ACIT, Circle - 7, Kolkata, Kolkata V. M/s. Bartaman Pvt. Ltd., Kolkata

ITA 1286/KOL/2010

• Counselvise Citation: 128623514 RSA 2010
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 11-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 21-06-2010
• Court: TRIBUNAL
• Department Lawyers: P C NAYAK
• Assessee Lawyers: S M SURANA
• Keywords: Fair market value; Tax effect

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , , , , SMT.DIVA SINGH, JUDICIAL MEMBER. /AND ! ! ! ! !' !' !' !' , #$ SHRI AKBER BASHA, ACCOUNTANT MEMBER % % % % / ITA NOS . 1286 & 1287/KOL/2010 &' ()/ ASSESSMENT YEARS : 2003-04 & 2004-05 (+, / APPELLANT ) A.C.I.T., CIRCLE-7, KOLKATA - & - - VERSUS - . (./+,/ RESPONDENT ) M/S. BARTAMAN PVT. LTD., KOLKATA, (PAN : AABCB 2117 R) +, 0 1 #/ FOR THE APPELLANT: SHRI P.C.NAYAK ./+, 0 1 #/ FOR THE RESPONDENT: SHRI S.M.SURANA #' / ORDER ( (( ( ) )) ), ,, , PER SMT.DIVA SINGH, JM BOTH THESE APPEALS HAVE BEEN FILED BY THE DEPARTMEN T AGAINST SEPARATE ORDERS DATED 24.03.2010 AND 26.03.2010 RESPECTIVELY OF THE CIT(A)-XIII, KOLKATA PERTAINING TO 2003-04 AND 2004-05 ASSESSMENT YEARS. IN BOTH TH ESE APPEALS, THE SOLE ISSUE AGITATED BY THE ASSESSEE READS AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , AND IN LAW, LD.CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM GUARANTEE FEES PAID TO ITS DIRECTORS AMOUNTING TO RS.51,00,000/- (RS. 5,75 ,000/- FOR A.YR.2004-05) WHEREAS THE SAME WAS EXCESSIVE AND UNWARRANTED BY A LL MEASURES AND WAS MERELY A COLOURABLE DEVICE. 2. THAT THE APPELLANT BEGS THE LIBERTY TO ADD, DELE TE, MODIFY OR TAKE NEW GROUNDS OF APPEAL. 2. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE COMPANY IS ENGAGED IN PUBLICATION OF DAILY NEWSPAPER, WEEKLY AND MONTHLY MAGAZINE. THE AO ON AN 2 EXAMINATION OF TAX AUDIT REPORT FILED BY THE ASSESS EE, NOTICED THAT THE COMPANY HAS PAID A SUM OF RS.17,00,000/- EACH TO ITS THREE DIRE CTORS. THE AO WAS OF THE VIEW THAT THESE DIRECTORS WERE SUBSTANTIALLY INTERESTED IN TH E COMPANY ON ACCOUNT OF REMUNERATION FOR GUARANTEE GIVEN TO BANKS OTHER THA N SALARY, RENT ETC.. HE FURTHER OBSERVED THAT TWO OF THE DIRECTORS WERE EXECUTIVE D IRECTORS DRAWING A SALARY OF RS.15,000/- PER MONTH NAMELY (1) MR.BARUN SENGUPTA, (2) MR.SUBHA DUTTA AND MR.SAKTI DASGUPTA WAS NON EXECUTIVE DIRECTOR. ON EN QUIRY FROM THE ASSESSEE COMPANY AS TO WHY THE SAID SUM WAS PAID TO PERSONS SPECIFIED U/S 40A(2)(B ) OF THE IT ACT. THE FOLLOWING