Bombay High Court
The Commissioner Of Income Tax, ... vs M/S Ferro Alloys Corporation Limited, ... on 28 January, 2016
Author: B.P. Dharmadhikari
Bench: B.P. Dharmadhikari, V.M. Deshpande
ITR 7 OF 1988
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY :
NAGPUR BENCH : N A G P U R.
INCOME TAX REFERENCE No. 07 OF 1988
The Commissioner of Income-tax,
Vidarbha, Nagpur. ... APPLICANT.
- Versus -
M/s Ferro Alloys Corporation Ltd.
Tumsar. ... NON-APPLICANT.
ig ...
Mr. Anand Parchure with Advocate Bhushan Mohta for the
Applicant.
Mr. L.S. & K.P. Dewani Advocate for the Non-applicant.
....
CORAM : B.P. Dharmadhikari & V.M. Deshpande, JJ.
DATED : 27th & 28th January, 2016.
ORAL ORDER (Per B.P. Dharmadhikari, J.) :
We have heard respective counsel on relevance of Circular No.21 dated 10.12.2015 issued by the CBDT in these matters.
2. Respective counsel appearing for the assessee urge that such circulars issued in past have already been extended even to pending reference proceedings and hence these reference ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 2 proceedings where tax effect is less than Rs.20 lacs should also be returned unanswered. They have relied upon certain judgments, to which we will make reference in the course of our reasonings.
3. Respective counsel appearing for the Department, however, has pointed out that the earlier view of this Court in relation to the circular issued by CBDT being applicable retrospectively has not found favour with the Full Bench of Gujarat High Court and Full Bench of Punjab & Haryana High Court. It is further contended that the respective Full Benches referred to various judgments of Hon'ble Apex Court while interpreting the Circular and pointed out need of adherence to the rule of literal interpretation. As, the words used in said circular are clear and unambiguous, the retrospective effect could not have been read.
Respective counsel for the Department do not dispute that the language employed in Circular 10.12.2015 expressly gives it retrospective effect. But, according to them, it does not provide for any monetary limit as far as reference applications pending before any High Court are concerned. Thus, they urge that literal meaning rule would mean that the circular needs to be applied to pending appeals and cannot be extended to pending reference applications. They are also relying upon above judgments of Gujarat High Court and Punjab & Haryana High Court.
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4. The controversy in relation to retrospective effect need not detain us here because the Hon'ble Apex Court has in its order dated 1.7.2015 while deciding Civil Appeal Nos. 4919/15 and 4920/15 expressly found that the circular dated 9.2.2011 issued by CBDT was very clear and the High Court erred in giving it a retrospective effect and, therefore, the Hon'ble Apex Court remitted the matters back to Delhi High Court for further consideration.
5. The issue considered by the Full Bench of Gujarat High Court in the judgment reported at CIT vs. Shambhubhai Mahadev Ahir - 2014 (363) ITR 572 and by the Full Bench of Punjab & Haryana High Court in CIT vs. Varindera Construction Co. - 2011 (331) ITR 449 is about retrospective effect of such circular. In the backdrop of above mentioned orders of Hon'ble Apex Court, it is apparent that in these matters it is not necessary for us to appreciate those judgments of the High Court.
6. Perusal of Circular No.21/15 dated 10.12.2015 issued by CBDT would show that as per clause (c) the CBDT has stipulated that the said circular apply retrospectively to pending appeals also. In view of this express stipulation, the above mentioned orders of Hon'ble Apex Court and of two Full Bench ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 4 judgments mentioned supra, need not be gone into in more details.
7. The first of the circulars issued is dated 27.3.2000.
Its perusal shows that prior thereto vide Circular No. 1903 dated 20.10.1992 and Circular No. 1777 dated 04.11.1987, monetary benefit of Rs.20,000/- was prescribed for departmental appeals before the appellate tribunal, of Rs.50,000/- for filing Reference to High Court and of Rs.01,50,000/- for filing appeal to Supreme Court. The Circular dated 27.3.2000 for the first time prescribed limit of Rs.two lac for filing appeal under Section 260A to High Court. Same limit has also been made applicable to Reference to be filed to this Court. Thus it employes both words ie appeals & reference & therefore governs both the proceedings ie Appeals as also References.
