High Court Of Andhra Pradesh
Institute Of Chartered Financial Analysts Of India vs. Assistant Commissioner Of Income Tax & Anr.
Sections Art. 226
Asst. Year 1995-96, 1996-97
S.R. Nayak & S. Ananda Reddy, JJ.
Writ Petn. Nos. 6628 & 7334 of 1996
7th March, 2002
Counsel Appeared
A.V.S. Ramakrishnaiah, for the Petitioner : S.R. Ashok, for the Respondents
JUDGMENT
S.R. NAYAK, J. :
In both the writ petitions, the Institute of Chartered Financial Analysts of India is the petitioner. In WP No. 6628 of 1996, the order of the Asstt. CIT, Circle 5(3), TDS and Systems, Hyderabad, dt. 22nd March, 1996, made under s. 201 of the IT Act, 1961 (for short “the Act”), is assailed, whereas, in WP No. 7334 of 1996, the order of the same officer dt. 25th March, 1996, under s. 201 of the Act, is assailed. The impugned order in W.P. No. 6628 of 1996 relates to the period from 1st April, 1994, to 31st March, 1995, whereas the order impugned in W.P. No. 7334 of 1996 relates to the period from 1st April, 1995, to 30th June, 1995. Since the facts of the case and the legal questions that arise for decision in both the writ petitions are substantially similar, both the writ petitions were clubbed, heard and they are being disposed of by this common judgment. The background facts leading to the filing of the writ petitions be summarised as follows : The petitioner-institute is an educational unit, and claims to be one of the foremost educational units in India. It is stated that highly advanced subjects such as Securities Valuation, International Money Markets, Management Accountancy, etc., are covered with the collaboration of expert foreign institutes along with basic studies therefor.
It is also stated that the institute conducts “Distance Education” through post and has a number of students from distant places in India and abroad. On 5th Jan., 1996, the officers of the IT Department made a surprise visit to the premises of the petitioner and conducted inspection and during the inspection, it was noticed that the institute had not deduced tax at source on contract, i.e., AMC of computers, printing, courier and also on rental payments. At the time of inspection, one Sri B. Venkata Rao, Registrar, and Sri Sharma, manager, along with an accountant appeared and filed the information called for. After examining the same, the Asstt. CIT, Circle 5(3), the first respondent in the writ petition determined the liability of the institute at Rs. 9,31,730 payable towards tax deduction at source by passing the order dt. 22nd March, 1996, in respect of the period from 1st April, 1994, to 31st March, 1995, and subsequently by a separate order dt. 25th March, 1996, he determined liability of the institute at Rs. 1,67,892 payable towards tax deduction at source in respect of the period from 1st April, 1995, to 30th June, 1995. WP No. 6628 of 1996 was filed in this Court on 29th March, 1996, initially challenging the above order of the first respondent dt. 22nd March, 1996, and WP No. 7334 of 1996 was filed on 5th April, 1996, assailing the validity of the order of the first respondent dt. 25th March, 1996. In WP No. 7334 of 1996 in addition to assailing the validity of the order of the first respondent dt. 25th March, 1996, the petitioner also sought for quashing the Circular No. 715, dt. 8th Aug., 1995 [(1995) 127 CTR (St) 13] and Circular No. 681, dt. 8th March, 1994 [(1994) 117 CTR (St) 229], issued by the CBDT, the second respondent in the writ petition. Such relief was not sought in WP No. 6628 of 1996 initially. However, subsequently, WPMP No. 8650 of 1996 was filed to amend the prayer seeking quashing of the above two circulars also. That WPMP was ordered by the Court on 4th Sept., 2000. The resultant position is that in both the writ petitions not only the validity of the orders of the first respondent dt. 22nd March, 1996, and 25th March, 1996, is assailed, but also that of the Circular No. 715, dt. 8th Aug., 1995, and Circular No. 681, dt. 8th March, 1994. In both the writ petitions, the first respondent filed their counter-affidavits opposing the writ petitions. Sri A.V.S. Ramakrishnaiah, learned counsel appearing for the petitioners, assailing the validity of the impugned circulars, would contend that in issuing the impugned circulars, the CBDT exceeded its jurisdiction conferred upon it under s. 119 of the Act. In other words, learned counsel would contend that the impugned circulars are ultra vires s. 119 r/w s. 194C of the Act inasmuch as the impugned circulars contain clarifications which intend to widen the scope and meaning of the word “work”. Learned counsel would also contend that the CBDT has no power to make “supplemental legislation” under the guise of exercising power under s. 119 of the Act and that the provisions of the law or the judgment of the Courts can be interpreted only by the competent Courts and not by the statutory authorities like the CBDT or the administrative authorities. Assailing the impugned orders of the first respondent, learned counsel would contend, that there is no oral or written contract with any of the courier units through whom the transactions were done. Each packet, each time, to each candidate, to each place of destination, is a clear, simple and separate transaction.
