1998 (3) TMI 117 - HC - Income Tax

Summary

Issues Involved:
1. Appropriate remedy available to the petitioner.
2. Justification of the Tribunal in refusing to make a reference based on the tax effect being less than Rs. 30,000.

Summary:

1. Appropriate Remedy Available to the Petitioner:
The primary issue was whether the petitioner should file an application u/s 256(2) of the Income-tax Act, 1961, or invoke the writ jurisdiction of the High Court under Article 226/227 of the Constitution. The court examined the relevant part of section 256 and the principles laid down by the Supreme Court in CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589. It was determined that if the Tribunal rejects an application u/s 256(1) on grounds other than "no question of law arises," the remedy u/s 256(2) is not available. Instead, the aggrieved party should invoke the writ jurisdiction of the High Court. In this case, the Tribunal did not form an opinion on whether the suggested questions were questions of law arising out of its appellate order but refused to apply its mind based on CBDT instructions. Therefore, the appropriate remedy was to file a writ petition, and the petitioner was rightly advised to file CWP No. 1725 of 1996.

2. Justification of the Tribunal in Refusing to Make a Reference Based on the Tax Effect Being Less Than Rs. 30,000:
The Tribunal refused to make a reference solely based on CBDT Circular F. No. 319/11/1987, dated July 14, 1987, which set a monetary limit for references to the High Court. The court noted that while CBDT instructions are binding on income-tax authorities, they do not bind the Tribunal or the High Court. If the Tribunal or the High Court is satisfied that the question sought to be referred is a question of law arising from the Tribunal's order, a reference must be made regardless of the monetary limit. The court also highlighted that negligible amounts of revenue can be a relevant consideration for refusing a reference, but the Tribunal must examine if the case falls under any exceptions to the CBDT instructions. Since the Tribunal did not examine the case from this perspective, the matter was remanded to the Tribunal for fresh consideration.

Conclusion:
CWP No. 1725 of 1996 was allowed, and the Tribunal's order dated October 14, 1993, was set aside. The matter was remanded to the Tribunal for fresh consideration of the Department's application u/s 256(1) in light of the CBDT instructions and any applicable exceptions. ITC No. 37 of 1994 was dismissed as redundant. No order as to costs.