ITO, WD-36(2), KOLKATA, KOLKATA vs. SRI RAM COMMERCIAL CO., KOLKATA

Recently the CBDT has issued Circular No. 21/2015, dated 10th December, 2015, whereby the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court have been increased as measure for reducing Litigation. The revised monetary limits laid down in para-3 of this Circular and the manner of computing tax effect as laid down in para-4 of this Circular are as follows: & C.O.104/Kol/2014 – Sri Ram Commercial Co., ,A.Y.2010-11 “3. Henceforth, Appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: - Sl. 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.

In para-10 of the said circular it has further been clarified that the revised monetary limits will apply retrospectively. The relevant para-10 of the Circular reads thus:

In the present case, the tax effect in this appeal by the revenue is less than Rs.10,00,000/-. Though this appeal had been filed by the revenue on 23.09.2014 and was within the monetary limit in the form of tax effect for filing appeals before Tribunal, in view of para-10 of the Circular of CBDT, even such appeals will be governed by the new monetary limits laid down in the CBDT Circular No.21/2015 referred to above.

It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd. reported in 267 ITR 272 wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. The appeal under consideration has certainly been filed contrary to the Circular issued by the CBDT Circular No.21 dated 10.12.2015.

In view of the above, We hold that the appeal filed by the Department, against the impugned order of the Ld. CIT(A), is contrary to the policy decision of the Department and as such the appeal filed by the Department is dismissed in limine.

In the result, the appeal by the Revenue is dismissed.

As far as the cross objection filed by the Assessee is concerned, the first aspect to be considered is the condonation of 26 days delay in filing the cross-objection which is explained as owing to sickness of the employee who was looking after income tax matter of the Assessee. Considering the reasons given, we deem it fit to condone the delay in filing the appeal.

As far as the issue raised in the cross objection is concerned, the question is whether interest earned on Fixed Deposits is to be assessed as “Income from Business” or “Income from other sources”. It is not in dispute that the business of the Assessee was investment, financing, lending, etc. The Assessee therefore claimed that the interest income from fixed deposits should be assessed under the head “Income & C.O.104/Kol/2014 – Sri Ram Commercial Co., ,A.Y.2010-11 from Business”. The AO found that fixed deposits had nothing to do with the business of the Assessee and that the same cannot also be said to be offered as security to the Bank for availing credit facilities. In this regard, the AO has found that the secured loans availed by the Assessee was miniscule compared to the fixed deposit made. Hence, the AO treated the interest income as “Income from other sources”.

Before us, the only contention was that in the past, interest income from fixed deposits was accepted as business income by the AO and therefore the same treatment should be given in this AY also. We do not find any force in the argument of the learned counsel for the Assessee. The law is well settled that each year of assessment is separate. There is no principle of res judicata in income tax matters. The rule of consistency however has to be followed. It does not emanate from the record that this issue was ever raised in the past in the assessment proceedings of the Assessee. In such circumstances, it cannot be said that the rule of consistency can be applied. We therefore confirm the order of the CIT(A). The cross objection is dismissed.

In the result, the appeal as well as the cross objection are dismissed.