The “charge” for each transaction is separate and it is a “per piece contract” not falling under the tax deducted at source provisions of the Act. According to learned counsel, the transaction relating to printing is essentially in the realm of sale of goods and hence it is not amenable to s. 194C of the Act. Learned counsel would also point out that Expln. III to s. 194C of the Act was inserted w.e.f. 1st July, 1995, that is to say, after the asst. yr. 1995-96 widening the meaning of the word “work” and therefore before insertion of Expln. III, there was no valid law to levy TDS on the transactions in question. Learned counsel would also contend that the impugned orders are without jurisdiction in the light of the judgment of the Gujarat High Court in All Gujarat Federation of Tax Consultants vs. CBDT (1995) 126 CTR (Guj) 288 : (1995) 214 ITR 276 (Guj) and that of the Delhi High Court in S.R.F. Finance Ltd. vs. CBDT (1994) 122 CTR (Del) 431 : (1995) 211 ITR 861 (Del). The learned counsel would submit that in the absence of a contrary decision of this Court, the authorities and the Tribunals who are within the territorial jurisdiction of this Court are bound by the judgments of the other High Courts as regards any point arising under the Act. Sri S. R. Ashok, learned senior standing counsel for the IT Department, at the threshold, would contend that against the impugned orders, the petitioner has got effective right of appeal under s. 246(1)(i) of the Act. Further, against the order that may be made by the appellate authority, the petitioner has got right of second appeal to the Tribunal ; further, a reference to this Court and finally an appeal to the Supreme Court and that there are no extraordinary circumstances to permit the petitioner to by-pass the statutory remedies and, therefore, the writ petitions are liable to be dismissed in limine. Learned senior standing counsel would also contend that in the instant case, effective and comprehensive adjudication is necessary to decide the nature of contract and it involves interpretation of contractual clauses and in that view of the matter also, the petitioner cannot invoke the extraordinary jurisdiction of this Court under Art. 226 of the Constitution of India. Meeting the contention of learned counsel for the petitioners as regards the validity of the impugned circulars, learned senior counsel would maintain that the clarification issued by the CBDT is in conformity with the law laid down by the apex Court in Associated Cement Co. Ltd. vs. CIT (1993) 111 CTR (SC) 165 : (1993) 201 ITR 435 (SC), and such a power is available to the CBDT under s. 119 of the Act and therefore, the impugned circulars are valid in law. Be that as it may, learned senior counsel would maintain that in the instant cases, deciding the validity of theimpugned circulars is only academic and it is not necessary to pronounce upon the validity of the impugned circulars in order to decide the controversies between the petitioner-assessee and the IT Department.
