The DCIT, Central Circle-2(4), Ahmedabad V. M/s. Mahalaxmi Fabrics Mills Pvt. Ltd., Ahmedabad

ITA 1531/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6680 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-04-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 17-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHA SRDR
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Question of law; Difference of opinion; Tax effect
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1531/AHD/2007 ASSESSMENT YEAR:2002-03 DATE OF HEARING:1.4.10 DRAFTED:5.4.10 DCIT, CENTRAL CIRCLE- 2(4), AHMEDABAD V/S. M/S. MAHALAXMI FABRICS MILLS PVT. LTD., AHMEDABAD PAN NO.AABCM7865M (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. NEETA SHA, SR-DR RESPONDENT BY:- SHRI P.M. MEHTA, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII, AHMEDABAD IN APPEAL NO. C IT(A)-VIII/AC-4/049/05-06 DATED 24-01-2007. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE-4, AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 15-03-2005 FOR THE ASSESSMENT YEAR 2002 -03. 2. AT THE OUTSET, IT IS NOTICED THAT THE TAX EFFECT IN THIS APPEAL IS BELOW THE PRESCRIBED LIMIT UNDER INSTRUCTION NO.2/2005 DATED 24-10-2005 . WE FIND THAT THE TAX EFFECT IN IS AMOUNTING TO RS.1,61,504/- AS PER DEMA ND NOTICE ISSUED TO THE ASSESSEE ON THE ISSUES CONTESTED BY THE REVENUE, AS THE COMP UTATION IS MADE UNDER MAT PROVISION, I.E. SECTION 115JB OF THE ACT. THIS APP EAL OF THE REVENUE WAS FILED ON 17- 04-2007. WHEN THIS WAS CONFRONTED TO THE DR, HE HA S NOT DISPUTED THAT THE TAX EFFECT IS MORE THAN THIS. 3. IT SEEMS THAT RECENTLY HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT V. CONCORD PHARMACEUTICALS IN TAX APPEAL NO.402/2001 VIDE ORDER DATED 05-08-2 008 ITA NO.1531/AHD/2007 A.Y.2002-03 DCIT, CC-2(4), ABD V. M/S. MAHALAXMI FABRIC MILLS P.LTD. PAGE 2 HAS FINALLY SETTLED THE ISSUE REGARDING TAX EFFECT CASES. HONBLE HIGH COURT IN THIS CASE HAS HELD AS UNDER:- 20. THERE IS ALSO DIFFERENCE OF OPINION AMONGST TH E COURTS WITH REGARD TO THE APPLICABILITY OF THE CIRCULAR. IF ON THE DATE OF FILING OF AN APPEAL, A CIRCULAR IS NOT IN FORCE OR CERTAIN EXCEPTIONS ARE NOT THERE OR MONETARY LIMIT IS LESS THAN WHAT WAS THERE AT THE TIME OF DECIDING THIS APPEAL, IN SUCH CASES, THE TRIBUNAL WILL HAVE TO GIVE DUE WEIGHTAGE TO THE PROVISIONS C ONTAINED IN THE CIRCULAR PREVALENT ON THE DATE OF FILING OF APPEAL AND NOT O N THE DATE OF THE DECISION OF THE APPEAL. IN CIT V. CHHAGER PACKAGING & PLASTIC S (P) LTD.,(2008) 214 CTR 389 (BOM), THE BOMBAY HIGH COURT TOOK THE VIEW THAT CIRCULARS / INSTRUCTIONS ISSUED BY THE BOARD ARE APPLICABLE ONLY PROSPECTIVE LY AND IF THERE IS NO REFERENCE TO THEIR APPLICABILITY TO THE PENDING MAT TERS, SUCH PENDING MATERS CANNOT BE DECIDED ON THE BASIS OF CIRCULARS / INSTR UCTIONS. IN CIT V. PITHWA ENGINEERING WORKS 276 ITR 519 (BOM), THE BOMBAY HIG H COURT TOOK THE VIEW THAT TAKING JUDICIAL NOTICE OF THE MONEY VALUE HAVI NG GONE DOWN AND COST OF LITIGATION EXPENSES HAVING GONE UP AS WELL AS HUGE PENDENCY OF CASES, THE BOARD SHOULD EVOLVE A POLICY OF APPLYING THE CIRCUL AR EVEN TO THE OLD REFERENCES WHICH ARE STILL UNDIVIDED. THE DEPARTMEN T SHOULD NOT HAVE PROCEEDED WITH THE APPEALS / REFERENCES WHEREIN THE TAX IMPACT IS MINIMAL, IRRESPECTIVE OF THEIR DATE OF FILING. 