Judgment :- The petitioner seeks for a writ of declaration declaring Circular No. F.No.200/79/2000-ITA.1, dated 23.1.2001 issued by the second respondent as invalid. 2. Petitioner is a Public Limited Company mainly engaged in the manufacture and sale of sewing threads and industrial fabrics. For the previous year ended 31st March 1996, the petitioner filed return of income on 29.11.1996 admitting a loss of Rs.26,47,02,780/-. The return was processed under section 143 (1)(a)of the Income Tax Act on 13.5.1997. Notice under section 143 (2) of the Act was issued on 27.11.1997 calling upon on the petitioner to furnish various details for the purpose of completing the assessment. After the details were furnished, assessment was completed under section 143(3) of the Act on 31.3.1999. 3. Subsequently, the first respondent had issued a notice on 22.3.2003 for reopening the completed assessment under section 148 of the Act. One of the grounds for reopening is the allowability of the amounts paid by the petitioner to its employees under Voluntary Retirement Scheme (VRS) by relying on the Circular dated 23.01.2001 issued by the Central Board of Direct Taxes. 4. The petitioner contends that the Circular thus issued is contrary to the provisions of the Act and also that it is beyond the powers of the Board to issue such a circular against the interests of the assessee. 5. In the counter filed by the respondent, though the terms of the circular is sought to be differentiated in so far as the case of the petitioner is concerned it is stated that the assessment has been completed not on the basis of the circular but on the facts of the particular case. It is also stated that under the provisions of the Income-tax Act the Board has issued instructions to its subordinate officers after considering the question of allowance of VRS payment and deductions, the Board has given guidelines to the assessing officers to decide the issues on the facts of each case. The assessee was therefore not correct in suggesting that the Board's circular was contrary to law. 6. Learned counsel for the petitioner brings to the notice of the Court the power of the Board to issue instructions to the subordinate authorities, as envisaged, under Section 119 of the Income-tax Act 1961. The assessee was therefore not correct in suggesting that the Board's circular was contrary to law. 6. Learned counsel for the petitioner brings to the notice of the Court the power of the Board to issue instructions to the subordinate authorities, as envisaged, under Section 119 of the Income-tax Act 1961. Under Section 119 (2), it was open to the Board to issue directions for the purpose of proper and efficient management of the work of the assessment and collection of revenue, provided the instructions are not prejudicial to the assessee. The learned counsel after referring to the circular, relies on the direction that the expenditure has to be treated as capital expenditure and therefore the said directions are prejudicial to the assessees. 7. Learned Counsel appearing for the Revenue, however, contends that the instructions are only in the form of guidelines and they are to be applied by the Assessing Officers only in the context of the facts of the case and the assessing officers are free to apply the circular only wherever it is appropriate. In the present case, in the assessment of the petitioner under Section 148 it has already been considered and therefore nothing further survives for consideration. It is also represented that the petitioner has also filed an appeal as against the assessment order. 8. I have considered the above submissions. The validity of the circular is questioned. The circular which is impugned in this writ petition is as follows: " C.B.D.T. Circulars Circular No. .... 23rd January 2001. To All Chief Commissioners of Income-Tax. All Directors-General of Income-Tax. Subject : Admissibility of ex-gratia amount paid by assessees for gaining enduring benefit or advantage under Voluntary Retirement Scheme (VRS) – regarding. Sir, It is noticed that a number of assesses have resorted to restructuring of human resources, financial engineering, etc. Invariably, ex-gratia payments are made in order to encourage such scheme to further long-term advantage to the assessee by way of profitability, competitiveness and also to further induction of technology. Particular mention may be made of the Voluntary Retirement Scheme (VRS) of the banking sector in this connection. The question arises whether the ex-gratia amount is allowable as revenue expenditure. In this connection, the primary test is to see whether any enduring benefit has resulted to the assessees by making an expenditure. Particular mention may be made of the Voluntary Retirement Scheme (VRS) of the banking sector in this connection. The question arises whether the ex-gratia amount is allowable as revenue expenditure. In this connection, the primary test is to see whether any enduring benefit has resulted to the assessees by making an expenditure. In the event, the expenditure is laid out for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If any such asset or advantage for enduring benefit of the business is thus acquired or brought into existence, it would be immaterial whether the source of payment was the capital or the income of the concern or whether payment was made once and for all or was made instalments. While it is