TaxTMI 
TaxTMI 
2007 (8) TMI 333
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....suance of the order of the AAIFR dated June 13, 1990. Hence, for the assessment year 1991-92, the assessee quantified the total loss as shown above which included the depreciation claimed for the assessment years 1985-86 to 1990-91 amounting to Rs. 1,15,96,862 and carry forward loss from the assessment years 1981-82 to 1990-91 amounting to Rs. 6,81,88,117. 3. The Deputy Commissioner of Income-tax, Special Range-II, Coimbatore, finalised the assessment determining the net loss for the year at Rs.1,38,842 and disallowed in toto the claim of carry forward loss of the earlier years. Aggrieved by that, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Coimbatore. Placing reliance on the Circular No. 523, dated October 5, 1988 (see [1988] 174 ITR (St.) 1), the Commissioner (Appeals) by his order dated July 13, 1994, found that the assessee was entitled to the benefit of carry forward loss of the earlier years in terms of the said circular and the said order was also confirmed by the Income-tax Appellate Tribunal in its order dated June 18, 2001. Aggrieved by the orders of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, th....
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....r it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. 8. As per sub-section (3) of section 17 of the SICA, if the Board decides under sub-section (1) that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in section 18 in relation to the said company, it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company. 9. The above provisions show that as and when a reference is made to the Board by a sick industrial company for determination of the measures that shall be adopted in respect of a company, the Board may make inquiry for determining whether such industrial company shall become a sick industrial company. Once the Board decides that the company has become sick but it is practicable for reviving the company, it may appoint an operating agency. 10. S....
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....at if a scheme is sanctioned in pursuance of section 17(3) of the Act, it will have an overriding effect over the provisions of the Income-tax Act, by virtue of section 32 of the Act. 3. Consequently, if the BIFR sanctions a scheme under section 17(3) of the Act, specifically excluding or limiting the application of sections 41(1), 79 and 115J or of any one or more of these sections of the Income-tax Act, 1961, in respect of the assessment years which are also specified, then the Assessing Officer will have to take due cognizance of this order and give effect to the same. Such a situation may arise in the case of a sick industrial company which has debited its account in respect of its interest liability in a particular assessment year. Subsequently, if, in a scheme sanctioned by the BIFR, banks are directed to either waive or reduce the interest liability, this remission will become chargeable to tax under section 41(1) of the Income-tax Act, in the year of reduction or waiver by the banks. It is possible that for speedier rehabilitation, the BIFR in its scheme provides that section 41(1) of the Income-tax Act, would not apply in the case of the sick company. The Assessing Offi....
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....t.) 98), the earlier circulars dated October 5, 1988 (see [1983] 174 ITR (St.) 1) and August 31, 1990 (see [1990] 185 ITR (St.) 48) were clarified. Circular No. 683, dated June 8, 1994 (see [1994] 208 ITR (St.) 98), reads as under : "Subject : Withdrawal of Circulars Nos. 523 and 576-New procedure for representation before Board for Industrial and Financial Reconstruction and the Appellate Authority for Industrial and Financial Reconstruction. The Board had issued two circulars, Circular No. 523, dated October 5, 1988 (see [1988] 174 ITR (St.) 1), and Circular No. 576, dated August 31, 1990 (see [1990] 185 ITR (St.) 48), in connection with the procedure to be followed in respect of grant of 'consent' by the Central Government in cases involving financial assistance to be given under the Direct Tax Laws for rehabilitating sick industries under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). 2. While issuing the two circulars, the provisions of section 19(2) of the SICA were not considered. According to section 19(2), all parties concerned with giving 'financial assistance' for the rehabilitation scheme should give their 'consent'. 3. The Board ....
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....t the circular dated October 5, 1988 (see [1988] 174 ITR (St.) 1), itself was without reference to sub-section (3) of section 19 of the SICA and, therefore, the benefit arising out of such circular cannot be claimed as a matter of right and the CBDT is entitled to withdraw the said circular giving retrospective effect. The source of power of the CBDT to issue circular is traceable to section 119 of the Income-tax Act. That section empowers the CBDT to issue such orders, instructions and directions to other income-tax authorities for proper administration of the Act, with a further direction that such authority should observe and follow such orders, instructions and directions. Apparently, a decision of the Board declaring an industry as sick had weighed the mind of the CBDT to issue circular giving tax benefit to an assessee, when the assessee-company approaches the Board for declaration that the company is sick and the Board declares the company sick. Such benefit is only with reference to the sickness of the company and the CBDT had correctly understood while issuing the said circular. The subsequent appointment of an operating agency, the preparation and framing of schemes and f....
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.... in accordance with the correct interpretation of a statutory provision and they depart or deviate from such construction. 24. The above dictum of law laid down by the Supreme Court show that although the circulars are not binding on the courts or an assessee, they are certainly binding on the Revenue and it is not open to the Revenue to advance an argument or filing an appeal contrary to the circulars. In fact, the Department cannot even take contrary stands to the circulars as well. 25. In UCO Bank v. CIT [1999] 237 ITR 889, the Supreme Court while considering the circulars issued in exercise of power under section 119 of the Income-tax Act regarding the interest on " sticky" advances has held that the circulars were in the nature of concessions, which could always be prospectively withdrawn. 26. The above discussion leads us to the only conclusion that so long as a circular issued under section 119 of the Income-tax Act is applied and enforced, it would be binding on the Departmental authorities to ensure a uniform and proper administration and application of the Income-tax Act. Such circulars cannot be withdrawn retrospectively as they could operate only pr....