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| DATE: | August 30, 2012 (Date of publication) |
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| Click here to download the judgement (sureshchandra_low_tax_effect_circular.pdf) |
Low Tax Effect Circular has retrospective effect & applies to pending appeals
The department filed an appeal in the High Court where the tax effect was less than Rs. 10 lakhs. The assessee argued that in view of Instruction No. 3 of 2011 dated 9.2.2011, the appeal was not maintainable. The department argued that the said Instruction made it clear that it applied only to appeals filed the date of its issue and had no retrospective effect. HELD by the High Court dismissing the appeal:
The question about applicability of Instruction No.3 of 2011 has been considered in several judgements including Smt. Vijaya V. Kavekar (Bom) and Ranka & Ranka (Kar) and the view is that Instruction No.3 of 2011 dated 9.2.2011 would also apply to pending appeals. We are in agreement with this view and so tax appeals filed by the department which are below the tax effect of Rs.10 lakhs are not maintainable.
A Bench of the High Court of Karnataka has not followed the judgement of a Coordinate Bench in the case of Ranka & Ranka and held that Instruction No. 3 of 2011 is prospective and not applicable to pending appeals, which is a interesting development. This judgement is in ITA No. 5049 of 2010 dated 3-10-2012 in the case of CIT, Belgaum Vs. B. Sumangaladevi. The Judgement also makes suggestions on how to increase the tax base.