TaxTMI 
TaxTMI 
2014 (4) TMI 971
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....ts 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 learned counsel appearing for the assessee/respondent rai....
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....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 year, it shall not preclude such authority from filing an appeal or a....
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.... 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 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 th....
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....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 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 ....
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.... 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 appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all assessment years even if the "tax effect" is less than the prescribed monetary li....
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....ecified 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 Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12 A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to f....
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....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 literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB v. Securities and Exchange Board, India, AIR 2004....
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....kes. 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 this Court in CIT v. Keshab Chandra Mandal, AIR 1950 SC 265: "Hardship or inconvenience cannot alter the meaning of the language employed by the Legislature if such meaning is clear on the face of the statute". 22. Where the words are unequivocal, there is no scope for importing any rule of int....
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....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 the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the wo....
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.... 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 instructions prevailing on the date of presentation of such appeals. 11. In view of such clear legislative intention, we are unable to hold that even if an appeal is filed prior to 9th February 2011, the same would be barred notwithstanding the fact that at the time of filing such appeal, the same was not barred by the then instruction....
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....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. The Court, while considering the issue observed that paragraph 5 of the Circular made it clear that no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature. Relying on the judgement in CIT V/s Polycott Corporation, the Court observed as follows: "6 The aforesaid j....
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....en 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 Polycot Corporation (supra). However, the instruction of 2005 which was considered in Chhajer's case has also been interpreted in Polycot Corporation (supra). The consistent view of the Court has been that the CBDT instruction would apply to pending cases as well. The main objective of such instructions is to reduce the pending litigation where the tax ....
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....e 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 transgress the same. The initial difference between subordinate legislation and the statute laws lies in the fact that a subordinate law making body is bound by the terms of its delegated or derived authority and that Court of law, as a general rule, will not give effect to the rules, thus made, unless satisfied that all the conditions precedent to the validity of the r....