Circular No. ​Modification of Circular No. 21/2015 dated 10.12.2015

What this is

Circular No. ​Modification of Circular No. 21/2015 dated 10.12.2015 was issued by the Central Board of Direct Taxes on 14 July 2017. Its subject is No. 21/2015 dated 10.12.2015.

This fixes the monetary limits below which the department will not appeal. It binds the department only: it is not a rule about the merits, and an assessee cannot draw an inference from a withdrawn appeal.

What it does

Inserts a new paragraph 4.1 into Circular No. 21/2015 dated 10 December 2015 prescribing how tax effect is to be worked out where income is computed under section 115JB or section 115JC. Tax on the assessed total income is computed as (A-B)+(C-D), where A is the total income assessed under the general provisions, B is that income reduced by the disputed issues under the general provisions, C is the total income assessed under section 115JB or section 115JC, and D is that income reduced by the disputed issues under those provisions. Where an amount in dispute figures both under the book profit provisions and under the general provisions, it is not to be reduced from the assessed total income in arriving at item D. The instruction is addressed to all Principal Chief Commissioners for circulation among their officers.

Why it was issued

References were received that appellate authorities were dismissing departmental appeals without going into the merits, on the definition of tax effect in Circular No. 21/2015, in cases where additions made under the general provisions did not affect book profit and so were not being counted towards tax effect.

Who it reaches

• Companies assessed under section 115JB with additions that do not touch book profit
• Departmental representatives defending appeals against a maintainability objection
• Assessing Officers computing tax effect before an appeal is authorised
• Assessees relying on the monetary limits to have an appeal dismissed

The provisions it speaks to

The instrument, as the Board published it

To,
F.No.279/Misc-142/2007-ITJ-(Pt)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
*****
New Delhi, the;L{luly, 2017
All Principal Chief Commissioners of Income Tax
Sub: Modification of Circular No. 21/2015 dated 10.12.2015
Madam/Sir,
References are being received by the Board that in certain cases appellate authorities
are dismissing appeals without going into the merits of the case by relying on the definition
of 'tax effect' as defined in Circular No. 2112015, which prescribes the monetary limit for
filing appeals before various appellate authorities. In certain situations where income is
computed under the provisions of section 115JB or section II5lC for the purposes of
determination of 'tax effect', and the additions made under provisions other than sections
115JB or section 11SlC do not impact book profit, the appellate authorities are not
considering the said additions for the purpose of 'tax effect' as defined in para 4 Circular No.
2112015. The matter has been examined by the Board and the following para may be read as
para 4.1 after the para 4 of the Circular No. 2112015.
"4.1 Where income is computed under the provisions of section 115JB or section 115JC
for the purposes of determination of 'tax effect', tax on the total income assessed shall be
computed as per the following formula-
(A-B)+ (C-D)
where,
A = the total income assessed as per the provisions other than the provisions
contained in section 115JB or section 115JC (herein called general provisions);
B = the total income that would have been chargeable had the total income
assessed as per the general provisions been reduced by the amount of the disputed
issues under general provisions;
C = the total income assessed as per the provisions contained in section
115JB or section 115JC;
D = the total income that would have been chargeable had the total income
assessed as per the provisions contained in section 115JB or section ll5JC been
reduced by the amount of disputed issues under the said provisions:
However, where the amount of disputed issues is considered both under the provisions
contained in section llSJE or section I 15JC and under general provisions, such amount
shall not be reduced from total income assessed while determining the amount under
item D."
2. The Same may brought to the knowledge of all officers working under your charge.
3. This issues with the approval of the Board.
Copy to:
Yours faithfully,
(D.S. L.~l·'iD Rathl)
DCIT(OSD)(ITJ)
Tele: 011-26882637
1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary
and above.
2. All Pro Chief Commissioners ofIncome Tax and All Directors General oflncome Tax
with a request to bring to the attention of all officers.
3. ADG (PR, PP & OL), Mayur Bhawan, New Delhi for printing in the quarterly Tax
Bulletin and for circulation as per usual mailing list.
4. The Comptroller and Audit General ofIndia.
5. ADGj (Vigilance), Mayur Bhawan, New Delhi.
6. The Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi.
7. All Directorates of Income-tax, New Delhi and DGIT(NADT), Nagpur.
8. ITCC (3 Copies).
9. The ADG(Systems)-4, for uploading on the Department's website.
10. Data Base Cell for uploading on irsofficersonline.gov.in
11. Hindi Cell for translation.
12. Guard file.
- - ----- - - - -------
(D.S. Rathi)
DCIT(OSD)(ITJ)

What to watch

• This does not change the monetary limits themselves; it changes only how tax effect is measured in book profit cases.
• The carve-out in the proviso works against the assessee: an amount disputed under both limbs is not deducted in item D, so the tax effect is larger.
• The section numbers are badly rendered in the scanned copy supplied, appearing variously as 115JC, 11SlC and 115JE, and the correct references are section 115JB and section 115JC.
• The document is issued as a letter modifying an earlier circular rather than as a numbered circular, so cite it by its file number and date.

Where you meet it

On a preliminary objection before the Appellate Tribunal or High Court that a departmental appeal is below the monetary limit in a company assessed on book profit.

What it names

It mentions. Circular No. 21/2015

On the same provision

• Circular No. 3/2018 — Revision of monetary limits for filing of appeals by the department before income tax appellate tribunal high courts and 11 July 2018
• Notification No. 80/2017 [F. No. 133/23/2015-TPL] / GSR 1028(E) — [Central Board of Direct Taxes] 18 August 2017
• Circular No. 24/2017 — Clarifications on computation of book profit for the purposes of levy of minimum alternate tax MAT under section 115JB o 25 July 2017
• Notification No. 894(E) — A notification under section 115JB of the Income-tax Act, 1961 27 September 2000
• Notification No. 11524 — A notification under section 115JB of the Income-tax Act, 1961 27 September 2000
• Circular No. 02/2012 — Finance Act, 2011 - Explanatory notes to the provisions of the Finance Act, 2011 22 May 2012

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