21.THERE IS NO DISPUTE ABOUT THE FACT THAT WHERE SU BSTANTIAL QUESTION OF LAW OF IMPORTANCE IS INVOLVED OR WHERE QUESTION OF LAW IS IMPORTANCE IS INVOLVED OR WHERE QUESTION OF LAW IS REPEATEDLY ARISING OR WHER E THE ISSUE IS COVERED BY THE JUDGMENT OF TERRITORIAL HIGH COURT OR SUPREME C OURT, THE TRIBUNAL WILL HAVE TO DECIDE THE APPEAL ON MERITS AND IN TERMS OF THE LAW DECLARED BY THE SUPREME COURT OR BY THE TERRITORIAL HIGH COURT. HO WEVER, ON THIS GROUND THE MATTERS CANNOT BE REMANDED TO THE TRIBUNAL DIRECTIN G THE TRIBUNAL TO DECIDE THE SAME AFRESH. IF NO OBJECTIONS ARE RAISED BY TH E DEPARTMENTAL REPRESENTATIVE AT THE TIME OF HEARING OF THE APPEAL AGAINST THE APPLICABILITY OF THE CIRCULAR DESPITE THERE BEING AN EXCEPTION, THE DEPARTMENT HAS MISSED THE BUS AND SECOND INNING CANNOT BE GRANTED FOR THAT PU RPOSE. HOWEVER, IN MATTERS WHERE SUCH OBJECTIONS ARE RAISED AND DESPIT E THOSE OBJECTIONS OR WITHOUT DEALING WITH THOSE OBJECTIONS IF THE TRIBUN AL HAS DISMISSED THE APPEAL ONLY ON THE GROUND OF LOW TAX EFFECT IN SUCH MATTER , AN INDULGENCE IS REQUIRED TO BE SHOWN BY THIS COURT AND FOR THIS LIMITED PURP OSES, THE DEPARTMENT IS PERMITTED TO MOVE AN APPROPRIATE APPLICATION BEFORE THE TRIBUNAL FOR DECIDING THE APPEAL ON MERITS. 22. WE ARE OF THE VIEW THAT SIMPLY BECAUSE THE APPE AL IS FILED BY THE DEPARTMENT IN CONTRAVENTION OF THE CIRCULAR THE TRI BUNAL IS NOT BOUND TO DECIDE THE APPEAL ON MERITS. DUE WEIGHTAGE SHOULD INVARIABLY BE GIVEN BY THE TRIBUNAL TO THE CIRCULAR ISSUED BY THE BOARD. EVEN OTHERWISE, THE NEWLY INSERTED PROVISIONS CONTAINED IN SECTION 268A(4) MA KE IT OBLIGATORY FOR THE TRIBUNAL TO CONSIDER SUCH CIRCULAR. IT IS NOT OPEN FOR THE DEPARTMENT TO CONTEND THAT CIRCULARS ARE INTERNAL MATTERS OF THE DEPARTMENT AND ASSESSEE CANNOT OBJECT TO FILING OF AN APPEAL ON THE BASIS O F SUCH CIRCULAR. IT IS TRUE THAT FILING OF AN APPEAL IS A STATUTORY RIGHT BUT IT CAN CERTAINLY BE REGULATED BY THE BOARD BY ISSUANCE OF ORDERS, INSTRUCTIONS OR CIRCUL ARS. THIS WOULD NOT AMOUNT ITA NO.1531/AHD/2007 A.Y.2002-03 DCIT, CC-2(4), ABD V. M/S. MAHALAXMI FABRIC MILLS P.LTD. PAGE 3 TO TAKING AWAY THE RIGHT OF FILING OF APPEAL OR THA T SUCH RIGHT IS PROHIBITED BY EXECUTIVE INSTRUCTIONS. SECTION 268A(1) OF THE ACT NOW RECOGNIZES SUCH RIGHT OF THE BOARD TO REGULATE THE FILING OF APPEAL OR AP PLICATION BEFORE THE TRIBUNAL OR THE COURT. IT IS ALSO TRUE THAT WHEN THE HONBL E SUPREME COURT OR THE TERRITORIAL HIGH COURT HAVE DECLARED THE LAW ON A Q UESTION, IT IS NOT OPEN TO THE TRIBUNAL TO DIRECT THAT THE CIRCULAR ISSUED BY THE BOARD PRESCRIBING THE MONETARY LIMIT SHOULD BE GIVEN EFFECT TO AND NOT TH E DECISION OF HONBLE SUPREME COURT OR THE TERRITORIAL HIGH COURT. IT IS, HOWEVER, EQUALLY TRUE THAT THE TRIBUNALS ATTENTION MUST BE DRAWN BY THE DEPAR TMENTAL REPRESENTATIVE TO SUCH DECISION OF THE HONBLE SUPREME COURT OR THE H IGH COURT. AN OBJECTION MUST BE RAISED BY THE DEPARTMENTAL REPRESENTATIVE. 