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TMI Blog2011 (3) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... is to the prejudice of the assessee. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... was neutral. No doubt, he conceded that thereafter clarification was issued by the Central Board of Direct Taxes vide O. M. dated May 15, 2008 which is Instruction No. 5 of 2008 and as per these instructions, in loss cases the notional tax effect is to be taken into account. However, his submission was that this O. M. was made operative only prospectively and was to be applicable in respect of appeals filed on or after May 15, 2008. Hence, as the appeals were filed in December, 2007, the aforesaid Central Board of Direct Taxes circular had no application and as per the prevailing instructions as on the date of filing of these appeals, the actual tax effect and not the notional tax effect was taken into consideration. It was, thus, argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Direct Taxes has issued O. M. dated May 15, 2008, which is Instruction No. 5 of 2008 and as per these instructions, in loss cases, notional tax effect is to be taken into account. The learned counsel, however, conceded that these instructions are applicable in respect of those appeals preferred after the issuance of these instructions. In fact, it is specifically provided in paragraph 11 of the said instruction as under 'this instruction will apply to appeals filed on or after May 15, 2008'. However, the cases where appeals have been before May 15, 2008, will be governed by the earlier instructions on this subject, operative at the time when such appeal was filed. In the present case, the appeal was filed in the year 2005 before the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the burden on the Department has also increased to a tremendous extent. The corridors of the superior courts are choked with huge pendency of cases. In this view of the matter, the Board has rightly taken a decision not to file references if the tax effect less than Rs. 2 lakhs. The same policy for old matters need to be adopted by the Department. In our view, the Board's circular dated March 27, 2000 is very much applicable even to the old references which are still undecided. The Department is not justified in proceeding with the old references wherein the tax impact is minimal. Thus, there is no justification to proceed with decades old references having negligible tax effect." 6. The question that arises is as to whether there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is/are of a recurring nature to be decided by the court, should be separated, considered on the merits without being hindered by the monetary limits'." 9. It was thus clarified that while calculating the tax effect, the interest component would not be included. We may record at this stage that way back in the year 2003 the Board had issued instruction dated July 17, 2003 clarifying the meaning of "tax effect" in the following words : "In order to avoid ambiguity and to adopt uniformity in approach while filing appeals by the field formation, it is hereby clarified by the Board that the words 'monetary limit' and 'tax effect' in the aforesaid instruction be read as 'revenue effect' which denotes the amount of tax, interest, penalty, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fixed a higher tax effect limit than the tax effect involved in those pending appeals. The court held that the new circular prescribing a higher limit was very much applicable even to old cases which are still undecided and the Department is not justified in proceeding with those old references/appeals where the tax impact is minimal. 11. On the other hand, in the instant case we are concerned with the issue as to how the tax effect is to be calculated and not with the minimum limit of the tax effect prescribed in the circular simpliciter. When it comes to the meaning that is to be assigned to the "tax effect" and the modified manner/formula is prescribed in O. M. dated May 15, 2008, such a circular on this aspect has to be treated as h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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