2018 (4) TMI 1740 - HC - Income Tax

Maintainability of appeal - low tax effect - cascading effect of circulars - Deduction u/s 80-O entitlement - HELD THAT - As per the Circular/Instruction issued by CBDT, the present Appeal should be not pressed by the Revenue. If, at the time of filing of the Appeal, decision has to be taken whether to file an Appeal or not and the Authority by due application of mind and bearing the two caveats laid down by the Hon'ble Supreme Court, in Surya Herbal Ltd. 2011 (8) TMI 137 - SC ORDER should take a decision. In cases, where, the Appeals are pending before the Court, appropriate Officer has to take a decision. In the instant case, it appears that, no such specific instruction is issued to Mr.M.Swaminathan, the learned Senior Standing Counsel to withdraw the Appeal, nor, can we compel the learned counsel to withdraw the Appeal. Having held that the Circular issued by CBDT is applicable to the case on hand and the tax effect being less than the threshold limit prescribed in the Circular. Therefore, we dismiss the present Appeal by applying the law laid down by the Hon'ble Supreme Court, in Surya Herbal Ltd., case (supra), as the two caveats mentioned thereunder does not arise in the instant case.

Summary

Issues Involved:
1. Applicability of CBDT Circular No.21 of 2015 on pending appeals.
2. Retrospective effect of CBDT Circulars.
3. Monetary limits for filing appeals by the Revenue.
4. Interpretation of the term "retrospective" in the context of CBDT Circulars.
5. Application of the two caveats from the Surya Herbal Ltd. case.

Detailed Analysis:

1. Applicability of CBDT Circular No.21 of 2015 on Pending Appeals:
The respondent/assessee's counsel argued that the appeal should be dismissed based on Circular No.21 of 2015, which sets a monetary limit of ?20,00,000 for filing appeals by the Revenue. The tax effect in this case was ?3,50,000, well below the threshold. The court noted that Circular No.21 of 2015 explicitly states that it applies retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunals. This interpretation was supported by the Supreme Court's decision in S.R.M.B. Diary Farming (P) Ltd., which confirmed that the circulars/instructions would apply to both filed and pending appeals.

2. Retrospective Effect of CBDT Circulars:
The appellant/Revenue's counsel argued that CBDT Circulars should not have retrospective effect. However, the court referred to multiple Supreme Court decisions, including Mathew M. Thomas Vs Commissioner Of Income-Tax, which indicated that certain circulars are applicable to all pending proceedings. The court emphasized that Circular No.21 of 2015 explicitly states its retrospective applicability to pending appeals, which was not a feature in earlier circulars.

3. Monetary Limits for Filing Appeals by the Revenue:
The court reviewed several instructions and circulars issued by the CBDT over the years, noting the incremental increases in the monetary limits for filing appeals. At the time of filing the appeal in 2008, the applicable instruction was No.5 of 2008, which set a limit of ?4,00,000. Since the tax effect in this case was ?3,50,000, the appeal should not have been filed according to the instructions in place at that time.

4. Interpretation of the Term "Retrospective" in the Context of CBDT Circulars:
The court clarified that the term "retrospective" in the context of the CBDT Circulars should be understood as part of the litigation policy of the Government of India to reduce litigation and not to prosecute matters below the threshold limit. This interpretation helps in reducing confusion around the term "retrospective" as used in the circulars.

5. Application of the Two Caveats from the Surya Herbal Ltd. Case:
The court examined whether the two caveats from the Surya Herbal Ltd. case would apply: (i) the circular should not be applied ipso facto when the matter had a cascading effect, and (ii) where common principles may be involved in subsequent group of matters. The court found that neither caveat applied to the present case. The Revenue's counsel also did not dispute this.

Conclusion:
The court concluded that the appeal should be dismissed based on the applicability of Circular No.21 of 2015, which applies retrospectively to pending appeals. The monetary limit for filing appeals was not met, and none of the caveats from the Surya Herbal Ltd. case applied. Therefore, the appeal was dismissed, and the question of law raised was left open. No costs were awarded.