COMMISSIONER OF INCOME TAX-I. vs. FLEXATHERM EXPANLLOW PVT. LTD.

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TAXAP/406/2007HC GujaratGJHC24040327200706 August 2008Bench: HONOURABLE MR. JUSTICE K.A.PUJ,HONOURABLE MR. JUSTICE BANKIM.N.MEHTA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed all the Tax Appeals filed by the Revenue. The Court answered the substantial question of law in the affirmative, in favour of the assessee and against the Revenue. This implies that the Court found the ITAT's decision to dismiss the appeal on the ground of low tax effect, relying on the internal CBDT circular, to be correct. The reasoning is based on a detailed order passed in similar Tax Appeals (No. 1402 to 1405 of 2007 and other cognate matters) where the Court had decided in favour of the assessee. The ratio decidendi would be that an internal CBDT circular, even if not issued under Section 119, can be a valid basis for the ITAT to dismiss an appeal on grounds of low tax effect, and the Revenue's appeal on this point is not sustainable. The operative direction was to dismiss the appeals.

What were the facts?

The Revenue (Commissioner of Income Tax) filed multiple Tax Appeals before the High Court of Gujarat against orders passed by the Income Tax Appellate Tribunal (ITAT). The appeals challenged the ITAT's decision to dismiss the Revenue's appeals on the grounds of low tax effect. The ITAT had relied on an internal CBDT circular for this dismissal. The High Court had previously dealt with similar matters in other Tax Appeals and had decided them in favour of the assessee. The present appeals were heard together with those prior matters.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal on the ground of low tax effect relying upon an internal Circular issued by the CBDT which is meant for department use and cannot be equated to a circular issued under Section 119 of the I.T. Act? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, by implication, the assessee would have supported the ITAT's decision to dismiss the Revenue's appeal based on the low tax effect and the reliance on the CBDT circular. Revenue's Contention: The Revenue contended that the Appellate Tribunal was wrong in dismissing its appeal on the ground of low tax effect by relying on an internal CBDT circular. The Revenue argued that such internal circulars are for departmental use and cannot be equated with circulars issued under Section 119 of the Income-tax Act, 1961, which are binding on the department.

Which sections of the Income-tax Act were involved?

Section 260A,Section 119

AI-generated summary — verify with the full judgment below

TAXAP/962/2006 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 962 TO 966 of 2006 WITH TAX APPEAL No. 1493 TO 1495 of 2006 WITH TAX APPEAL No. 1880 of 2006 TAX APPEAL No. 406 of 2007 TAX APPEAL No. 496 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ Sd/- HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Sd/- ==================================== 1. Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2. To be referred to the Reporter or not ? NO 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5. Whether it is to be circulated to the civil judge ? NO

TAXAP/962/2006 2/3 JUDGMENT ==================================== COMMISSIONER OF INCOME TAX - Appellant(s) Versus DEEPAL H. MEHTA - Opponent(s) ==================================== Appearance : MR MANISH R BHATT for Appellant. MR SN SOPARKAR, SENIOR ADVOCATE WITH MRS SWATI SOPARKAR for Opponent. ==================================== CORAM : HONOURABLE MR.JUSTICE K.A.PUJ and HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 06/08/2008 COMMON ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. The revenue has filed these Tax Appeals under Section 260A of the Income-tax Act, 1961 proposing to formulate the following substantial question of law for the consideration and determination of this Court :- Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal on the ground of low tax effect relying upon the internal Circular issued by the CBDT which is meant for department use and cannot be equated to circular issued under Section 119 of the I.T. Act ? 2. All these tax appeals were admitted by this Court on different dates and more or less, substantial question of law is framed in similar manner. All these Tax Appeals were heard together by this Court. Similar

TAXAP/962/2006 3/3 JUDGMENT question was involved in Tax Appeals No.1402 to 1405 of 2007 and other cognate matters and a detailed order is passed by us in the said Tax Appeals. We have decided the said Tax Appeals in favour of the assessee and against the revenue and the question paused therein was answered in affirmative i.e. in favour of the assessee and against the revenue. 3. For the reasons stated and conclusions drawn therein and subject to the directions issued therein, we dismiss all these Tax Appeals filed by the revenue and question paused in all these Tax Appeals is answered in affirmative i.e. in favour of the assessee and against the revenue. 4. All these Tax Appeals are accordingly disposed of without any order as to costs. Sd/- [K. A. PUJ, J.] Sd/- [BANKIM N. MEHTA, J.] Savariya

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