8. The later circular comes into force with effect from 31.10.2005 and in its preamble, it carries reference of earlier circular dated 27.3.2000. In preamble part, it mentions monetary limits for filing appeal/reference before various appellate authorities. However, in operative part, i.e. clause (2), in partial modification of earlier instructions, a decision of Board that appeals would be filed where tax effect exceeds Rs. Four lacs to High Court, has been incorporated. Thus, in paragraph 2 word "reference" does not find mention. This Court has on 22.6.2007 ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 5 decided ITR No. 54/96 where tax effect was Rs.03,21,000/-. While deciding that reference, this Court has made mention of its earlier judgment in case of CIT v. Pithwa Engineering Works reported at 2005 (276) ITR 519. This reported judgment in ITR No. 397 of 1988 is delivered on 01.7.2005 in the background of Circular dated 27.3.2000 issued by CBDT and the limit of Rs. two lacs has been applied to a pending reference. Following this judgment and the Circulars dated 27.3.2000 & 5.6.2007 as also a later judgment in case of CIT v. M/s Vitessee Trading Ltd. this Court returned ITR No. 54/96 unanswered on 22.6.2007.
9. The CBDT circular which has come into force with effect from 31.10.2005 is incorporated as instruction no. 2 of Circular dated 24.10.2005. It has been clarified vide Circular No. 5 of 2007 dated 16.7.2007. The next circular in the line is Circular No. 5 of 2008 dated 15.5.2008. Here again in preamble part all earlier instructions have been mentioned. Language employed is on same lines as mentioned supra while considering the instruction no. 2 which have been brought into force from 31.10.2005. ITR 376 of 1987 with connected 11 reference applications of various years between 1987 to 1998 are returned unanswered by this Court at Nagpur on 2.9.2010. Support has been taken from CIT v. Pithwa Engineering Works (supra) & CIT vs. Madhukar K. Inamdar - 318 ITR 149. This course of action ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 6 has also attained finality. The revised tax effect limit of Rs. 4 Lacs for filing an appeal under Section 260A has been applied to reference proceedings though word "reference" proceeding or application are absent in instruction no. 5 of 2008.
10. In CIT vs. Madhukar K. Inamdar - 2009 (318) ITR 149 (BOM), Division Bench of this Court has considered CBDT Circular No. 5/08 issued on 15.5.2008 and applied it to pending appeals. Language employed in Circular No. 3/11 dated 9.2.2011 and Circular No. 5/14 dated 10.7.2014 is again on same lines.
Hon. Apex Court has vide its order dated 1.7.2015 mentioned supra held Circular No. 3/11 dated 9.2.2011 not retrospective.
11. Office memorandum dated 5.6.2007 issued by the Revenue has been looked into in CIT vs. Madhukar K. Inamdar.
(supra) which shows that it was issued because of directions of this High Court dated 23.4.2007 in the case of CIT Bombay v.
M/s Vitessee Trading Ltd.. In this judgment, the Division Bench of this Court considers CIT v. Pithwa Engineering Works (supra) & CIT vs. Camco Colour Co.-- 2002 ITR 565 as also the CBDT instructions dated 24.10.2005. It takes note of revised tax effect of Rs. 4 Lacs for filing Appeals under S. 260A in High Court & then in paragraph 4 finds that where ever the tax effect is less than one stipulated in such CBDT circulars, the appeals or reference should ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 7 not have been filed. It also observes that if the same are already filed, the department should to proceed to withdraw it to receive back the court fee. It directs CBDT to issue suitable consequential instructions to all its Chief Commissioners within the region to withdraw such appeals. This led to birth of office memorandum dated 5.6.2007 already mentioned supra. The said office memorandum requests the respective Chief Commissioners of Income Tax within the jurisdiction of Bombay High Court to examine the cases individually and in case where the criteria of monetary limits as per the prevailing instructions was not satisfied, a direction to withdraw the case subject to certain riders was issued. This office memorandum also finds mention in the F.B. Judgment (supra) of Punjab & Haryana High Court.
12. Instruction No. 5/08 dated 15.5.2008 is expressly in exercise of powers under Section 268A of Income Tax Act. In this Circular again in the preamble part, all previous instructions have been mentioned and reference is to monetary limits for filing departmental appeals and appeals before appellate Tribunal, High Court and Supreme Court. By this time & while issuing said instruction or the later instructions, the fact that earlier CBDT instructions or circulars were also being extended to pending references was well within the knowledge of the department, but no steps to clarify the position by stipulating that pending reference ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 8 proceedings shall not be regulated by these instructions were taken.