From the pleadings of the parties filed in these writ petitions, it is clear that during the inspection of the premises of the petitioner on 5th Jan., 1996, when the books of account produced by the petitioner were verified, the inspecting staff found non-deduction of tax at source on some items like payments effected to the printers, hoteliers and courier service and when that was brought to the notice of the petitioner, the petitioner itself prepared detailed statements of such deductions and remittances and filed copies of the same before the inspecting officials. In the course of inspection on 5th Jan., 1996, the officials of the petitioner-institute admitted that there was an obligation on it to deduct tax at source on annual maintenance contract of computers and courier service and accordingly paid a sum of Rs. 55,563 towards tax deductible at source. It needs to be noticed that the said amount was paid on 11th March, 1996, that is to say, even before passing of the orders dt. 22nd March, 1996, and 25th March, 1996, under s. 201 of the Act by the first respondent. However, for the reasons best known to the petitioner, it subsequently made note on 25th March, 1996, setting out the modalities of the institute and pleaded that the transactions relating to printing is essentially in the realm of sale of goods and, therefore, s. 194C of the Act is not applicable. Similarly, the petitioner also pleaded for exclusion of courier charges and interest payments apart from payments to hotel from the scheme of tax deduction at source. The first respondent considering all the objections raised by the petitioner-institute passed orders on 22nd March, 1996 to 25th March, 1996, holding that the tax is liable to be deducted at source from the payments effected to courier, printing press and hotels by the petitioner and accordingly fixed liability of the petitioner at Rs. 9,31,730 payable towards tax deduction at source in respect of the period from 1st April, 1994, to 31st March, 1995, and Rs. 1,67,892 in respect of the period from 1st April,
1995, to 30th June, 1995. After hearing learned counsel for the parties, we find several factual controversies between the parties and the effective resolution of them is possible only after proper comprehensive adjudication by the authorities under the Act. For example, it is the contention of the petitioner that printing of literature and script material and supply of the same constituted sale of goods. According to the Department, the petitioner used to get the literature and script printed in the printing press duly paying the necessary charges therefor and selling of study material is a regular transaction and, therefore, it constitutes its regular business. In that view of the matter, according to the Department, the amount paid for printing inevitably takes the shape of job charges paid for the work secured and hence the amounts paid to the printers are amenable to TDS under s. 194C of the Act. As regards the amounts paid to the Hotel Krishna Oberai, it is the case of the petitioner that a sum of Rs. 16,71,560 paid to the hotel relates to sale of food alone and the banquet hall provided was free of cost. However, the case of the Department is that the said sum of money should be treated as rent paid by the petitioner for the user of banquet hall, within the purview of s. 194-I and the liability was fastened on the petitioner to the extent of tax in terms of s. 201 of the Act. As regards the courier charges, according to the petitioner, there is no oral or written contract with the courier units, and therefore it cannot be construed as a case of contract of work. This claim is also seriously contested by the Department.
Thus, it is quite clear that there are serious factual controversies between the parties and the effective resolution of it is possible only after recording findings on factual issues on appreciation and on the basis of evidence that may be adduced by the parties. A High Court, shall not, ordinarily, enter into disputed questions of fact. One of the grounds against the exercise of the discretion under Art. 226 is that the right claimed by the petitioner is not capable of being established in summary proceeding under Art. 226 because it requires a detailed examination of the evidence as may be had in a suit. The object of Art. 226 is the enforcement and not the establishment of a right, or title and a petition under Art. 226 cannot be converted into a suit and the High Court cannot take up adjudication of disputed facts and record findings on questions of fact. For effective adjudication, it becomes absolutely necessary to decide the nature of contract and interpretation of the clauses of contracts, if any, and whether there is consensus ad idem between the parties with regard to the claims. Only after the resolution of the factual issues, the question whether the impugned circulars would have any application or not and whether they are valid or not would arise. Therefore, we do not find any necessity at this stage to pronounce upon the validity of the impugned circulars issued by the CBDT under s. 119 of the Act.
