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2009 DIGILAW 896 (HP)

COMMISSIONER OF INCOME TAX v. KHUSHAL COLD

2009-10-21

DEEPAK GUPTA, V.K.AHUJA

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JUDGMENT Deepak Gupta, J.(Oral)-This appeal was admitted on the following questions of law: “1.Whether the ITAT was right in law in holding that ‘interest Subsidy’ received from the Government by the assessee is allowed to be included as profits derived from the industrial undertaking and eligible for deduction u/s 801B of the Income Tax Act, 1961, when it has been clearly laid down by the Hon’ble supreme Court in it’s decision in the case of CIT vs. Cambay Electric Supply Industrial Co. Ltd., 113 ITR 84 that the words “derived from” referred to in the section 801B has narrower meaning than ‘attributable to’ and the freight subsidy cannot be treated as profits ‘derived’ from the industrial undertaking though it may be ‘attributable’ to the industrial undertaking? 2.Whether the ITAT was right in not appreciating the ratio of judgments of the Hon’ble Madras High Court in its decision in the cases of CIT vs. Jameel Leathers and Uppers 246 ITR 97 and CIT vs. Vishwanathan & Co. 261 ITR 737 which are applicable in this case wherein it has been clearly held that the amounts received on account of cash assistance, duty drawback, import entitlements and air subsidy etc. are not the amounts which form part of the profits and gains ‘derived’ from the industrial undertaking and the Hon’ble Madras High Court while deciding the cases (supra) has followed the law laid down by the Hon’ble Supreme Court in their judgment in the case of Cambay Electric supply Industrial Co. Ltd. vs. CIT (Supra).” 2. The question whether interest subsidy is income derived from business or not has already been answered by us in ITA No.63 of 2007 titled as Commissioner of Income Tax vs. M/s.Gheria Oil Gramudyog workers Welfare Association Khanpur decided on 19.10.2009 in favour of the Revenue. 3. However, another question which arises is whether the present appeal itself is maintainable or not. Sh.Vishal Mohan appearing for the respondents submits that the Revenue should not have filed this Appeal since the tax effect even if the appeal is decided in favour of the revenue is less than Rs.2 lakhs. He has placed reliance on Circular F.No.279/126/98-IT, dated March 27, 2000, issued by the Central Board of Direct Taxes, which reads as under: “Instruction No.1979 F.No.279/126/98-IT Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, New Delhi, dated the 27th March, 2000. He has placed reliance on Circular F.No.279/126/98-IT, dated March 27, 2000, issued by the Central Board of Direct Taxes, which reads as under: “Instruction No.1979 F.No.279/126/98-IT Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, New Delhi, dated the 27th March, 2000. To All Chief Commissioners of Income-tax/ Directors General of Income-tax. Sir, Subject: Revising monetary limits for filing Departmental appeals/references before Income-tax Appellate Tribunal, High Courts and Supreme Court-measures for reducing litigation-Regarding. Reference is invited to the Board’s Instruction No.1903, dated 28th October, 1992, and Instruction No.1777, dated 4th November, 1987, wherein monetary limits of Rs.25,000 for Departmental appeals (in income-tax matters) before the Appellate Tribunal, Rs.50,000 for filing reference to the High Court and Rs.1,50,000 for filing appeal to the supreme Court were laid down. 2. In supersession of the above instruction, it has now been decided by the Board that appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder: (Tax effect) (i) Appeal before the Appellate Tribunal ( income-tax matters) Rs.1,00,000 (ii) Appeal under section 260A/reference under section 256(2) before Rs.2,00,000 the High Court (iii)Appeal in the Supreme Court Rs.5,00,000 The new monetary limits would apply with reference to each case taken singly. In other words, in group cases, each case should individually satisfy the new monetary limits. The working out of monetary limits will therefore not take into consideration the cumulative revenue effect as envisaged in the Board’s earlier instruction referred to above. 3. Adverse judgments relating to the following should be contested irrespective of revenue effect: (i) Where Revenue audit objection in the case has been accepted by the Department. (ii) Where the Board’s order, notification, instruction or circular is the subject-matter of an adverse order. (iii) Where prosecution proceedings are contemplated against the assessee. (iv) Where the constitutional validity of the provisions of the Act are under challenge. 4. Special leave petitions under article 136 of the Constitution are filed before the Supreme court only in consultation with the Ministry of Law. Therefore, where the Chief Commissioner decides to contest an adverse judgment by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing. 5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc. 6. Therefore, where the Chief Commissioner decides to contest an adverse judgment by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing. 5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc. 6. These monetary limits will not apply to writ matters. 7. This instruction will come into effect from April 1, 2000. Sd/ Anuradha Goyal, Deputy Secretary to the Government of India.” 4. The question which arises is that when Union of India has taken a decision not to file appeals in the High Courts where the tax effect is less than two lakhs should this appeal be rejected only on this ground. The Circular in question was issued with a view to reduce litigation in the High Courts and the Supreme Court. Despite the above circular having been issued the Revenue has chosen to file the present appeal knowing fully well that the Courts are flooded with cases and such a case should not have been filed. The filing of this appeal is contrary to the circular issued which is binding on all the Chief Commissioners and Director General of Income-tax. While taking this view, we are supported by the judgment of the Bombay High Court in Commissioner of Income-tax vs. Camco Colour Co. (2002) 254 ITR 565. 5. In view of the above discussion and keeping in view the Circular issued by the Central Board of Direct Taxes, we are satisfied that the Board has taken a policy decision not to file appeals in the High Courts where the tax effect is less than two lakhs. The present appeal is therefore not maintainable. Accordingly the same is rejected.