REPLY WAS RECEIVED ON BEHALF OF THE ASSESSEE AS UNDER :- THE MANAGING DIRECTOR AND OTHER DIRECTOR OF COMPAN Y HAVE GIVEN PERSONAL GUARANTEE TO THE BANKS FOR LOAN GIVEN TO THE COMPAN Y. IN THIS CONTEXT THE THREE DIRECTORS WERE GIVEN REMUNERATION TO THE TUNE OF RS .17,00,000/- EACH AMOUNTING TO RS.51,00,000/-. A CERTIFIED COPY OF RE SOLUTION IS ATTACHED. THE DIRECTORS GAVE PERSONAL GUARANTEE TO THE BANK FOR T ERM LOAN SANCTIONED BY THEM TO THE TUNE OF RS.937 LACS. 2.1. THUS IT WAS THE SUBMISSION THAT THE SAID AMOUN T WAS PAID TO THE THREE DIRECTORS AS PER RESOLUTION DATED 17.02.2003. HOWEVER, THE AO WAS OF THE VIEW THAT THE EXECUTIVE DIRECTOR/DIRECTORS ETC. ARE APPOINTED TO LOOK AFTER THE AFFAIRS OF THE COMPANY WHICH NECESSARILY REQUIRES THE RAISING OF T HE SHARING CAPITAL, BORROWING SECURED AND UNSECURED FUND, SETTING UP OF THE PROJE CT AND ALSO FOR RUNNING DAY-TO-DAY AFFAIRS. AS SUCH THE TERM LOAN TAKEN BY THE COMPAN Y IS PART AND PARCEL OF THE COMPANY AND THE DIRECTORS OF THE COMPANY HAVE BEEN SPECIFIC ALLY APPOINTED FOR THIS PURPOSE. HAD THE FUND NOT BEEN ARRANGED THE AFFAIRS OF THE C OMPANY CANNOT MOVE. THE TERM LOAN SANCTIONED BY THE BANK TO ANY COMPANY, IT WAS HIS OPINION, IS A SECURED LOAN BY HYPOTHECATED OR TAKING CHARGE OF THE ASSETS OF THE COMPANY AND REQUIRING PERSONAL GUARANTEE TO THE DIRECTORS OF THE COMPANY AS SUCH I S A NORMAL BANKING PRACTICE. THUS IF ANY PERSONAL GUARANTEE IS GIVEN TO A PERSON ON THE SECURED LOAN OBTAINED FROM THE BANK BY MAKING A CHARGE ON THE ASSETS IT WAS CONSID ERED WAS ONLY A FORMALITY OF THE BANK. HE WAS ALSO OF THE VIEW THAT THE TOTAL TERM L OAN AT THE YEAR END WAS RS.74,45,117/- AND AT THE END OF PRECEDING PREVIOUS YEAR IT WAS TO THE EXTENT OF RS.96 LAKHS. THE SAID TERM LOAN FROM BANK WAS STATED TO B E SECURED BY EXCLUSIVE CHARGE ON PLANT AND MACHINERY (MORE THAN RS.5 CRORES) AND IMM OVABLE PROPERTY OF THE COMPANY. 3 THUS THE TERM LOAN GRANTED BY THE BANK WAS FULLY SE CURED AGAINST THE ASSETS OF THE COMPANY. CONSEQUENTLY ANY PERSONAL GUARANTEE GIVEN BY THE DIRECTOR OF THE COMPANY AS PER NORMS OF THE BANKS IS AN USUAL PRACTICE. THU S FOR A TERM LOAN OF RS.74 LAKHS THE REMUNERATION OF RS.51 LAKHS, PAID TO THE DIRECTORS FOR PERSONAL GUARANTEE WAS QUESTIONED. ACCORDINGLY IT WAS CONSIDERED THAT THE SAID ACTION IS A COLOURABLE TRANSACTION TO EVADE THE TAX AND THE SAME WAS ACCOR DINGLY DISALLOWED AND ADDITION MADE. 2.2. IN APPEAL BEFORE THE CIT(A) THE ACTION