High Court dismisses appeal based on CBDT Circular 21/2015 on tax effect limit, without considering case merits.

The High Court admitted the appeal concerning the applicability of Section 50C to depreciable assets under Section 50 of the Income Tax Act, 1961. The respondent argued that the appeal fell within the tax effect limit set by Circular 21 of 2015 issued by the CBDT, directing appeals below Rs. 20 lakhs not to be filed. Despite the lack of a written instruction for withdrawal, the Court held that the circular was binding on the department and dismissed the appeal based on the retrospective effect of the circular, without delving into the case's merits.

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Issues:
- Applicability of Section 50C to depreciable assets under Section 50 of the Income Tax Act, 1961.
- Effect of Circular 21 of 2015 issued by the Central Board of Direct Taxes on appeals with tax effect below Rs. 20 lakhs.

Analysis:
The appeal before the High Court was admitted based on the substantial question of law regarding the applicability of Section 50C to depreciable assets covered under Section 50 of the Income Tax Act, 1961. The respondent, represented by Mr. D.S. Gupta, argued that the tax effect in the appeal was below Rs. 20 lakhs, as per Circular 21 of 2015 issued by the CBDT. This circular directed the department not to file appeals before the High Court where the tax effect did not exceed the specified limit. Mr. Gupta highlighted that the appeal fell within the monetary limit set by the circular and should be disposed of accordingly.

On the other hand, Mr. Dudhoria, representing the appellant, acknowledged that the tax effect in the appeal was below Rs. 20 lakhs. However, he stated that he had no written instruction from the Commissioner of Income Tax for withdrawing the appeal. He also mentioned that circulars issued by the CBDT under Section 268A of the Income Tax Act are binding on the department as per Section 119(1) of the Act. Considering these arguments, the Court noted that the tax effect was below the monetary limit specified in the circular, which was issued with retrospective effect. Despite the lack of a written instruction for withdrawal, the Court held that the circular was binding on the department and treated the appeal as dismissed.

The Court clarified that the order of dismissal was made in accordance with the circular and emphasized that they did not delve into the merits of the case. By applying the directive of Circular 21 of 2015, the Court concluded that the appeal would be treated as withdrawn due to the tax effect falling below the specified limit, as per the binding nature of the circular on the departmental authority.

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