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TMI Blog2004 (12) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... Board to issue such a circular against the interests of the assessee – Held that the very reason behind the statutory bar u/s 119(2) to issue any instruction contrary to the interests of the assessee is that a subordinate official (Assessing Officers) is bound to comply with the directions/opinion of a superior authority - In this case there is a positive direction to treat the ex gratia amount as capital expenditure, which direction is certainly adverse to the assessee. Therefore to the extent that the circular is against the interests of the assessees, the same is liable to be held ultra vires. - - - - - Dated:- 15-12-2004 - Judge(s) : K. P. SIVASUBRAMANIAM. JUDGMENT K.P. Sivasubramaniam J. - The petitioner seeks for a writ of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the circular are sought to be differentiated in so far as the case of the petitioner is concerned it is stated that the assessment has been completed not on the basis of the circular but on the facts of the particular case. It is also stated that under the provisions of the Income-tax Act the Board has issued instructions to its subordinate officers after considering the question of allowance of VRS payments and deductions, the Board has given guidelines to the Assessing Officers to decide the issues on the facts of each case. The assessee was therefore not correct in suggesting that the Board's circular was contrary to law. Learned counsel for the petitioner brings to the notice of the court the power of the Board to issue instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by assessees for gaining enduring benefit or advantage under Voluntary Retirement Scheme (VRS) - Regarding Sir, It is noticed that a number of assessees have resorted to restructuring of human resources, financial engineering, etc. Invariably, ex-gratia payments are made in order to encourage such schemes to further long-term advantage to the assessee by way of profitability, competitiveness and also to further induction of technology. Particular mention may be made of the Voluntary Retirement Schemes (VRS) of the banking sector in this connection. The question arises whether the ex-gratia amount is allowable as revenue expenditure. In this connection, the primary test is to see whether any enduring benefit has resulted to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as capital expenditure. The powers of the Board to issue instructions to the subordinate authorities are contained in section 119 of the Income-tax Act. "119. Instructions to subordinate authorities.-(1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board : Provided that no such orders, instructions or directions shall be issued - (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:- (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee ; and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital expenditure in the given facts and circumstances. I am inclined to hold that this will not be permissible in terms of section 119(2) as it is bound to affect the interests of the assessees. It is needless to mention that the assessing authorities exercise their functions which are quasi-judicial in nature and they should be free to apply their mind based on the provisions of the Act. There cannot be any overriding instructions or guidelines by the Board which would go against the interests of the assessee. The Assessing Officers being subordinate to the Board, they are bound 14 to pass orders only in terms of the circular without applying their mind independently. The very reason behind the statutory bar under section 119(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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