OF THE AO WAS NOT UPHELD AND THE CIT(A) DELETED THE ADDITION HOLDING AS UNDER :- ON THIS ISSUE, I FIND THAT THE ASSESSEE HAS FILED A LETTER FROM STATE BANK OF INDIA DATED 28-12-2002. ON EXAMINATION OF THIS L ETTER, IT IS SEEN THAT THE FOLLOWING THREE TYPES OF LOANS HAVE BEEN SANCTIONED TO THE ASSESSEE : 1. MEDIUM TERM LOAN RS.5.68 CRORE 2. CASH CREDIT RS. 3.5. CRORE 3. LETTER OF CREDIT RS.3 CRORE THE ASSESSEE HAS ALSO FILED A LETTER DATED 3.1.2003 WRITTEN BY IT TO THE S.B.I. WHEREIN THIS LOAN HAS BEEN ACCEPTED BY IT. T HIS SHOWS THAT THE ASSESSEE- COMPANY HAD BEEN SANCTIONED LOAN OF RS.12.18 CRORE DURING FINANCIAL YEAR 2003-04 BY THE ABOVE MENTIONED LETTER OF THE S.B.I. IN PARA-4 OF THE LOAN LETTER OF THE S.B.I. THE DET AILS OF SECURITY AGAINST THESE LOANS ARE MENTIONED. THE SECURITY INCLUDES DI FFERENT TYPES OF ASSETS OF THE COMPANY AND ALSO PERSONAL GUARANTEE BY SHRI BARUN S ENGUPTA, SHRI SAKTI DASGUPTA AND SMT. SHUBHA DUTTA. THIS SHOWS THAT THE DIRECTORS HAVE GIVEN PERSONAL GUARANTEE FOR THE ABOVE LOAN FROM SBI. IT MAY BE NOTED THAT THE LIABILITY OF THE GUARANTOR IS COEXTENSIVE WITH THAT OF THE DEBTOR/LOANEE. IF THE DEBTOR FAILS TO PAY THE LOAN THE GUARANTOR WILL BE LIABLE TO PAY THE SAME. IF THE GUARANTOR FAILS TO PAY THE LOAN HIS PERSONAL ASSETS AND PROPERTIES MAY BE ATTACHED AND SOLD IN EXECUTION OF ANY DECREE THAT M AY BE PASSED IN RESPECT OF THAT LOAN. THEREFORE, BY GIVING THE GUARANTEE, THE DIRECTORS HAVE EXPOSED THEMSELVES TO A LIABILITY. THE FEES OR REMUNERATION HAS BEEN PAID TO THE DIRECTORS FOR TAKING THIS LIABILITY UPON THEM. THER EFORE, THIS FEES/REMUNERATION CAN BE CONSIDERED AS LEGITIMATE BUSINESS EXPENDITUR E. HOWEVER, IT IS SEEN THAT THIS EXPENDITURE HAS BEEN PAID TO THE DIRECTORS WHO ARE THE PERSONS AS DEFINED U/S 40A(2)(B). THERE FORE, IT HAS TO BE DECIDED WHETHER SUCH EXPENDITURE WAS EXCESSIVE OR UNREASONA BLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SERVICES OF PERSONAL GUARA NTEE PROVIDED BY THESE PERSONS. IT IS SEEN THAT IT IS DIFFICULT TO ESTIMAT E THE FAIR MARKET VALUE OF SUCH SERVICES BECAUSE GENERALLY SUCH SERVICES ARE NOT AV AILABLE IN THE OPEN MARKET. 