2008 (2) TMI 410

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....g that the expenses it claimed were purely of the nature of repairs and no new assets having come into being, the deduction is fit to be granted. The Commissioner of Income-tax (Appeals) allowed the deduction of the amount spent on the repairs but did not express any opinion in respect of the amount spent in plumbing work. While doing so, the Commissioner of Income-tax (Appeals) observed that repairing expenditure incurred by the assessee in respect of the tenanted building cannot be allowed unless there is an agreement between the landlord and the assessee in view of section 30(a)(i) of the Income-tax Act, 1961, hereinafter referred to as "the Act". However, he was of the opinion that even if the expenditure of a tenanted building cannot be allowed under section 30(a)(i) of the Act unless there is an agreement between the land lord and the assessee, but it can be allowed under section 37 of the Act. 3. The Revenue, aggrieved by the same, preferred an appeal before the Patna Bench of the Income-tax Appellate Tribunal, hereinafter referred to as "the Tribunal". The Tribunal affirmed the order of the Commissioner of Income-tax (Appeals) in respect of Rs. 70,000 the amount spent in....

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....y limit given as under: (i) Appeal before the Appellate Tribunal, in income-tax matters) Rs. 1,00,000 (ii) Appeal under section 260A/ reference/under section 256(2) before the High Court 2,00,000 (iii) Appeal before the Supreme Court 5,00,000" 9. In partial modification of the above instructions, by notification dated October 24, 2005, it has been decided that appeal will henceforth be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder: (i) Appeal before Appellate Tribunal Rs. 2,00,000 (ii) Appeal under section 260A 4,00,000 (iii) Appeal before the Supreme Court 10,00,000" 10. The aforesaid instructions also provide that cases involving substantial question of law of importance as well as cases where same question of law is likely to repeatedly arise, such cases shall be considered on its own merits, without being hindered, by the monetary limits. The aforesaid instructions were to come into effect from October 31, 2005. 11. Mr. Rastogi points out that the tax effect in all these cases are within the monetary limit as prescribed by the Central Board of Direct Taxes and as ....

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....ubmissions, I am not inclined to return the references unanswered. The instruction of the Central Board of Direct Taxes fixing the monetary limit for filing appeals and references are administrative in nature, Whereas the references made and called statutory in nature. In my opinion, the administrative instructions issued by the Central Board of Direct Taxes, are for the guidance of the functionaries of the Income-tax Department. It is neither binding on the Tribunal nor the High Court or for that matter, the assessee. In my opinion, in case of conflict, the administrative instruction must give way to the statutory provision. Thus, on the first principle, the plea put forth by the assessee for return of the references, deserves to be rejected. 14. True it is that the judgment of the Bombay High Court in the case Pithwa Engineering Works [2005] 276 ITR 519 supports the contention the assessee, but the principle, which I have enunciated hereinbefore, prohibits me to charter that course and return the references unanswered. fact, there are several precedents to the contrary. The Punjab and Haryana High Court had the occasion to consider the effect of the Board's circular dated Marc....

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....held that once the reference is before the court, the same has to be decided on its own merits. The relevant portion of the judgment reads as follows (page 29): "Accordingly, we do not deem it appropriate to restrain from discharging our judicial function, in hearing and deciding the appeal on the merits. As far as the issue as to whether the circular prescribing limits for filing appeals before the courts or the Tribunals is concerned, different courts have taken different views as to whether in case an appeal is filed, which involves tax effect less than the amount prescribed in the circular for filing the appeals, still the court/Tribunal is bound to reject the same as such or to dispose of it on the merits." 19. In the light of the discussions aforesaid, I am not inclined to return the references unanswered. 20. Now, I proceed to consider the references on the merits. 21. Section 37(1) of the Act, at the relevant time, stood as follows: "37 General.-(1) Any expenditure not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclus....

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....eration of liabilities which would fall under any of those sections. We shall explain. Taking for instance, the liability for gratuity, the nature of the liability is a liability towards gratuity. It is towards that liability provision has been made under section 36(1)(v) of the Act. If the submission of counsel for the Revenue is accepted, only payments made to a fund such as contemplated by section 36(1)(v) of the Act will be permissible as deductions towards gratuity liability for computing profits and gains. We cannot accept this contention. We cannot give a meaning to the words 'in the nature of' so as to stultify a legitimate claim in accordance with the principles of accountancy and according to well-established commercial practice and which must be taken into account in ascertaining the true/profits and gains of business. Unless there be some statutory provisions which in clear terms or by necessary implication negatives against adoption of such principles and practice, those principles and practice must be given their full play." 26. The judgment of the Kerala High in the case of CIT v. High Land Produce Co. Ltd. [1976] 102 ITR 803, was assailed before the Supreme Court....