High Court Of Madras
CIT vs. Associated Electrical Agencies
Section 119, 260A
Asst. Year 1991-92
K. Raviraja Pandian & Mrs. Chitra Venkataraman, JJ.
Tax Case No. 222 of 2004 (Appeal No. 217 of 2004)
16th August, 2007
Counsel Appeared :
N. Muralikumaran, for the Appellant : N. Devanathan, for the Respondent
JUDGMENT
K. RAVIRAJA PANDIAN, J. :
The assessee was an unregistered firm. For the asst. yr. 1991-92, the assessment of the assessee was completed under s. 143(3) of the IT Act on 29th March, 1994 on a total income of Rs. 36,27,580. In the course of assessment proceedings, the AO noticed from the P&L a/c that the assessee has claimed a sum of Rs. 3,27,895 towards bonus, however, in the balance sheet as on 31st March, 1991, the assessee has shown a sum of Rs. 84,01,475.98 ps. under the head “Accounts payable”. The AO called for the details regarding payment of bonus. The assessee’s representative stated that the bonus was paid to the staff on 31st Oct., 2001 after drawing the cash from the bank. On verification of the accounts, the AO found that though there was cash withdrawal from the bank on 31st Oct., 2001, there was no entry in the books of account relating to disbursement of bonus and even the vouchers did not contain the date of receipt except in a few cases wherein the date of receipt of bonus was mentioned as 2nd Nov., 1991. In the absence of any materials to vouch the payment of bonus on 31st Oct., 2001, the AO was of the view that the bonus could not have been disbursed on the same day for the staff working at Cochin and Bangalore branches. Finally, it was conceded that the bonus was disbursed to the staff of Madras branch on 1st Nov., 1991, Cochin branch on 2nd Nov., 1991 and Bangalore branch on 2nd Nov., 1991. In view of the above, the AO disallowed the claim of bonus payment of Rs. 3,27,895 applying the provisions of s. 43B.
2. Aggrieved by the disallowance made by the AO, the assessee filed appeal before the CIT(A). The appeal came to be dismissed on the ground that the bonus has not been actually paid on or before 31st Oct., 1991. In the second appeal filed in ITA No. 2190/Mds/1994, the Tribunal by its order dt. 6th Nov., 2003 held that actually the cash was withdrawn on 31st Oct., 1991 itself; that the delay in distribution of bonus was occurred while transmitting the money from one branch to another through bank and thus the delay was justifiable and acceptable. On that basis, the Tribunal has concluded that the claim made by the assessee was an allowable expenditure and on that reason, set aside the orders of the lower authorities. The Revenue filed the present appeal questioning the correctness of the order of the Tribunal by formulating the question of law as follows :
“Whether on the facts and in the circumstances of the case, the Tribunal was right in directing the AO to allow the payment of bonus to staff as deduction even though the payment has not been made on or before the due date for filing the return of income?”
3. Though the appeal was filed by the Revenue, learned counsel appearing for the assessee/respondent contended that considering the tax effect involved, which is very negligible, this is not a fit case to entertain the appeal for consideration by relying on Instruction No. 1979, issued by the CBDT in Circular F.No. 279/126/98-ITJ, dt. 27th March, 2000.
4. However, learned counsel for the Revenue contended that when the appeal was entertained by this Court and was pending before this Court from the year 2004, the Court should not throw away the case without deciding the issue on merits. The circular with which reliance has been made by the learned counsel for the respondent is not an unqualified embargo on the Revenue proceeding with the matter in appeal. He relied on a decision of this Court in the case of CIT vs. P.S.T.S. Thiruvirathnam & Sons (2004) 186 CTR (Mad) 400 : (2003) 261 ITR 406 (Mad).
5. We heard the arguments of the learned counsel on either side and perused the materials on record.
6. The factual issue is undisputed that the tax effect involved in this appeal is only few thousand rupees. The above referred judgment was rendered in a reference case and the question of law therein was referred for the decision of this Court. This Court rejected the contention of the respondent therein by saying that the Circular dt. 4th Nov., 1987 was not an unqualified embargo on the Revenue proceeding with the matter in appeal where the amount of tax in issue was Rs. 30,000 or less. Several exceptions were set out in that circular. If the assessee wanted the benefit of the circular, it should have put the Revenue on notice when the Revenue applied for having the question referred so that the Revenue could have gathered relevant material, if any, to show that the matter was within the expected (excepted) category. Incidentally, one of us (K. Raviraja Pandian, J.) was also a party to the said judgment. The said judgment has not denied the benefit of the circular to the assessee, but only cautioned the assessee that if the assessee put on notice the Revenue, the Revenue would have gathered material and satisfied whether it is a fit case for filing appeal with reference to the exception clause contained therein. Hence, the judgment cannot be regarded as one which decided the scope and binding nature of the circular and decided in favour of the Revenue.
