2009 (12) TMI 628 - HC - Wealth-tax

Maintainability of the appeals - question of law - maintainability of the appeals with reference to Instruction No. 2 of 2005 which in exception clause (3) provides for entertaining of appeals below the tax effect if the question of law involved is substantial question of law of importance as well as cases where the same question of law will repeatedly arise for decision in successive years of assessment Held that - appeals are maintainable before the Tribunal no matter the tax effect is below the threshold limit prescribed by the Central Board of Direct Taxes. Appeals allowed by reversing the order of the Tribunal and restore the appeals to the file of the Tribunal- CIT v. Smt. K. R. Ushasree (2009 -TMI - 203002 - Kerala High Court).

Summary

Issues:
1. Maintainability of appeals before the Tribunal under the Wealth-tax Act.
2. Interpretation and applicability of Central Board of Direct Taxes Instructions No. 2 of 2005 and No. 5 of 2008.
3. Consideration of substantial questions of law and exceptions for maintaining appeals.

Analysis:
The High Court of Kerala addressed the issue of the maintainability of appeals filed by the Revenue against the Tribunal's orders. The Tribunal had held that the Departmental appeals were not maintainable due to the tax effect being below the threshold limit set by the Central Board of Direct Taxes in Instruction No. 2 of 2005. The primary question revolved around whether urban land with a semi-constructed building is assessable under the Wealth-tax Act, irrespective of the tax effect. The Court considered the provisions of Instruction No. 2 of 2005, which allows for entertaining appeals below the tax effect if they involve substantial questions of law or recurring issues of importance. The purpose of the exception clause in the Instruction is to address issues that have a cumulative effect over multiple assessment years. In this case, the question of liability for wealth-tax on semi-constructed buildings on urban land, as per the amendments to the Act, was deemed a substantial question of law affecting numerous assessees. Therefore, the Court concluded that the appeals were maintainable under the exception clause of Instruction No. 2 of 2005.

Regarding the interpretation and applicability of Instruction No. 5 of 2008, the Court deliberated on whether the subsequent Instruction superseded the earlier one. The Court noted that Instruction No. 5 of 2008 explicitly stated that it would apply only to appeals filed after May 15, 2008. Appeals filed before this date were to be governed by the instructions in force at the time of filing. Consequently, the Court determined that Instruction No. 2 of 2005 was applicable in this case, and appeals were maintainable under its provisions.

Furthermore, the Court examined the exceptions provided in Instruction No. 5 of 2008, emphasizing that adverse judgments related to constitutional validity, legality of Board orders, or accepted revenue audit objections should be contested regardless of the tax effect. The Court disagreed with the stance taken by the Bombay High Court in a related case, highlighting the importance of considering exception clauses in instructions. Ultimately, the High Court allowed the appeals, overturning the Tribunal's decision, and remanded the case for further consideration on the merits, directing the Tribunal to apply relevant legal principles from a prior judgment.