Exception to CBDT Circular specifying Monetary Limit for filing Appeal not Applicable If Assessee

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the exception to the circular issued by the Central Board of Direct Taxes (CBDT) prescribing the monetary limit for filing an appeal would not be applicable if the assessee provides full information about the foreign income of the assessee.

The department approached the Tribunal stating that the case of the assessee is covered by the exceptional clause of circular wherein it is held that in para 10 of the said circular provides that adverse judgments relating to the issues enumerated in the said para should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 thereof or there is no tax effect.

The Tribunal bench comprising Smt. Annapurna Gupta, Accountant Member & Shri Mahavir Prasad, Judicial Member has dismissed the application filed by the department and observed that “As we can see in this case, the assessee himself has claimed that certain payments are covered in provisions of Section 5, 9, 195 of the Act and also under DTAA. Therefore, tax was not applicable. As per this letter, the assessee has explained that it is engaged in the business of processing and packaging various food items and its turnover is mainly from exports to foreign countries. Hence, to improve its international market it had paid the said payment to the persons who were non-residents and they provided all business and marketing related services abroad. These expenses were booked under the head advertisement expenses, legal and professional fees and sales commission expenses. In circular dated 20th August, 2018, it is mentioned ‘where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account. But in this case, everything has been disclosed by the assessee only payments were made to the foreign entities under double taxation avoidance agreement. In our considered opinion, circular dated 20th August, 2018 is not applicable in this case. Therefore we dismiss the Miscellaneous Application filed by the Revenue.”