7. In the case of CIT vs. Rajasthan Patrika Ltd. (2002) 178 CTR (Raj) 414 : (2002) 258 ITR 300 (Raj), the Rajasthan High Court categorised the circular as one of administrative instruction and held that the administrative instruction cannot prevail over the statutory provision.
8. In the case of Rani Paliwal vs. CIT (2003) 185 CTR (P&H) 333 : (2004) 268 ITR 220 (P&H), the Punjab & Haryana High Court has held that from the perusal of the order of the Tribunal, it was clear that no plea was raised before the Tribunal that appeal was not entertainable because tax effect was less than Rs. 1 lakh in each of the assessment year and therefore the High Court did not allow the assessee to raise the plea for the first time before the High Court and further held that the circular was not binding on the Tribunal and further held that such a plea was not a question of law.
9. The circular referred to in the abovesaid judgment has been subsequently revised in Circular No. F/279. It is not in dispute in this case that the tax effect is only a few thousand rupees and not exceeded the monetary limit of Rs. 2 lakhs prescribed in the abovesaid circular for filing appeal before High Court. The exceptions stated in the circular for contesting the case irrespective of the revenue effect were : (i) Where Revenue audit objection in the case has been accepted by the Department. (ii) Where the Board’s order, notification, instruction or circular is the subject-matter of an adverse order. (iii) Where prosecution proceedings are contemplated against the assessee. (iv) Where the constitutional validity of the provisions of the Act is under challenge. and the monetary limit would not apply to writ matters. The circular would come into effect from 1st April, 2000.
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 under s. 119 of the IT Act. The appeal is filed under s. 260A of the IT 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 under s. 119 of the IT Act, the appeal could be filed by the Revenue under s. 260A has to be rejected for the reason that if the contention is accepted, one of the sections would become virtually otiose and that cannot be the intention of the law makers. Hence, the above judgments cannot be taken in aid for non-suiting the respondent/assessee from taking shelter under the Government order.
In this case, not only the tax effect involved is nearly Rs. 5,000, but also the other qualifications prescribed in the circular were also not available or in existence to carve out the case to bring outside the purview of the circular. Even de hors the circular, if the facts are considered, the assessee is entitled to claim the benefit for the next assessment year if the same was negatived for the assessment year in question. Further, the point in issue is whether the bonus as claimed by the respondent has been paid within 31st Oct., 1991 or subsequent to that date, can by no stretch of imagination be considered as a question of law rather than substantial question of law as provided under s. 260A of the IT Act.
The Supreme Court in the case of CGT vs. Executors and Trustees of the Estate of Late Sh. Ambalal Sarabhai (1988) 67 CTR (SC) 247 : (1988) 170 ITR 144 (SC), under GT Act, having regard to the fact that the gift was of the year 1964, the total gift-tax assessed was Rs. 5,661, upon a fresh determination of the value of the shares adopting the somewhat intricate processes inherent in the “profit method” of valuation, the difference in the quantum of the tax might, perhaps, not be substantial. The magnitude of the mechanism for refixation of the value of the gifts and the difference in the quantum of the tax it might result in, do not bear a reasonable or sensible proportion. Having regard to the pecuniary involvement in that case, which was obviously small, the Supreme Court observed that they should not expose the parties to a fresh round of litigation.
In the case of CIT vs. Digvijay Singh (2007) 213 CTR (MP) 490 : (2007) 292 ITR 314 (MP), the Madhya Pradesh High Court, after referring to the judgment of the Bombay High Court in the case of CIT vs. Zoeb Y. Topiwala (2005) 199 CTR (Bom) 656 : (2006) 284 ITR 379 (Bom), wherein the Bombay High Court has held that the directions issued by the Board dt. 27th March, 2000, directing the Department not to raise questions of law where the tax effect is less than Rs. 2 lakhs was binding on the Revenue and dismissed the appeal in which tax effect was less than Rs. 7,000 as not maintainable by holding that the directions issued by the Board are binding on the Department.
In the case of CIT vs. Camco Colour Co. (2002) 173 CTR (Bom) 255 : (2002) 254 ITR 565 (Bom), the Bombay High Court has reproduced the circular issued by the Ministry of Finance, dt. 27th March, 2000 in which it was directed that the appeals under s. 260A of the IT Act in which the tax effect was less than Rs. 2 lakhs should not be preferred. In all the cases relied on by the assessee, the long line of judicial opinion is that if the tax effect is less than the one stated in the circular, the Revenue need not agitate the issue on appeal and the circular is binding on them.
For all the above reasons, the appeal filed by the Revenue is dismissed.
[Citation : 295 ITR 496]
