THE COMMISSIONER OF INCOME TAX vs. T.K.GINARAJAN
What did the High Court hold?
The High Court declined to entertain the appeal and rejected it. The Court noted that the Revenue's Departmental Representative before the ITAT had only stated that the tax effect was less than Rupees two lakhs and did not argue that the legal issue was substantial and required consideration. The Court found no fault with the ITAT's order if it accepted the statement regarding the tax effect. Therefore, the appeal was rejected without deciding the merits of the framed questions of law. No issue was expressly left undecided; the appeal itself was rejected.
What were the facts?
The Revenue, the Commissioner of Income Tax, Thiruvananthapuram, is in appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The ITAT had rejected the Revenue's appeal for the assessment year 1996-97. The sole ground for rejection by the ITAT was that the tax effect on the disputed issue was less than Rupees two lakhs, referencing CBDT Circular No. 2/2005 dated 24th October 2005. The Revenue contends that the ITAT should have considered the case on merits despite the low tax effect. The assessee is Shri T.K. Ginrajan, an LIC Development Officer.
What were the issues?
1. Whether, in light of CBDT instruction No. 2/2005, the Tribunal should have considered the case on merits despite the tax effect being less than Rupees two lakhs? (Question of law) 2. Whether the Tribunal erred in applying the decision of the Bombay High Court in *Pitwa Engineering Ltd.*, overlooking paragraph three of CBDT instruction No. 2/2005? (Question of law) 3. Whether the Tribunal should have upheld the Assessing Officer's order in light of the Supreme Court's decision in *Karmacharee Union Vs. Union of India*, which held reimbursements covered by Section 17(3)(ii) of the Income Tax Act, 1961, if not covered by Section 10? (Question of mixed law and fact) 4. Whether the assessee has a duty to adduce evidence to prove the incurrence of expenditure for additional conveyance allowance claimed as exempt under Section 10(14), as held by the Kerala High Court in *Franco John Vs. Union of India*? (Question of law) 5. Whether the Assessing Officer was right in disallowing the assessee's claim for exemption under Section 10(14) due to a lack of proof of actual expenditure? (Question of mixed law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue argued that the ITAT should have considered the case on merits, not solely on the tax effect. They also argued that the ITAT wrongly applied *Pitwa Engineering Ltd.* and should have upheld the Assessing Officer's order based on the Supreme Court's decision in *Karmacharee Union* and the Kerala High Court's decision in *Franco John*, as the assessee failed to prove actual expenditure for the conveyance allowance exemption.
Which sections of the Income-tax Act were involved?
Section 17(3)(ii),Section 10(14)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT H.L.Dattu, C.J. Revenue is before us in this Income Tax Appeal being aggrieved by the orders passed by the Income Tax Appellate Tribunal, Cochin Bench, Cochin in I.T.A.No.461 of 2005 dated 21st April, 2006, for the assessment year 1996-97. (2) By the impugned order, the appellate Tribunal has rejected the Revenue's appeal solely on the ground that the tax effect on the disputed issue involved in the appeal is less than Rupees two lakhs. For rejecting the appeal, the Tribunal has relied upon the Circular Instructions issued by the Board in No.2/2005 dated 24th October, 2005. (3) The Revenue has framed the following questions of law for our consideration and decision. They are as under:
“1. Whether on the facts and in the circumstances of the case, and also in the light of the CBDT instruction relied on by the Tribunal should not the Tribunal have considered the case on merits?
Whether on the facts and in the circumstances of the case, did not the Tribunal go wrong in applying the decision of the Honourable High Court of Bombay in Pitwa Engineering Ltd [(2005) 276 ITR 519] overlooking paragraph three of the CBDT instruction no.2/2005 dated 24.10.2005 (Marked as Annexure-D)
Whether, on the facts and in the circumstances of Assessing Officer?
Whether, on the facts and in the circumstances of the assessee's claim of exemption under section 10(14), as no proof for incurring actual expenditure was produced?”
(4) Before the Tribunal, the Departmental representative had only stated that the tax effect on the disputed issue involved in the appeal is less than Rupees two lakhs. It was not the stand of the Departmental representative, that, though the tax effect is less than Rupees two lakhs, the legal issue raised in the appeal is a substantial legal issue and it requires to be considered by the Tribunal. (5) In our view, it was expected of the Departmental representative to have brought to the notice of the Tribunal the important legal issue that was raised and canvassed in the appeal filed. If for any reason, the Departmental representative accepts that the tax effect is less than Rupees two lakhs and if that statement is accepted by the Tribunal, we cannot find fault with the orders passed by the Tribunal. (6) In that view of the matter, we decline to entertain this appeal. Accordingly this Income Tax Appeal is rejected. Ordered accordingly.
(H.L.DATTU) CHIEF JUSTICE
(A.K.BASHEER) JUDGE vns
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