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2009 (12) TMI 444 - HC - Income TaxDisallowing the claim of exemption - the assessee is an individual and deriving income from LPG distributorship. For the assessment year 2000-01, the assessee filed his return declaring his income of Rs. 2,25,710. The Assessing Officer, framed the assessment under section 143(3) of the Act at an income of Rs. 7,60,580 while disallowing the claim of exemption of Rs. 4,04,664 under section 54F of the Act. It was held by the Assessing Officer that the assessee was not eligible for the benefit of section 54F of the Act on the amount of repayment of housing loan taken for construction of residential house as the investment on the purchase of new residential house had not been made within the specified time of one year before the date when the long-term capital gains arose. Held that - Since admittedly the tax effect in this appeal is less than Rs. 4 lakhs, therefore, in our opinion, the appeal filed by the Revenue is not maintainable and the same is hereby dismissed with no order as to costs.
Issues Involved:
1. Eligibility for exemption under Section 54F of the Income-tax Act, 1961. 2. Applicability of Circular No. 5 dated May 15, 2008, issued by the Central Board of Direct Taxes (CBDT) concerning monetary limits for filing appeals. Issue-wise Detailed Analysis: 1. Eligibility for Exemption under Section 54F of the Income-tax Act, 1961: The primary issue in this case was whether the assessee was eligible for the exemption under Section 54F of the Income-tax Act, 1961. The Assessing Officer disallowed the exemption claim of Rs. 4,04,664 on the grounds that the investment in the residential house was not made within the specified time of one year before the date when the long-term capital gains arose. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Income-tax Appellate Tribunal (ITAT) set aside the addition, concluding that the investment was made within the period of one year prior to the transfer of long-term capital assets, thus making the assessee eligible for the benefit of Section 54F. The ITAT based its decision on the finding that the investment in the residential house was made between March 1, 1999, and March 26, 1999, and the transfer of long-term capital assets occurred on February 1, 2000. 2. Applicability of Circular No. 5 dated May 15, 2008, Issued by the CBDT: The second issue pertained to the applicability of Circular No. 5 dated May 15, 2008, which sets monetary limits for filing appeals by the Revenue. The learned counsel for the assessee raised a preliminary objection, arguing that the tax effect in this case was less than Rs. 4 lakhs, making the appeal non-maintainable as per the CBDT Circular. The Revenue's counsel contended that the circular was not applicable to appeals filed before May 15, 2008, and argued that the issue was of a recurring nature, thus meriting consideration on its merits. Upon hearing the arguments, the court found merit in the preliminary objection raised by the assessee. It was undisputed that the tax effect in this case was less than Rs. 4 lakhs. The court referred to the decision in CIT v. Oscar Laboratories P. Ltd., which held that the instructions and circulars issued by the CBDT are mandatory and binding on the Revenue. The court also considered the Bombay High Court's decision in CIT v. Madhukar K. Inamdar (HUF), which ruled that Circular No. 5 of 2008 applies to pending appeals, regardless of whether they were filed before or after May 15, 2008. The court emphasized that the CBDT Circular aims to reduce the burden on the Department and the courts by limiting appeals to cases with substantial tax effects. It noted that the monetary limit should be considered even for pending cases and that the circular applies to all cases, including those of a recurring nature, if the tax effect is less than Rs. 4 lakhs. Conclusion: The court concluded that the appeal filed by the Revenue was not maintainable due to the tax effect being less than Rs. 4 lakhs, as per the CBDT Circular No. 5 of 2008. The appeal was dismissed with no order as to costs, reinforcing the binding nature of the CBDT's monetary limits on the Revenue for filing appeals.
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