7. The IT Act is a code in itself as regards legal remedies too. Against the impugned orders, the petitioner has an effective, comprehensive legal remedies by way of appeal under s. 246(1)(i) of the Act, further second appeal to the Tribunal, a reference to this Court and further appeal to the Supreme Court. Art. 226 is not meant to circumvent statutory legal remedies. It is quite often held and reiterated by the Courts that ordinarily the High Court should not entertain writ applications filed bypassing the statutory legal remedies where violation of the fundamental rights is not involved. At times it becomes necessary for the Court to remind itself about the self-imposed restraints and limitations in exercise of the power granted to the Court by the Constitution under Art. 226. The Court can take judicial notice of the fact that large number of writ petitions are filed in this Court by persons without exhausting statutory alternative remedies or other remedies available to them. Art. 226 empowers High Courts to issue directions, orders or writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari or any of them. Such directions, orders or writs may be issued for the enforcement of fundamental rights or for any other purpose. It is well established that the remedy provided for in Art. 226 of the Constitution of India is a discretionary remedy and the High Court has always the discretion to refuse to grant such a relief in certain circumstances even though a legal right might have been infringed. Availability of an alternative remedy is one of such considerations which the High Court may take into account to refuse to exercise its jurisdiction, but this principle does not apply to the enforcement of fundamental rights either under Art. 32 or under Art. 226 of the Constitution. The Supreme Court in Mohd. Yasin vs. Town Area Committee AIR 1952 SC 115 and the cases to follow that case held that an alternative remedy is not a bar to move a writ petition in the High Court to enforce a fundamental right. This is the only exception. In all other cases where no fundamental right is involved, it has been ruled that the High Court would not exercise its jurisdiction under Art. 226 when an alternative, adequate and efficacious legal remedy is available and the petitioner has not availed of the same before coming to the High Court. Of course, Art. 226 is silent on this point; it does not say in so many words anything about this matter, but the Courts have themselves evolved this rule as a kind of self-imposed restriction on their jurisdiction under Art. 226. The rule of exhaustion of a remedy before invoking jurisdiction under Art. 226 has been characterised as a rule of policy, convenience and discretion rather than a rule of law, per decision of the Supreme Court in State of Uttar Pradesh vs. Md. Nooh AIR 1958 SC 86 and Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad AIR 1969 SC 556. The rule has been justified on the ground that the persons should not be encouraged to circumvent the provisions made by a statute providing for a mechanism and procedure to challenge administrative or quasi-judicial actions taken thereunder.
8. In Union of India vs. T.R. Varma AIR 1957 SC 882, the Supreme Court observed : “It is well settled that when an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not invoke the special jurisdiction of the High Court to issue a prerogative writ. It is true that the existence of another remedy does not affect the jurisdiction of the Court to issue a writ; but. . . ‘the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granting writs . . .’ And where such remedy exists, it will be a sound exercise of discretion to refuse to interfere in a petition under Art. 226, unless there are good grounds therefor”. (p. 884)
9. In Thansingh Nathmal vs. Superintendent of Taxes AIR 1964 SC 1419, the Supreme Court was pleased to observe : “The jurisdiction of the High Court under Art. 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are expressly provided in the articles. But the exercise of the jurisdiction is discretionary; it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain selfimposed limitations. Resort to that jurisdiction is not intended as an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Art. 226, where the petitioner has an alternative remedy, which, without being unduly onerous, provides an equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not, therefore, act as a Court of appeal against the decision of a Court or Tribunal, to correct errors of fact, and does not by assuming jurisdiction under Art. 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another Tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Art. 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up”. (p. 1420)
10. In Asstt. Collector of Central Excise vs. Dunlop India Ltd. AIR 1985 SC 330, the Supreme Court in para (3) observed : “Art. 226 is not meant to shortcircuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as, for instance, where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Art. 226 of the Constitution. But then the Court must have good and sufficient reason to bypass the alternative remedy provided by statute. Survey matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vast majority of the petitions under Art. 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.” (p. 332) Further, what could be gathered from the decisions of the Supreme Court in U.P. Jal Nigam vs. Nareshwar Sahai Mathur (1995) 1 SCC 21; Titaghur Pape Mills Co. Ltd. vs. State of Orissa AIR 1983 SC 603 and H.B. Gandhi vs. Gopi Nath & Sons (1992) Supp. (2) SCC 312 is that where statutory remedies are available or a statutory Tribunal has been set up, a petition under Art. 226 should not be entertained, unless the statutory remedies are ill-suited to meet the demands of any extraordinary situation, for example, where the very vires of the statute is in question, or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require that recourse may be had to Art. 226; or where the alternative remedy is not effective or adequate; or where the alternative remedy is onerous or burdensome or inadequate; or where it involves inordinate delay or is illusory in nature; where the impugned action is palpably wrong or goes to the root of the jurisdiction or where there is total lack of jurisdiction in the authority.