4 AT THE MOST WE CAN COMPARE WITH THE CHARGES TAKEN B Y BANKS WHEN THEY GIVE GUARANTEE FOR ANY FINANCIAL TRANSACTION. FOR SUCH S ERVICES THE BANKS NORMALLY CHARGE 2.5 TO 3% OF THE AMOUNT INVOLVED BUT AT THE SAME TIME THEY TAKE SOME SORT OF SECURITY ALSO FROM THE PARTY. BUT HERE THE DIRECTORS HAVE NOT TAKEN ANY SECURITY WHILE GIVING THE PERSONAL GUARANTEE. THIS MEANS THAT THEY ARE TAKING RISK IN GIVING THIS GUARANTEE. HENCE THEY CAN BE EX PECTED TO CHARGE MORE. IN MY OPINION RS.51 LAKH PAID FOR THE SANCTIONED LOAN OF ABOUT RS.12 CRORE LOOKS REASONABLE AND CAN BE ALLOWED. THE A.O. HAS ALSO ARGUED THAT DURING THE YEAR THE ASSESSEE HAS AVAILED LOAN OF ONLY ABOUT RS.75 LAKH AND HENCE GUARANTEE F EES OF RS.51 LAKH IS UNJUSTIFIED. IN THIS RESPECT I FEEL THAT THE DIRECT ORS HAVE GIVEN GUARANTEE FOR THE LOAN OF ABOUT RS.12 CRORE SANCTIONED DURING 2003-04 . THUS THE ASSESSEE IS ENTITLED TO DRAW THIS LOAN DURING THE YEAR AND THE DIRECTORS HAVE THE RISK FOR THE WHOLE SANCTIONED AMOUNT AND NOT JUST THE DRAWN AMOU NT. THEREFORE, THE FEES HAS TO BE COMMENSURATE WITH THE SANCTIONED AMOUNT. HENCE THIS ARGUMENT OF THE A.O. CANNOT BE ACCEPTED. IN VIEW OF THE ABOVE DISCUSSION I FEE THAT THE EXP ENDITURE OF RS.51 LAKH IS ALLOWABLE TO THE ASSESSEE AND, THEREFORE, THE DI SALLOWANCE MADE BY THE A.O. IS DELETED. 2.3. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL 3. ADDRESSING THE FACTS OF THE CASE, THE LD.DR SUBM ITTED THAT THE CIT(A) HAS WRONGLY CONCLUDED THAT THE PAYMENT IS NOT EXCESSIVE OR UNREASONABLE AND THE REASONS GIVEN BY THE AO HAVE NOT BEEN TAKEN INTO CONSIDERAT ION. IT WAS HIS STAND THAT THE SAME ARGUMENTS WOULD APPLY TO THE IDENTICAL GROUND IN TH E DEPARTMENTAL APPEAL OF 2004-05 A.YR. NAMELY ITA NO.1287/KOL/2010 AS THE FACTS AND CIRCUMSTANCES REMAIN IDENTICAL. 4. THE LEARNED AUTHORISED REPRESENTATIVE, ON THE OT HER HAND, PLACED HEAVY RELIANCE ON THE IMPUGNED ORDER ON THE BASIS OF WHIC H IT WAS HIS SUBMISSION THAT THE GENUINENESS OF THE PAYMENT HAS NOT BEEN QUESTIONED BY THE AO AND HE HAS MERELY MADE THE DISALLOWANCE ENTIRELY ON ACCOUNT OF THE FA CT THAT HE WAS OF THE VIEW THAT PAYMENT IS EXCESSIVE AND UNREASONABLE. FULLY RELYIN G UPON THE REASONING AND FINDING ARRIVED AT IN THE IMPUGNED ORDER OF THE CIT(A) WHER EIN IT HAS BEEN HELD THAT THE EXPENDITURE IS NEITHER EXCESSIVE NOR UNREASONABLE. IT WAS HIS SUBMISSION THAT IN THE FOLLOWING ASSESSMENT YEAR 2004-05 WHEREIN THE DEPAR TMENT IS BEFORE THE TRIBUNAL IT WAS SUBMITTED THAT THE AO HIMSELF WHILE CONSIDERING THE TOTAL PAYMENT OF RS.51,75,000/- HAS RESTRICTED DISALLOWANCE TO ONLY RS.5,57,891/- AS PER PAGE 2 PARA-3 5 OF THE ASSESSMENT ORDER IN ITA NO.1287/KOL/2010. IT WAS HIS STAND THAT THE LD. DR HAS RELIED UPON THIS ASSESSMENT ORDER. FOR