Commissioner of Income Tax vs Thiagarajar Mills Limited

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Income Tax Appellate Tribunal, Madras ''A'' Bench, dated

23.08.2005 in ITA No. 1466/Mds/2003 in respect of the assessment year 1997-98.

The facts of this case are as follows: For the assessment year 1997-98, the assessee company filed its return of income and claimed an

allowance towards the maintenance of the bunglow at Coutrallam and Kodaikanal on the ground that the expenses incurred regarding the same for

business purpose only. The Assessing Officer disallowed the claim of the assessee u/s 37(4) and brought the same to tax. The Commissioner of

Income Tax (Appeals) allowed the appeal relying on the decision of his predecessors, confirmed the order of the Assessing Officer and held the

appeal in favour of the revenue. Aggrieved by that order, the assessee filed an appeal before the Tribunal and the Tribunal held that the expenditure

on guest house is an allowable expenditure following the decision of this Court in Commissioner of Income Tax Vs. South India Viscose Ltd., .

The correctness of the same is now canvassed before us by the revenue by formulating the following question of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that expenditure on renting and maintaining a guest house is

allowable as business expenditure.

Though the Counsel for the revenue started arguing the case on merits, the learned Counsel for the assessee submits that the dispute in respect

of the disallowance is only a sum of Rs. 43,618/-. Hence the tax effect is much lower than the one fixed by the Central Board of Direct Taxes

Circular in F. No. 279/126/98ITJ dated March 27, 2000. In view of the circular, the impugned order need not be deliberately discussed and

decision rendered and can be disposed of based on the circular issued despite the fact that CIT v. South India Viscose reported in 259 ITR 107

has been disproved by the subsequent Supreme Court Judgment.

We have heard the argument of the learned Counsel on either side and perused the materials available on record.

In the Central Board of Direct Taxes Circular in F. No. 279/126/98ITJ dated March 27, 2000, the monetary limit prescribed for filing an

appeal by the revenue is Rs. 2.00 lakhs, however, with certain exceptions. The exceptions are not applicable to the facts of the present case and

admittedly, the tax effect in this case is lesser than the monetary limit prescribed in the said circular. Hence, it would not be proper on the part of

the revenue to file an appeal, which is against its own circular.

It may be noted that this Court considered a similar issue in the case of Commissioner of Income Tax Vs. Associated Electrical Agencies, ,

wherein this Court held as follows:

We are of the considered view that none of the exceptions stated in the circular are applicable to the facts of the present case. The circular was

stated to be issued by invoking the statutory power u/s 119 of the Income Tax Act. The appeal is filed u/s 260-A of the Income Tax Act. It is well

settled principle of law that each and every provision of a statute has to be given the same importance. One provision cannot be alleviated to a

higher pedestal than the other provision, of course, unless or otherwise specifically stated either in the scheme, the Act or in the provision itself that

a particular provision is subjected to or qualified by any other provision or the provision can be given effect to notwithstanding anything contained

in any other provisions by assigning overriding effect. Hence, the contention that notwithstanding the circular, which was issued u/s 119 of the

Income Tax Act, the appeal could be filed by the revenue u/s 260-A has to be rejected for the reason that if the contention is accepted, one of the

Section would become virtually otiose and that cannot be the intention of the law makers.

Thus, following the long line of case laws reported in Commissioner of Income Tax Vs. Rajasthan Patrika Ltd., , Commissioner of Income Tax Vs.

P.S.T.S. Thiruvirathnam and Sons, , to which one of us is a party (K. Raviraja Pandian, J.), Commissioner of Income Tax Vs. Digvijay Singh, and

Commissioner of Income Tax Vs. Camco Colour Co., , this Court held that the uniform line of judicial opinion is that if the tax effect is less than

what is stated in the circular, the Revenue need not agitate the issue on appeal and that the circular is binding on the Revenue.

The said judgment of this Court in the case of Commissioner of Income Tax Vs. Associated Electrical Agencies, has been relied by the Gujarat

High Court in the case of CIT v. Concord Pharmaceuticals (2008) 220 CTR 117 to reject the appeal of the revenue where the tax effect is less

than Rs. 2.00 lakhs. The apex Court in the case of State of Kerala and Others Vs. Kurian Abraham Pvt. Ltd. and Another, has laid down that the

circular issued by the CBDT is much binding on the revenue and that requires no support of judicial precedent.

Learned Counsel for the revenue fairly admitted that the tax effect is less than the monetary limit prescribed under the above said Circular dated

27.03.2000. The appeal is filed on 30.01.2006. Hence, the circular is binding on the revenue.

In view of the above and in view of the fact that every assessment of a unit is unique by itself, even assuming that the decision rendered by the

Tribunal is not in accordance with law and can be agitated in appropriate case before the appropriate forum, the appeal is dismissed. No costs.