11. There are certain sound reasons behind this rule. Remedies by way of judicial review under Art. 226 are fundamentally different from the other remedies. Instead of substituting its own decision for that of some other body, as happens when an appeal is allowed, the High Court on review under Art. 226 is concerned only with the question whether the act or order under attack should be allowed to stand or not. It is quite often stressed by the Courts that judicial review is not against a decision under attack but against the decision making process. In H. B. Gandhi vs. Gopi Nath & Sons (supra), in para 8, the Supreme Court observed : “Judicial review, it is trite, is not directed against the decision but is confined to the decision-making process. Judicial review cannot extend to the examination of the correctness or reasonableness of a decision as a matter of fact. The purpose of judicial review is to ensure that the individual receives fair treatment and not to ensure that the authority after according fair treatment reaches, on a matter which it is authorised by law to decide, a conclusion which is correct in the eyes of the law, judicial review is not an appeal from a decision but a review of the manner in which the decision is made. It will be erroneous to think that the Court sits in judgment not only on the correctness of the decision-making process but also on the correctness of the decision itself.” H.W.R. Wade in his Treatise on Administrative Law (6th Edn.) at p. 36, observes : “The system of judicial review is radically different from the system of appeals. When hearing an appeal the Court is concerned with the merits of the decision under appeal. When subjecting some administrative act or order to judicial review, the Court is concerned with its legality. On an appeal the question is ‘right or wrong’ ? On review the question is ‘lawful or unlawful’ ?”
The other underlying object of the rule is that the High Courts are the apex judicial institutions in the States, and it is but natural that if an alternative suitable, equally efficacious remedy is available to the party, they may refuse to exercise the extraordinary jurisdiction under Art. 226 and direct the aggrieved party to first avail of the said alternative remedy before approaching the High Court. The extraordinary jurisdiction of the High Court under Art. 226 cannot be reduced to an ordinary jurisdiction of the High Court. Similarly, to our mind, another object behind the rule is to save Judge-time of the High Courts. The High Courts are charged with onerous duties of deciding constitutional questions, the vires of the statutes and delegated legislations and deciding appeals, revisions, reviews and references made to the High Courts under various statutes, and if the High Courts were to entertain writ applications filed without exhausting the alternative statutory or common law remedies, the High Courts would not find necessary time to adjudicate upon the essential and unavoidable disputes brought before them for adjudication. The liberal attitude shown by the Court in entertaining writ petitions filed without exhausting statutory remedies is undoubtedly one of the causes for heavy accumulation of the cases on writs side. However, the contention of learned counsel for the petitioner is that he could not assail the validity of the impugned circulars before the appellate authority or the Tribunal and only this Court can pronounce on its validity by exercising power of judicial review under Art. 226. It is true that the validity of the circulars cannot be gone into by the statutory appellate authorities. But, as pointed out supra, the lis brought before the Court in these writ petitions bristles with many factual as well as legal controversies. Therefore, it becomes absolutely necessary for the appellate authorities under the Act to pronounce upon the factual controversies on appreciation of the evidence and also on interpretation of the clauses in the contracts. In that view of the matter, there is no need to pronounce upon the validity of the impugned circulars at this stage and we find some force in the contention of learned senior standing counsel for the IT Department that at this stage pronouncing on the validity of the impugned circulars is only academic. It is well settled that the constitutional Courts decline to pronounce upon the validity or constitutionality of a rule or law unless it becomes absolutely necessary for them to decide the lis brought before the Court. In other words, if the lis brought before the Court can be resolved on any other ground without going into the validity or constitutionality of an instrument or rule, then, the Court should decline to go into such questions. In State of Bihar vs. Rai Bahadur Hurdut Roy Moti Lall Jute Mills AIR 1960 SC 378, the Supreme Court held that the Court shall not enter upon the question of validity or constitutionality of a law if it is possible to dispose of the case and determine the rights of the parties before it, on other grounds. To the same effect is the opinion in Shephard vs. Union of India (1987) 4 SCC 431.
In the result and for the foregoing reasons, we dismiss these writ petitions reserving liberty to the petitioner to file appeal before the jurisdictional appellate authority under s. 246(1)(i) of the Act within one month from today. No costs. We make it very clear that all factual and legal contentions raised by the parties in these two writ petitions are left open to be agitated by the parties before the appellate authority. Liberty is also reserved to the petitionerinstitute to assail the validity of the impugned circulars, if there is any need for it, at an appropriate stage.
[Citation : 256 ITR 115]
