indeed below the prescribed limit of Rs. 50 lakhs and that the appeal did not fall under any of the exceptions that would justify its maintainability.

ITAT’s Observations

The ITAT, comprising Shri Anil Chaturvedi (Accountant Member) and Shri N.K. Choudhry (Judicial Member), carefully considered the submissions made by both parties. The bench observed that the CBDT Circular No. 17/2019, read with Circular No. 03/2018, clearly precludes the Revenue from filing appeals before the appellate tribunal if the tax effect does not exceed Rs. 50 lakhs, unless the case falls under one of the specified exceptions.

The tribunal noted that the Revenue had not demonstrated that the case fell under any of the exceptions outlined in the circular. As a result, the ITAT concluded that the appeal was not maintainable and should be dismissed. The tribunal also emphasized that the CBDT clarification dated 20th August 2019 made it clear that the revised monetary limits apply to all pending appeals, further supporting the dismissal of the Revenue’s appeal.

Final Judgment

In its final judgment, the ITAT dismissed the appeal filed by the ACIT, Circle-20(2), New Delhi, against Quatrro Global Services Pvt. Ltd. The tribunal ruled that the appeal was not maintainable under the guidelines set forth in CBDT Circular No. 17/2019, as the tax effect involved was below the Rs. 50 lakhs threshold and the case did not fall under any of the exceptions that would justify the appeal’s continuation.

The ITAT also granted liberty to the Revenue to approach the tribunal for a recall of the order if it is later discovered that the tax effect exceeds the prescribed limit or if the case is protected by any of the exceptions mentioned in para-10 of Circular No. 03/2018. This provision ensures that the Revenue retains the right to pursue the appeal if new information comes to light that would make the appeal maintainable under the circular’s exceptions.

Conclusion

The case of Quatrro Global Services Pvt. Ltd. vs ACIT underscores the importance of adhering to the guidelines set forth in CBDT circulars, particularly regarding the monetary limits for filing appeals. The ITAT’s decision reaffirms the principle that appeals should not be filed or pursued if the tax effect is below the prescribed threshold, unless the case clearly falls within one of the specified exceptions.

This ruling provides valuable guidance for both taxpayers and the Revenue, emphasizing the need to carefully evaluate the tax effect and the applicability of circulars before filing or continuing an appeal. The decision also highlights the significance of the CBDT’s efforts to manage litigation more effectively by setting clear guidelines on when appeals should be pursued, thereby reducing the burden on the appellate tribunals.

As the tax landscape continues to evolve, it is essential for all parties involved to stay informed about the latest developments and ensure compliance with the relevant regulations. The ITAT’s judgment in this case serves as a reminder of the critical role that CBDT circulars play in guiding the conduct of appeals and protecting the interests of both taxpayers and the Revenue.

In conclusion, the dismissal of the appeal in Quatrro Global Services Pvt. Ltd. vs ACIT reinforces the importance of following the guidelines set forth in CBDT circulars and ensures that the appellate process is used judiciously, only in cases where the tax effect warrants further litigation.

Quatrro Global Services vs ACIT: Tax Effect and Circular Exemptions Dispute