23. CONSIDERING ALL THE AFORESAID ISSUES, WE DISMIS S ALL THESE TAX APPEALS RESERVING LIBERTY TO THE DEPARTMENT ONLY ON THOSE C ASES TO APPLY TO THE TRIBUNAL TO DECIDE THE APPEAL ON MERITS WHERE THE O BJECTIONS WERE RAISED BEFORE THE TRIBUNAL EITHER IN THE APPEAL MEMO OR AT THE TIME OF HEARING OF APPEAL RAISING A SPECIFIC CONTENTION THAT A PARTICU LAR APPEAL IS COVERED BY AN EXCEPTION AND DESPITE THIS OBJECTION THE TRIBUNAL H AS NOT DEALT WITH THE SAID CONTENTION AND DISMISSED THE APPEAL ON THE GROUND O F LOW TAX EFFECT. IT IS EXPECTED FROM THE TRIBUNAL TO CONSIDER THIS BROAD P ARAMETERS WHILE APPLYING THE RELEVANT CIRCULAR TO THE FATS OF THE CASE AT TH E TIME OF DECIDING APPEALS. 4. AT THE TIME OF HEARING BEFORE US, THE LD. DEPART MENTAL REPRESENTATIVE WAS SPECIFICALLY ASKED BY THE BENCH, WHETHER THE APPEAL FALLS UNDER ANY OF THE EXCEPTIONS AS PROVIDED IN BOARDS INSTRUCTION NO.2/2005 DATED 24-10-2005, THE SUBJECT-MATTER OF THE APPEAL IS COVERED BY ANY OF THE JUDGMENT OF JURISDICTIONAL HIGH COURT OR OF SUPREME COURT, ANY SUBSTANTIAL QUESTION OF LAW IS I NVOLVED OR NOT. THE LD DR STATED THAT IN THE APPEAL THE ISSUE RAISED BY THE REVENUE IS DISALLOWANCE OF DEPRECIATION TO THE TUNE OF RS.9,38,117/- WHILE COMPUTING THE INCOM E U/S.115JB OF THE ACT ON MAT COMPUTATION. ACCORDING TO HER, TAX EFFECT IN THIS A PPEAL IS MORE THAN THE PRESCRIBED LIMIT FOR TAX EFFECT AND FALLS IN THE CRITERIA LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF CONCORD PHARMACEUTICALS (SUPRA). SHE STATED THAT THIS APPEAL SHOULD BE DECIDED ON ME RITS. WE FIND THE RELEVANT EXCEPTIONS AS PROVIDED IN BOARDS INSTRUCTION NO.19 79/2000 DATED 27-03-2000 READS AS UNDER:- 3. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING SHOULD BE CONTESTED IRRESPECTIVE OF REVENUE EFFECT : (I) WHERE REVENUE AUDITED OBJECTION IN THE CASE HA S BEEN ACCEPTED B THE DEPARTMENT (II) WHERE THE BOARDS ORDER, NOTIFICATION, INSTRUC TION OR CIRCULAR IS THE SUBJECT-MATTER OF AN ADVERSE ORDER. ITA NO.1531/AHD/2007 A.Y.2002-03 DCIT, CC-2(4), ABD V. M/S. MAHALAXMI FABRIC MILLS P.LTD. PAGE 4 (III) WHERE PROSECUTION PROCEEDINGS ARE CONTEMPLATE D AGAINST THE ASSESSEE. (IV) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVI SIONS OF THE ACT ARE UNDER CHALLENGE. 5. WE FIND THAT THE APPEAL RELATE TO LOW TAX EFFECT AND COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONCORD PHARMACEUTICALS (SUPRA). RESPECTFULLY FOLLOWING CONCORD PHARMACEUTICALS (SUPRA), AND IN VIEW OF THE ARGUMENTS OF THE LD. SR-DR THAT THE SUBSTANTIAL QUE STION OF LAW, THE ISSUE IS A FACTUAL ONE AS THIS IS ONLY A FACT WHETHER DEPRECIA TION IS TO BE ALLOWED WHILE COMPUTING INCOME U/S.115JB OF THE ACT BY APPLYING P ROVISIONS OF MAT COMPUTATION. THERE IS NO SUBSTANTIAL QUESTION OF LAW IN THIS. A S REGARDS TO ANOTHER ARGUMENT THAT THE APPEAL THE TAX EFFECT IS EXCEEDING THE PRESCRIB ED LIMIT OF BOARDS CIRCULAR IS OF NO CONSEQUENCE TO BE SEEN WHILE COMPUTING TAX EFFECT A S THIS APPEAL IS COVERED BY BOARDS INSTRUCTION NO.2/2005 DATED 24-10-2005 . ACCORDINGLY, WE DISMISS THIS APPEAL OF THE REVENUE. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01/04/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 01/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD