TaxTMI 
TaxTMI 
2014 (4) TMI 971
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....ons which provides for revised monetary limits for filing of the appeals and paragraph 11 thereof which provides inter-alia that such instructions will apply to appeals filed on or after 9th February 2011?" 2. Consequently, the matter has been placed before this Bench. 3. The facts leading to the present Reference may be summed up thus: 3.1 A Tax Appeal under section 260A of the Income Tax Act [the Act, hereafter] was filed by the Revenue calling in question the judgment dated May 31, 2010 passed by the Income Tax Appellate Tribunal (the Tribunal, hereafter) raising various questions. The Appeal was filed on 13th October 2010. There is no dispute that the tax effect involved in this appeal exceeded Rs.4 lac which was the threshold limit permitting the Revenue to prefer appeal before the High Court as provided by Central Board of Direct Taxes (CBDT hereafter), in its instructions dated 15th May (the instructions of 2008, hereafter). There is also no dispute that such tax effect, however, does not exceed Rs 10 lac, a revised limit provided by the CBDT in its later instructions dated 9th February 2011 (the instructions of 2011, hereafter). 3.2 In the above facts, the learn....
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....tance of the Revenue shall be also not maintainable even if those appeals complied with the requirement of the instruction of 2008 which was the applicable instruction on the date of filing of the appeals simply because the minimum tax effect for filing an appeal at the instance of the Revenue has since been increased by virtue of the instructions of 2011. 5. In order to appreciate the question involved in this Reference, it will be profitable to refer to the provisions contained in Section 268A of the Income Tax Act which has been enacted through Finance Act of 2008 with retrospective effect from 1st April 1999. The same is quoted below: "268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter. (2) Where, in pursuance of the orders, instructions or directions issued under subsection (1), an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment yea....
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....d that departmental appeals will be filed before Appellate Tribunals, High Courts and Supreme Court as per monetary limits and conditions specified below. 3. Appeals will henceforth be filed only in cases where the tax effect exceeds monetary limits given here under:- Sl. No. Appeals in Income-tax matters Monetary Limit (In Rs.) 1 Appeal before Appellate Tribunal 2,00,000/- 2 Appeal under section 260A before High Court 4,00,000/- 3 Appeal before Supreme Court 10,00,000/- 4. For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issue against which appeal is intended to be filed (hereafter referred to as "disputed issues"). However, the tax will not include any interest thereon. Similarly, in loss cases notional tax effect should be taken into account. In the cases of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 5. The Assessing Officer shall calculate the tax effect separately for every assessment ....
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....l in such cases was not filed or not admitted only by reason of the tax effect being less than the specified monetary limit and therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value. 8. Adverse judgments relating to the following should be contested irrespective of the tax effect. (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge. (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires. (c) Where Revenue Audit objection in the case has been accepted by the Department. 9. The proposal for filing Special Leave Petition under Article 136 of the Constitution before the Supreme Court should, in all cases, be sent to the Directorate of Income-tax (Legal & Research) New Delhi and the decision to file Special Leave Petition shall be in consultation with the Ministry of Law and Justice. 10. The monetary limits specified in para 3 above will not apply to writ matters. 11. This instruction will apply to appeal....
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....est thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal, can be filed in respect of such assessment year or years in which the tax effect, in respect of the disputed issues exceeds the monetary limited specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appella....
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....ce of CsIT must be maintained in a systemic manner for easy retrieval. 8. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect. (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department. 9. The proposal for filing Special Leave Petition under Article 136 of the Constitution before the Supreme Court should, in all cases, be sent to the Directorate of Income-tax (Legal & Research) New Delhi and the decision to file Special Leave Petition shall be in consultation with the Ministry of Law and Justice. 10. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of ....
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...., is clearly in favour of the appellants. 14. Hence, we cannot accept the submission of the learned senior counsel for the private respondents. The language of Rule 27(c) of the Rules is clear and hence we have to follow that language. 15. In M/s. Hiralal Ratanlal v. STO, AIR 1973 SC 1034, this Court observed: "In construing a statutory provision the first and foremost rule of construction is the literal construction. All that the Court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from the provision the legislative intent is clear, the Court need not call into aid the other rules of construction of statutes. The other rules of construction are called into aid only when the legislative intent is not clear." (Emphasis supplied) 16. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules of interpretation e.g. the mischief rule, purposive interpretation etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read li....
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....which if we depart we launch into a sea of difficulties which it is not easy to fathom." 19. In other words, once we depart from the literal rule, then any number of interpretations can be put to a statutory provision, each Judge having a free play to put his own interpretation as he likes. This would be destructive of judicial discipline, and also the basic principle in a democracy that it is not for the Judge to legislate as that is the task of the elected representatives of the people. Even if the literal interpretation results in hardship or inconvenience, it has to be followed(see G.P. Singh's Principles of Statutory Interpretations, 9th Edn. pp 45-49). Hence departure from the literal rule should only be done in very rare cases, and ordinarily there should be judicial restraint in this connection. 20. As the Privy Council observed (per Viscount Simonds, L.C.) : "Again and again, this Board has insisted that in construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used." (see Emperor v. Benoarilal Sarma, AIR 1945 PC 48, pg. 53). 21. As observed by t....