READY REFERE NCE THE SAME IS REPRODUCED HEREUNDER :- 3. THE ASSESSEE HAS DEBITED DIRECTORS REMUNERATIO N TO THE EXTENT OF RS.51,75,000/- FOR GUARANTEE GIVEN TO THE BANK. THE CO. HAS PAID A SUM OF RS.17,25,000/- TO EACH OF THREE DIRECTORS (TOTALING OF RS.51,75,000/-) AS A GUARANTEE COMMISSION FOR THE GUARANTEE GIVEN BY THE SE DIRECTORS IN RESPECT OF BORROWINGS MADE BY THE ASSESSEE CO. THE GUARANTEE C OMMISSION HAS BEEN ALLOWED BY THE ASSESSEE CO. TO THE DIRECTORS @2 % OF THE SANCTIONED LOAN AMOUNT. HOWEVER, GUARANTEE COMMISSION @ 2 % OF THE LOAN OF RS.18,46,84,363/- AVAILED BY THE ASSESSEE AS ON 31/ 03/2004 IS ONLY CONSIDERED AS REASONABLE EXPENSE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THIS ALLOWABLE SUM WORKS OUT TO RS.46,17,109/- (@2. 5% OF RS.18,46,84,363/-) THE EXCESS AMOUNT OF RS.5,57,891/- (RS.51,75,000/- (-) RS.46,17,109/-) CLAIMED BY THE ASSESSEE IS CONSIDERED AS UNREASONABLE AND D ISALLOWED U/S 40A(2)(A) OF THE I.T.ACT AS THE DIRECTORS ARE PARTIES RELATED TO THE ASSESSEE IN VIEW OF THE PROVISION OF SECTION 40A(2)(B) OF THE I.T.ACT. THE SUM OF RS.5,57,891/- IS ADDED TO THE ASSESSEES TOTAL INCOME. 4.1. IN THE LIGHT OF THE ABOVE FACTS ON RECORD IT W AS ARGUED THAT THE VERY CONDUCT OF THE AO IN THE VERY SAME FACTS AND CIRCUMSTANCES IN THE NEXT ASSESSMENT YEAR WOULD SHOW THAT HE HAS ACCEPTED THE GENUINENESS OF THE EX PENDITURE, HOWEVER, IN THE FIRST YEAR THE ENTIRE AMOUNT HAS BEEN DISALLOWED U/S 40A( 2)(B) AND IN THE NEXT YEAR A PORTION OF THE AMOUNT IS DISALLOWED. IN THE CONTEXT OF THESE FACTS ON RECORD IT WAS SUBMITTED THERE IS NO EVIDENCE ON RECORD TO SHOW TH AT THE PAYMENT IS EITHER EXCESSIVE OR UNREASONABLE. ON THE OTHER HAND, THE CIT(A) HAS FULLY DISCUSSED THE ISSUE AT LENGTH AND ESTABLISHED THE REASONABLENESS OF THE PAYMENT W HICH HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BASED ON ANY FACTS OR MATERIAL. IT W AS FURTHER AGITATED BY HIM THAT THE AO WAS NOT JUSTIFIED IN COMING TO THE CONCLUSION TH AT THE REMUNERATION HAD TO BE PAID ONLY ON ACCOUNT OF THE DISBURSED AMOUNT AS BANK GUA RANTEE IS GIVEN FOR THE ENTIRE LOAN AMOUNT HOW MUCH OF IT IS USED WILL NOT BE THE DECID ING CRITERIA FOR CONSIDERING REMUNERATION TO THE DIRECTORS. IT HAS TO BE SEEN TH AT WHAT IS AT STAKE FOR THE DIRECTORS AND NOT THE AMOUNT WHICH WAS DISBURSED TO THE COMPA NY OUT OF THE SANCTIONED AMOUNT. 