2006 (8) TMI 122 - HC - Income Tax

Monetary limit for the Department for filing reference/appeal to the High Court - Whether, Tribunal is correct in dismissing the appeal of the Revenue and confirming the order of the Commissioner of Income-tax (Appeals) as regards the expenses claimed by the assessee for earning the incentive bonus, other than the standard deduction? - Instructions dated March 27, 2000, reflect the policy decision taken by the Board not to raise questions of law where the tax effect is less than the amount prescribed in the instructions with a view to reduce litigation before the High Courts and the Supreme Court. The circular is binding on the Revenue. There is no justification to proceed with the appeal having tax effect less than Rs. 7,000. - We, thus, do not think it necessary to entertain this appeal and answer the question raised by the appellant-Revenue.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal on expenses claimed by assessee for earning incentive bonus.

Analysis:
The High Court was presented with an appeal challenging the order of the Income-tax Appellate Tribunal regarding expenses claimed by the assessee for earning the incentive bonus. The substantial question of law raised was whether the Tribunal was correct in dismissing the appeal of the Revenue and confirming the order of the Commissioner of Income-tax (Appeals) in this regard. The learned counsel for the appellant-Revenue referred to instructions issued by the Central Board of Direct Taxes, New Delhi, which revised the monetary limit for filing references/appeals to the High Court to cases where the tax effect exceeds Rs. 2,00,000. It was acknowledged that the stake of the Revenue in this specific case was only Rs. 6,000 to Rs. 7,000.

The Court cited precedents such as the case of CIT v. Cameo Colour Co. and CIT v. Pitthwa Engg. Works, emphasizing that the instructions issued by the Board were binding on the Department. It was highlighted that the policy decision reflected in the instructions aimed to reduce litigation before the High Courts and the Supreme Court by not raising questions of law where the tax effect fell below the prescribed amount. The Court noted that the circular was binding on the Revenue, and there was no justification to pursue the appeal with a tax effect of less than Rs. 7,000.

Consequently, the High Court decided not to entertain the appeal and declined to answer the question raised by the appellant-Revenue. The appeal was dismissed with no order as to costs, in line with the policy decision to avoid unnecessary litigation in cases with a minimal tax effect.