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....AIR SCW 1646) and Union of India v. Hamsoli Devi, 2002 (7) SCC 273 : (AIR 2002 SC 3240 : 2002 AIR SCW 3755). 28. In Union of India and another v. Hansoli Devi and others, 2002 (7) SCC 404: (AIR 2001 SC 2184: 2001 AIR SCW 1925) (vide para 9), this Court observed: "It is a cardinal principle of construction of a statute that when the language of the statute is plain and unambiguous, then the court must give effect to the words used in the statute and it would not be open to the courts to adopt a hypothetical construction on the grounds that such construction is more consistent with the alleged object and policy of the Act." 29. The function of the Court is only to expound the law and not to legislate vide District Mining Officer v. Tata Iron and Steel Company, 2002 (7) SCC 358. If we accept the interpretation canvassed by the learned counsel for the private respondents, we will really be legislating because in the guise of interpretation we will be really amending Rule 27(c) of the Rules. 30. In Gurudevdatta VKSSS Maryadit v. State of Maharashtra, AIR 2001 SC 1980 : (2001 AIR SCW 1380), this Court observed : "It is a cardinal principle of interpretation of statute that....
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.... we mean what we say and we say what we mean." 8. By applying the above principles to the facts of the present case, we find that clause 11 of the Instructions of 2011 specifically states that "this instruction will apply to appeals filed on or after 9th February 2011. However, the cases where appeals have been filed before 9th of February 2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed." 9. Similarly, clause 11 of the instructions of 2008 specifically provides that "this instruction will apply to appeals filed on or after 15th of May 2008. However, the cases where appeals have been filed before 15th of May 2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed.", meaning thereby, the earlier instructions. 10. There is, thus, no ambiguity in the instructions of either 2011 or 2008 as regards the applicability of those instructions in respect of the appeals, and, at the same time, it has also been made clear that if those appeals are not filed after the given dates mentioned in those instructions, the fate of the appeals will be governed in accordance with the in....
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....cular was issued in supersession of all earlier instructions issued by the Board. The monetary limit was increased and appeals were to be filed under Section 260A, thereafter, only in cases where the tax effect exceeded Rs. 4 Lacs. Paragraph 11 of that instruction stipulated that it was applicable to appeals filed on or after 15th May, 2008. It was further provided that in cases, where appeals were filed before 15th May, 2008, they would be governed by the instructions on this subject which were operative at the time when such appeals were filed. The instruction was issued under Section 268A (1) of the Act. The argument of the learned Counsel for the revenue in that case was, that the instruction issued on 15th May, 2008 did not preclude the department from continuing with the appeals and/or Petitions filed prior to 15th May, 2008, if they involved a substantial question of law of a recurring nature, notwithstanding the fact that the total cumulative tax effect involved in the appeals was less than Rs. 4 Lacs. It was submitted, such appeals which were filed prior to the issuance of Instruction and where substantial questions of law were raised, were required to be decided on merits....
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....hould take a decision to file appeals on merits of each case. Clause 11, again provides that the instruction would apply to appeals filed on or after ....2011 and appeals filed before ...... 2011 would be governed by the instructions on this subject, operative at the time when such appeals were filed. 11. In our opinion, when a similar clause has been interpreted by the Division Bench of this Court in CIT vs. Madhukar Inamdar (Supra), the same principles must apply in the present cases also, as we have found that the instructions of 15th May, 2008 is paramaterial with the instruction of 9th February, 2011. 14. Similarly, the Delhi High Court in the case of "Commissioner of Income Tax V/s Delhi Race Club Ltd.", decided on March 03, 2011, by relying on its earlier Judgement "Commissioner Income Tax Delhi-III V/s M/s P.S. Jain and Co. decided on 2nd August, 2010 has held that the CBDT circular raising the monetary limit of the tax effect to Rs. 10 Lacs would be applicable to pending cases also. 17. It is true that this judgement in Chhajer's case (supra) was not brought to the notice of the Division Bench, while deciding either Madhukar's case (supra) or the case of P....
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....d out by the Supreme Court in the case of Hukam Chand v. Union of India and others reported in AIR 1972 SC 2427, while dealing with the question of extent of power of a delegated authority, such authority in the absence of specific power so conferred cannot make any delegated legislation with retrospective effect. The following observations of the Supreme Court are relevant and are quoted below:- "The extent and amplitude of the rule making power would depend upon and be governed by the language of the section. If a particular rule were not to fall within the ambit and purview of the section, the Central Government in such an event would have no power to make that rule. Likewise, it there was nothing in the language of S. 40 to empower the Central Government either expressly or by necessary implication, to make a rule retroactively, the Central Government would be acting in excess of its power if it gave retrospective effect to any rule. The underlying principle is that unlike Sovereign Legislature which has power to enact laws with retrospective operation, authority vested with the power of making subordinate legislation has to act within the limits of its power and cannot tran....
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.... any different opinion on the point; Modi Food Products Ltd. v. Commr. of Sales Tax, U. P., AIR 1956 All 35; India Sugar Refineries Ltd. v. State of Mysore, AIR 1960 Mys 326 and General S. Shivdev Singh v. State of Punjab, (1959) 61 Pun LR 514 - (AIR 1959 Punj 453) (FB). (Emphasis supplied by us). 18. For the above reasons, the CBDT being fully conscious of its limitation, decided to give clear prospective effect to those instructions in paragraph 11 of the instructions. Thus, there is no scope of interpreting the instructions mentioned above as done by the Division Bench of this court in the case of THE COMMISSIONER OF INCOME TAX vs. SURESHCHANDRA DURGAPRASAD KATHOD [HUF]. 19. Mr. Soparkar, in this connection, placed before us the following decisions of different High Court in support of his contention that the Circular in question also applies to the pending appeals: 1) CIT vs. Ranka and Ranka ((2012) 19 taxman.com 65(Karnataka) 2) CIT vs. Smt. Vijaya V. Kavekar reported in (2013) taxman.com 412 (Bombay). 3) CIT III vs. Madhukar K. Inamdar HUF reported in (2009) taxman.com 101(Bombay) 4) CIT vs. Polycott Corporation reported in 2009 178 Taxman 255 (Bombay) ....