6 4.2. FOR THE CONTENTION THAT IT IS THE LEGITIMATE B USINESS EXPENDITURE OF THE ASSESSEE AS SUCH THE SAME CANNOT BE DISALLOWED. RELIANCE WAS PLACED UPON THE FOLLOWING JUDGEMENTS : I) CIT VS COMPUTER GRAPHICS LTD. 285 ITR 84(MAD) II) VOLTAMP TRANSFORMERS LTD. VS CIT 129 ITR 105 III) 107 TTJ 336 (DELHI) 4.3. RELIANCE WAS ALSO PLACED ON CIT VS UDAIPUR DIS TILLING CO.LTD. (RAJ)316 ITR 426 FOR THE PROPOSITION THAT IT IS FOR A BUSINESS M AN TO DECIDE HOW THE BUSINESS IS TO RUN. THE REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESS MAN AND NOT THE REVENUE. THE SAID J UGEMENT IT WAS SUBMITTED HAS RELIED UPON CIT VS WALCHAND AND CO.(P) LTD. 65 ITR 381 (SC). IT WAS ALSO ARGUED THAT IT IS FOR THE DEPARTMENT TO PROVE THAT THE EXP ENDITURE WAS UNREASONABLE NO SUCH EFFORT HAS BEEN MADE EITHER BY THE AO OR BY THE DR . FOR THE SAID CONTENTION RELIANCE WAS PLACED ON DCIT VS LAB INDIA INSTRUMENTS P.LTD. 277 ITR 39 (AT) PUNE . IT WAS ALSO HIS SUBMISSION THAT THE INCOME HAS BEEN TAXED IN THE HANDS OF THE DIRECTORS WHO ARE ALSO ASSESSED TO TAX. ON THE BASIS OF THESE FA CTS, ARGUMENTS AND POSITION OF LAW, IT WAS HIS SUBMISSION THAT THE DEPARTMENTAL APPEAL DES ERVES TO BE DISMISSED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT THE DEPARTMENTAL GROUND DOES NOT HAVE ANY MERIT. IT IS SEEN THAT NO MATERIAL HAS BEEN PLACED ON RECORD TO SHOW THAT THE EXPENDITURE IS UN REASONABLE OR EXCESSIVE. THE LEGITIMACY OF THE EXPENDITURE HAS NOT BEEN DOUBTED AND FOR THE EXTENT THERE IS NOTHING ON RECORD TO SHOW THAT IT IS EXCESSIVE OR UNREASONA BLE. ACCORDINGLY IN THE AFORE MENTIONED FACTS AND CIRCUMSTANCES AS HAVE BEEN DISC USSED AT LENGTH IN THE EARLIER PART OF THIS ORDER BEING SATISFIED BY THE REASONING AND FINDING ARRIVED AT IN THE IMPUGNED ORDER WHICH WE HAVE ALREADY REPRODUCED IN THE EARLI ER PART OF THIS ORDER THE DEPARTMENTAL GROUND IS DISMISSED. 6. IN THE RESULT ITA NO.1286/KOL/2010 IS DISMISSED. 7 7. IN REGARD TO THE DEPARTMENTAL APPEAL FOR 2004-05 A.YR. THE ARGUMENTS WOULD REMAIN THE SAME HOWEVER THE SECOND APPEAL IT WAS AR GUED WAS NOT MAINTAINABLE AS THE TAX EFFECT IS BELOW RS.3 LAKHS AS PER THE LATEST CI RCULAR OF THE CBDT. RELIANCE WAS ALSO PLACED ON CIT VS MADHUKAR K.INAMDAR, HUF 318 I TR 149 (BOM). 8. IN REPLY THE LD. DR SUBMITTED THAT AT THE TIME O F FILING OF THE PRESENT APPEAL THE CBDT INSTRUCTION PERTAINING TO FILING OF THE APPEAL S WHEREIN THE TAX EFFECT WAS LESS THAN RS.3 LAKHS WAS NOT APPLICABLE AND AS SUCH THE DEPARTMENTAL APPEAL HAS TO BE DECIDED ON MERIT. