Assessee challenged the constitutional validity of sections 2(6A)(e) and 12(1B) which were introduced by the Finance Act, 1955 w.e.f. 1st April 1955. Section 2(6A)(e) defined dividend to include any advance or loan by a company\u00a0 not being a company in which public are substantially interested to its shareholder. Section 12(1B) was inserted to provide that any advance or loan which would have been treated as dividend under section 2(6A)(e) in any year\u00a0 prior to A. Y. 1955-56 if that clause was in force in that year, shall be treated as a dividend received in A. Y. 1955\u201356 if such loan or advance remained outstanding\u00a0 as on 1st April 1955. At the time of introduction of these amendments in Parliament, the Hon\u2019ble Minister for Revenue and Civil Expenditure gave an assurance that outstanding loans and advances which would be otherwise liable\u00a0\u00a0\u00a0 to be taxed as dividends in A. Y. 1955-56 would not be subjected to tax if it was shown that they had been genuinely refunded to the respective companies before 30th June 1955. Government felt that the same was necessary as the operation\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of section 12(1B) would otherwise lead to extreme hardships by covering within\u00a0\u00a0 its ambit the aggregate of all outstanding loans of past years. Circular No. 20 (XXI\u20146)\/55 was issued by the Central Board of Revenue on the 10th May 1955\u00a0\u00a0\u00a0\u00a0\u00a0 so as to honour the assurance given by the Minister in Parliament.<\/p>\n
\u00a0<\/p>\n
Whether a circular issued by the CBDT is binding on the revenue?<\/p>\n
\u00a0<\/p>\n
Supreme Court held that the aforesaid circular issued by\u00a0 the Board would\u00a0\u00a0\u00a0 be binding on all officers and persons employed in the execution of the Act. Supreme Court observed that the circular clarified that it was likely that some companies might have advanced loans to their shareholders as a result of genuine transactions of loans and the provision was not intended to affect such transactions. Therefore, past transactions which would normally have attracted the stringent provisions of section 12(1B) were substantially granted exemption from the operation of the said provisions\u00a0 if\u00a0 the\u00a0 past\u00a0 loans\u00a0 were genuinely refunded to the companies. Such circular issued by the CBDT would be binding on the revenue authorities. (AY.1956-57) (CA No. 45 of 1964 dt. 28-10-1964)<\/p>\n
Editorial : <\/em><\/strong>Supreme Court in Ellerman Lines Ltd v.\u00a0 CIT (1971) 82 ITR 913 (SC),\u00a0 K.\u00a0 P.\u00a0 Varghese\u00a0 v.\u00a0 ITO\u00a0 (1981) 131\u00a0 ITR\u00a0 597\u00a0 (SC)\/(1981) 24\u00a0 CTR\u00a0 (SC) 358, UCO<\/em><\/strong><\/p>\n 136 Taxman 491 (SC), UOI v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC)\/<\/em><\/strong><\/p>\n (2003) 132 Taxman 373 (SC)\/(2003) 184 CTR 450 (SC) <\/em><\/strong>have upheld the binding nature of CBDT Circulars\/Instructions which are beneficial to the assessee even if they are not in accordance with the correct interpretation of the section.<\/p>\n Ltd. (1997) 228 ITR 463 (SC)\/(1997) 142 CTR (SC) 122 <\/em><\/strong>Supreme Court held that though a CBDT Circular is binding on the authorities under the Act but when the Supreme Court or the High Court has declared the law on a question the same\u00a0 shall be binding and not the circular which is contrary to the view expressed\u00a0\u00a0\u00a0\u00a0 \u00a0in the decision of the Supreme Court or the High Court. In CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 1 (SC)\/(2001) 119 Taxman 352 (SC)\/(2001) 171 CTR<\/em><\/strong><\/p>\n (SC) 1 <\/em><\/strong>the Court held that a clarificatory note or press release issued by the CBDT does not have statutory force like circulars issued bythe Board under section 119.<\/p>\n \u201cThe good man is the friend of all living things.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" S.119: Central Board of Direct Taxes \u2013 Instructions \u2013 Circulars binding on revenue. [ Indian Income -tax Act , 1922 , S .2(6A)(e), 12(IB) ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13401","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3u9","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13401"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13401\/revisions"}],"predecessor-version":[{"id":13402,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13401\/revisions\/13402"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Bank v. CIT (1999) 237 ITR 889 (SC), Paper\u00a0 Products Ltd\u00a0 v.\u00a0 CCE\u00a0 (2001) 247 ITR 128 (SC)\/(2001) 165 CTR (SC) 693, Commissioner of Customs v. Indian Oil Corporation\u00a0 Ltd.\u00a0 & Anr. (2004)\u00a0 267 ITR 272 (SC)\/(2004)\u00a0 187 CTR (SC) 297\/(2004)<\/h4>\n
In Hindustan Aeronautics Ltd. v. CIT (2000) 243 ITR 808 (SC)\/(2000) 110 Taxman 311 (SC)\/(2000) 160 CTR (SC) 524, CCE v. Ratan Melting & Wire Industries\u00a0 (2008)\u00a0 220 CTR (SC) 98\/(2008) 14 DTR (SC) 324,\u00a0 CIT v.\u00a0 Hero\u00a0 Cycles P.<\/h4>\n