|COURT:||Bombay High Court|
|CORAM:||B. P. Colabawalla J, M. S. Sanklecha J|
|CATCH WORDS:||low tax effect circular|
|DATE:||January 8, 2016 (Date of pronouncement)|
|DATE:||January 15, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 268A: Though the low tax effect circular No. 21/2015 dated 10.12.2015 does not refer to references filed u/s 256(1), it has to be held to apply to references as well in view of the objective of the CBDT to focus only on large tax effect matters|
(i) From a reading of Circular No.21/2015 dated 10th December, 2015 it is clear that it does not advert to pending References. It only makes mention about non-filing of appeals to the High Court where tax effect is less than Rs.20 lacs and that it would apply retrospectively even in respect of pending appeals which would not be pressed. The above Circular of 10 December 2015 is focused only on appeals under the Act and does not make any mention of References under Section 256 of the Act as after the introduction of statutory appeals in 1998 under Section 260A of the Act there are no References under Section 256 of the Act being made to this Court from the orders of the Tribunal passed after 1998. Therefore now there are no References being filed in the Court under Section 256 of the Act and thus the Circular does not deal with the same. Moreover as pointed out earlier in this order, this Court in M/s. Computer Point (I) Ltd. interpreting the earlier circular/instructions No.5 dated 10th July, 2014 (no mention as in this Circular about References) issued by the CBDT, has held that it would apply also to pending references. The aforesaid view has been followed by us in Income Tax Reference No. 419 of 1995 (CIT v/s. M/s. Dempo Mining Corporation Ltd.) and Income Tax Reference No. 214 of 1996 (CIT v/s. M/s. Sanrit Hotel, Margao, Goa), both rendered on 24th July, 2015. In all the above cases, pending references were returned unanswered in view of low tax effect.
(ii) Circular dated 10 December, 2015 is identically worded to the instructions No.5 dated 10th July, 2014 save and except enhancement of the threshold limit for the purpose of Revenue pursuing its appellate remedies inter alia before the High Court, specifically providing for the retrospective operation of the 2015 Circular so as to apply to pending appeals and directing that the pending appeals be withdrawn and/or not pressed. In the above view, we follow our decision in M/s. Computer Points (I) Ltd., (supra), M/s. Dempo Mining Corporation (supra) and M/s. Sanrit Hotel, Madgao, Goa (supra) and hold that even though the 2015 Circular does not specifically refer to References just as the instruction No.5 of 2014, it should apply even to pending References under Section 256 of the Act. This is so as the entire objective of the Circular in having been made retrospective is that the Court should concern itself with grievances of the Revenue having substantial financial stake in terms of the tax involved and normally the decision of the Tribunal up to the value of Rs.20 lacs even if it is adverse to the Revenue should be accepted. The Circular in paragraph 6 thereof protects the interest of the Revenue by providing that where it does not pursue appellate remedies in view of the low tax effect as provided therein, it would not be held against the Revenue for any other Assessment year in respect of the same Assessee or even in respect of any other Assessee, if the tax effect involved in those cases is higher than the threshold limits specified in the Circular.
(iii) One feature in support of the submission that the Circular be not applied to References could be that the References are opinions sought by the Tribunal on questions of law from this Court unlike statutory appeals filed by the parties, seeking the view of the Courts. However though these References are undoubtedly made by the Tribunal, they emanate from an application by one of the parties before it leading to the order giving rise to the question of law requiring the opinion of the Court. This in practice is similar to the statutory appeal under Section 260A of the Act being filed by a party to the High Court for the reason that, this appeal is not considered as a matter of right of the party but only if the court to which the appeal is preferred is satisfied that a substantial question of law arises and admits the appeal for further consideration. Therefore a pending appeal under Section 260A of the Act is no different from a pending Reference in as much as in the case of a Reference the Tribunal is of the view that a substantial question of law arises either on its own (Section 256(1) of the Act) or as directed by Court (Section 256(2) of the Act) which requires the opinion of the Court, while in a pending appeal under Section 260A of the Act which has been admitted, the Court is of the view that a substantial question of law arises which requires due consideration by the Court. Therefore we construe the Circular dated 10th December 2015 as applicable even to pending References in the same manner they apply to pending appeals.
(iv) The need for the CBDT to issue the 15th December 2015 Circular and to clarify that it would apply retrospectively to govern even pending appeals arose on account of the enormous increase in the number of appeals being filed by the Revenue over the years. To give figures of this Court in the year 1995, the total number of References filed in this Court were in the aggregate 504 i.e both at the instance of the Revenue and the Assessee. In 2001, the total number of appeals filed under Section 260A of the Act in this Court in the aggregate were 648 and 546 of there were filed by the Revenue. In 2009, the total number of appeals filed under Section 260A of the Act in the aggregate was 4266, out of which, that filed by the Revenue were 3790. However, it may be pointed out that in 2015, the total number of appeals filed under Section 260A of the Act in the aggregate was 2384, out of which, that filed by the Revenue were 1834. Thus, the Revenue has now become circumspect in filing appeals as they seem to filter orders of the Tribunal which requires challenge. However, many of the indiscriminate appeals filed by the Revenue, are awaiting disposal. It thus appears that appeals are being filed by the Revenue from almost every order of the Tribunal adverse to it, without taking into account the tax effect involved with the fear that in other cases where tax effect is more, the non-filing of an appeal may be used against the department as having accepted the position in law. It is in that view that the Circular of 2015 clarifies that non filing of appeal in view of low tax effect will not be used against the Revenue in other appeals. Therefore the CBDT to ensure that there is uniformity in respect of filing of appeals has fixed threshold limits which would do away with the discretion of the officer to file and pursue the appeal remedy where the tax effect is less than the minimum amounts specified. It is noteworthy that the Circular specifically provides that where the tax effect is higher than that specified in the Circular then the filing of appeal in such cases is to be decided on the merits of the case. Therefore, to enable the Revenue to focus on matters where the tax implication is above Rs.20 lacs only such matters should be agitated in appeal before the High Court according to the Circular. This policy of non filing and of not pressing and/or withdrawing admitted appeals having tax effect of less than Rs.20 lacs has been specifically declared to be retrospective by the Circular dated 10th December, 2015. There is no reason why the circular should not apply to pending References where the tax effect is less than Rs.20 lacs as the objective of the Circular would stand fulfilled on its application even to pending References more particularly bearing in mind that there are 1149 number of References still awaiting disposal by this Court and a large number of them would have tax effect of less than Rs. 20 Lakhs.
(v) In the above view, we hold that as admittedly, the tax effect is less than Rs. 20 lacs in the present Reference Application at the instance of the Revenue, the same is being returned unanswered. However, we make it clear that the question of law as raised for our opinion is left open be considered in an appropriate case.