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME WE ARE OF THE VIE W THAT IN REGARD TO THE DEPARTMENTAL APPEAL OF 2004-05 A.YR. WE ARE INCLINED TO AGREE WI TH THE SUBMISSIONS OF THE LD. AR IN AS MUCH AS IT IS SEEN THAT THEIR LORDSHIPS OF TH E DELHI HIGH COURT IN THE CASE OF DELHI RACE CLUB IN ITA NO NO.128/2008 DATED 03.03.2 011 HAD AN OCCASION TO CONSIDER THE CBDT INSTRUCTION NO.3 DATED 9.2.2011. THEIR LORDSHIPS HELD THEREIN THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS RS.4,65,860/-. AS PER RECENT GUIDELINES OF THE CBDT, APPEAL IN THOSE CASES WHERE THE TAX EFFECT IS LESS THAN 10 LACS, ARE NOT BE ENTERTAINED. THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TA X-III V. M/S. P.S.JAIN AND CO. BEING NO.179/1991 DECIDED ON 2 ND AUGUST, 2010 HAS TAKEN A VIEW THAT SUCH CIRCULAR WOULD ALSO APPLY TO PENDING CASES. 9.1. IN THE CONTEXT IT MAY NOT BE OUT PLACE TO REFE R TO THE PRINCIPLE LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MAD HUKAR K.INAMDAR (HUF) 318 ITR 0149 WHEREIN WHILE CONSIDERING THE APPLICABILIT Y OF CBDT CIRCULAR DATED 15 TH MAY, 2008 THEIR LORDSHIPS HELD THAT THE CIRCULAR MA KES IT CLEAR THAT ON THE DATE OF ISSUANCE OF THE CIRCULAR, PREVAILING INSTRUCTIONS F IXING MONETARY LIMIT WILL HOLD GOOD EVEN FOR PENDING CASES. THE CIRCULAR DATED MAY 15, 2006 WAS HELD TO BE APPLICABLE TO PENDING CASES REQUIRING THE DEPARTMENT TO WITHDRAW CASES WHEREIN THE TAX EFFECT IS LESS THAN THE PRESCRIBED MONETARY LIMITS AND WOULD APPLY TO THE CASES PENDING BEFORE THE HIGH COURT EITHER FOR ADMISSION OR FOR FINAL DI SPOSAL AND IT IS BINDING ON THE REVENUE. WE ALSO FORTIFY OURSELVES BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS MADHUKAR K.INAMDAR, HUF 318 ITR 149 (BOM). 8 RESPECTFULLY FOLLOWING THE SAME THE DEPARTMENTAL AP PEAL IN ITA NO.1287/KOL/2010 OF 2004-05 IS DISMISSED IN LIMINE. 10. IN THE RESULT THE APPEALS OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10.06.2011. SD/- SD/- ! !' ! !' ! !' ! !', ,, , #$ #$ #$ #$ AKBER BASHA, ACCOUNTANT MEMBER , , , , DIVA SINGH, JUDICIAL MEMBER. ( (( (2$ 2$ 2$ 2$) )) ) DATE : 10.06.2011. ORDER PRONOUNCED BY SD/- SD/- SVM MS (AM) (JM) #' 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S. BARTAMAN PVT. LTD., 6, J.B.S. HALDENE AVENUE, KOLKATA-700105. 2 THE A.C.I.T., CIRCLE-7, KOLKATA 3. THE CIT, 4. THE CIT(A)-XIII, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #'&;/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)