C.I.T. vs. M/S.UDAIPUR MINERAL DEV.SYNDICATE

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ITR/7/1997HC RajasthanRJHC02005977199702 February 20165 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the CBDT Circular No. 21/2015, which sets monetary limits for filing appeals to reduce litigation, is applicable to pending references where the tax effect is less than Rs. 20 lac. The Court concurred with the Bombay High Court's view in CIT v. M/s. Sunny Sounds P. Ltd. that there is no reason why the Circular should not apply to pending references, as its object of reducing litigation would be frustrated otherwise. Consequently, since the tax effect in these references was admittedly less than Rs. 20 lac, the references were returned unanswered. The Court clarified that the questions of law raised remain open for consideration in an appropriate case. The Revenue was granted liberty to move an application for recalling the order if the instant appeals fall under any of the exceptions mentioned in the Circular (e.g., constitutional validity challenges, Board's orders held illegal, revenue audit objections accepted, or additions relating to undisclosed foreign assets).

What were the facts?

These are two Income Tax References (ITR No. 7/1997 and 16/1997) filed by the Revenue (Commissioner of Income Tax, Jaipur) seeking the opinion of the Rajasthan High Court on questions of law arising from orders of the Income Tax Appellate Tribunal (ITAT). The references pertain to assessment years not explicitly stated but are related to the ITAT's decisions concerning disallowance of interest and classification of expenditure. The core of the matter is the applicability of a CBDT Circular dated 10.12.2015 (No. 21/2015) which revised monetary limits for filing appeals by the Department to reduce litigation. The Revenue argued that the Circular, relating to appeals, might not apply to references. The High Court considered the Bombay High Court's decision in CIT v. M/s. Sunny Sounds P. Ltd.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the AAC deleting the disallowance of interest of Rs.97,691/- made u/s. 36(1)(iii) of the I.T. Act, 1961? (D.B. ITR No.7/1997) 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the expenditure claimed at Rs.3,90,595/- was allowable as revenue expenditure? (D.B. ITR No.16/1997) Assessee's Contention: The assessee (respondent in both cases) did not explicitly argue on the merits of the questions of law. Their implicit stance would be that the ITAT's orders were correct. Revenue's Contention: The Revenue (applicant) sought the High Court's opinion on the aforementioned questions of law. They also contended that the CBDT Circular dated 10.12.2015, which sets monetary limits for filing appeals, might not be applicable to pending references under Section 256(1) & 256(2) of the Income Tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 256(2),Section 36(1)(iii),Section 268A(1),Section 12A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR 1. D.B. Income Tax Reference No.7/1997 Commissioner of Income Tax, Jaipur

Vs. M/s. Udaipur Mineral Development Syndicate P. Ltd.

2.

D.B. Income Tax Reference No.16/1997

Commissioner of Income Tax, Jaipur Vs. M/s. Golecha Properties P. Ltd. Date of order : 02.02.2016 Hon'ble Mr. Justice Ajay Rastogi Hon'ble Mr. Justice J.K. Ranka Mr. Anuroop Singhi Adv., for applicants Mr. Anant Kasliwal Adv., for respondent in (16/1997). By the Court

1.

These two references u/sec. 256(2) & 256(1) of the Income Tax Act, 1961, at the instance of Revenue seeks our opinion on the following questions of law :- D.B. ITR No.7/1997 “1. Whether on the facts and in the circumstances of the case the Tribunal was justified in upholding the order of the AAC deleting the disallowance of interest of Rs.97,691/- made u/s.36(1) (iii) of the I.T. Act, 1961?” D.B. ITR No.16/1997

2 “1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the expenditure claimed at Rs.3,90,595/- was allowable as revenue expenditure?”

2.

It is brought to our notice that a Circular has been issued by the Central Board of Direct Taxes dated 10.12.2015 bearing No.21/2015 in exercise of powers u/sec. 268A(1) of the Income- Tax Act laying down revision of monetary limits for filing of appeals by the Department before the Tribunal and High Courts and SLP before Supreme Court keeping in view the measures for reducing litigation. The relevant paras 3, 8, 9 and 10 of the Circular are quoted hereunder :- “3. Henceforth, appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder :- S. No. Appeals in Income-tax matters Monetary Limit (in Rs.) 1 Before Appellate Tribunal 10,00,000/- 2 Before High Court 20,00,000/- 3 Before Supreme Court 25,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. 4. xxx xxx xxx 5. xxx xxx xxx 6. xxx xxx xxx 7. xxx xxx xxx

8.

Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:

3 (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/bank accounts.

9.

The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12 A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.

10.

This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.”

3.

And laying down other conditions as well which has to be considered by the Assessing Officer or Appellate Authority as well, the CBDT in paras 9 and 10 of the Circular it has been observed that the monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than income tax, and at the same time these instructions will apply retrospectively to the pending appeals and appeals to be filed henceforth in High Courts/Tribunals, and also before the Supreme

4 Court. The Circular in para 8 carves out four exceptions as referred to hereinabove.

4.

However, instant are cases of references u/sec. 256(2) & 256 (1) of the Income Tax Act, as it then was, and plea raised is that the aforesaid Circular may not be applicable as it relates only to appeals.

5.

In our view, taking into consideration the judgment rendered by the Bombay High Court in the case of CIT v. M/s. Sunny Sounds P. Ltd. Mumbai Income Tax Reference No.213/1997, dated 8.1.2016, where this issue came up for consideration and it was held that there is no reason why the Circular should not apply to pending references where the tax effect is less than Rs.20 lac and object of the Circular to reduce litigation would be frustrated and be applicable even to pending references. We also concur with the view expressed by the Bombay High Court (supra).

6.

In view of the above, we hold that as admittedly the tax effect is less than Rs.20 lac in the instant references at the instance of Revenue, the same are returned unanswered. However, we make it clear that the question of law as raised for our opinion, is left open to be considered in an appropriate case. In case the instant appeal falls in any of the exceptions as referred to in the Circular, the 5 Revenue will be at liberty to move an application for recalling of the order.

7.

The references are disposed of accordingly. No order as to costs. (J.K. Ranka) J. (Ajay Rastogi) J. S.Kumawat-1-2 Certificate- All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed.

S.Kumawat Jr. P.A

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