13. Last circular No.21/15 which is issued on 10.12.2015 revises the monetary limits for filing appeal to this Court to Rs.
twenty lacs. It is again expressly under Section 268-A(1) of Income Tax Act. Here again no such clarification has been issued.
We find it necessary to mention that in Circular No.5/08 dated 15.5.2008 vide clause (2), it has been specifically stipulated that said instructions would apply to appeals filed on or after 15.5.2008 and appeals filed before that date would be governed by the instructions operative at the time of its filing.
14. It is in this background that we refer to the orders passed at Bombay in ITR No. 372/9 ( CIT vs. M/s. Vulcan Laval Ltd.) on 18.12.2015.. On that day, the Division Bench adjourned that matter to 22.1.2016. On 22.1.2016 learned counsel appearing for the Revenue pointed out as per instructions from the Department that the Circular dated 10.12.2015 would apply equally to pending references under Section 256 of Income Tax Act.
Accordingly, on 22.1.2016 the Division Bench of this Court at Bombay has returned ITR Nos. 372/97 and 373/97 unanswered.
Thus, the Revenue Department has at Bombay taken a stance which runs counter to its contentions here.
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15. On 8.1.2016 the Division Bench at Bombay has considered same controversy while passing the orders in ITR No. 213/97. Statistical data available to the Court has been looked into to point out why the word "Reference" was not expressly mentioned in the later instructions. Limit of Rs. 20 Lacs in circular no. 21 dated 10.12.2015 has been held applicable to pending reference & it has been returned unanswered.
16.ig As we have already found that this Court has applied earlier instructions even to pending references and the reference proceedings were returned unanswered adhering to the revised monetary limits, it is not necessary for us to go into those details.
On 23.4.2007 itself in CIT Bombay v. M/s Vitessee Trading Ltd this Court has applied hiked tax effect for appeals to pending references. Thus the literal interpretation aspect being canvassed by the respective counsel on behalf of the Department is already concluded. This judicial extension has been acquiesced by the Revenue. As such, we find that Instruction No. 21 dated 21.12.2015 also applies to pending references where the tax effect does not exceed twenty lacs.
17. Revenue has not pointed out why the distinction needs to be made between the Appeals & Reference proceedings.
::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 :::ITR 7 OF 1988 10 Effect after adjudication of such appeal or reference by the High Court is not going to be different. If small tax effect may be the consideration for not filing or not prosecuting the appeals under S. 260A to this Court though a substantial question of law is involved therein, the same analogy holds good even for the pending reference. Hiked ceiling of tax effect has been now made applicable retrospectively by CBDT instruction no. 21 dated 10.12.2015 to pending appeals in High Court & those appeals are being withdrawn. There is no justification for not applying this principle to the old or pending references.
18. Reduction in number of matters to be filed in Court or then intention to bring down the pendency in Courts does not appear to be the only object behind such instructions. Even for filing the departmental appeals before ITAT or CIT(A), the ceiling of Rs. 10 Lacs is prescribed. Thus, it also puts an end to otherwise prevailing uncertainty for a bonafide assessee. The hanging sword of tax demand for large number of years & uncertainty inherent in the determination thereof affects the trade as also the Income Tax Department. If the department has succeeded in collecting & returning to Government the funds expected of it in the budget or shortfall therein, if any, is provided for in next budget, the atmosphere of uncertainty need not continue. If such contingent liabilities or recoveries are legally extinguished thereby restoring ::: Uploaded on - 12/02/2016 ::: Downloaded on - 31/07/2016 02:39:22 ::: ITR 7 OF 1988 11 the normalcy for all, perhaps it will help the trade as also the Government. We can not observe any thing finally on this angle as the respective Counsel could not get time to assist us effectively.
But the certainty has to be the backbone even in this jurisprudence & every effort to achieve it must be encouraged. We do not find any justification for treating the pending appeals & pending references differently.
19. Parties at this stage seek time of one day to point out to this Court the exact tax effect in reference applications today on the Board to ascertain whether it t is covered by Instruction No. 21 dated 21.12.2015.
Adjourned accordingly.
JUDGE JUDGE
/TA/
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