not ordinarily easy to evolve a fool-proof test for ascertaining whether in a given case, expenditure is capital or revenue, the Assessing Officers normally decide the character of expenditure on the facts and circumstances of each case. They consider the nature and the ordinary course of business and the objects for which the expenditure has been laid out. Towards this purpose, the test of enduring benefit is a useful tool in considering the ex-gratia amount, prima facie, as a capital expenditure. In this view of the matter, the expenditure, as said above, is to be treated as capital expenditure. This may be brought to the notice of all concerned. Yours faithfully, (Sd.) Samar Bhadra Under Secretary to the Government of India [F.No.200/79/2000-ITA-I] 9. The petitioner is aggrieved by the positive direction of the Board to the subordinate authorities directing them that the expenditure as mentioned therein, has to be treated as capital expenditure. 10. The Power of the Board to issue instructions to the subordinate authorities are contained in section 119 of the Income-Tax Act. "Instructions to subordinate authorities. 119. The petitioner is aggrieved by the positive direction of the Board to the subordinate authorities directing them that the expenditure as mentioned therein, has to be treated as capital expenditure. 10. The Power of the Board to issue instructions to the subordinate authorities are contained in section 119 of the Income-Tax Act. "Instructions to subordinate authorities. 119. (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions are directions shall be issued - (a) so as to require any income-tax authority to make a particular assessment or to dispose of particular case in a particular manner ; or (b) so as to interfere with the discretion of the [Commissioner (Appeals)] in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections [139,] 143, 144, 147, 148, 154, 155, [158BFA], [sub section (1A) of section 201, sections 210, 211, 234A, 234B, 234C], 271 and 273 or otherwise), general or special orders in respect of any class of incomes or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information; (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise [any income-tax authority, not being a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:- (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed: Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament." 11. In the present case, Section 119 (1) will not be attracted considering that the said provision relates only to instructions and directions to be issued for the proper administration of the Act. Such directions can only relate to procedural and administrative matters and not to the criteria to be adopted in the matter of assessment. But under section 119 (2), the Board, is given the power to issue instructions to subordinate authorities for the purpose of proper and efficient management of the work of assessment and collection of revenue. 12. Therefore under section 119(2), the Board is enabled to issue such instructions, provided that such directions and issues are not prejudicial to the assessees. Therefore, any instruction to be issued should not affect the interests of the assessees. If such directions are issued they have to be held as ultra vires the scope of section 119 (2). In the present case the above extract of the impugned circular discloses that there is a positive direction that the expenditure as dealt with under the circular should be treated as capital expenditure. In short, it is a positive direction to the assessing authorities to treat the particular category of expenditure as capital expenditure in the given facts and circumstances. I am inclined to hold that this will not be permissible in terms of section 119 (2) as it is bound to affect the interests of the assessees. 13. It is needless to mention that the assessing authorities exercise their functions which are quasi-judicial in nature and they should be free to apply their mind based on the provisions of the Act. There cannot be any overriding instructions or guidelines by the Board which would go against the interests of the assessee. 14. The Assessing Officers being subordinates to the Board, they are bound to pass orders only in terms of the circular without applying their mind independently. The very reason behind the statutory bar under Section 119 (2) to issue any instruction contrary to the interest of the assessee is that a subordinate official is bound to comply with the directions/opinion of a superior authority. Any such instruction to an authority discharging the functions of quasi-judicial nature would be impermissible. In this case there is a positive direction to the assessing authorities. Any such instruction to an authority discharging the functions of quasi-judicial nature would be impermissible. In this case there is a positive direction to the assessing authorities. There is a positive direction to treat the ex-gratia amount as capital expenditure, which direction is certainly adverse to the assessee. Therefore to the extent that the circular is against the interests of the assessees, the same is liable to be held as ultra vires. 15. In the result, I am inclined to allow the writ petition and the declaration as sought for by the petitioner is issued. Writ petition is allowed. No costs. Consequently, interim injunction is vacated and WPMP No.14183 is dismissed.