By TIOL News Service

AHMEDABAD, APR 26, 2014: THE issues before the Bench are - Whether the powers of the CBDT to issue Instructions fall within the purview of delegated legislation; Whether such authority has the force of law; Whether when the language employed in a statute is crystal clear and unambiguous it would amount to a fanciful interpretation if a court of law finds it wiser to give another reasonable view; Whether when the Board Instructions clearly debar the appeals filed prior to the dates specified from being eligible to avail the monetary limits they can still be maintained; Whether from the language of the delegated legislation it can be construed that powers have been vested in the CBDT to allow pending appeals or references to be eligible for the new monetary limits and Whether the language chosen to draft the Board Instruction leaves no room for new interpretation. And the verdict goes against the assessee.

Facts of the case

The assessee is an individual. The asssessee got a favourable order from the Tribunal on the issue of tax effect of its case decided against it by the Revenue which preferred an appeal in the High Court. 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, in its Instructions dated 15th May of 2008. There was also no dispute that such tax effect, however, did not exceed Rs 10 lac, a revised limit provided by the CBDT in its later Instructions of 2011.

While submitting before the Bench the counsel for the assessee raised a preliminary objection as to the maintainability of the appeal on the ground that the tax effect involved was less than the minimum threshold limit provided by the CBDT which was in force on the date when the appeal came up for hearing, i.e. 12th September 2012. The counsel further tried to convince the Division Bench that although at the time of filing of the appeal, the limits prescribed by the Board in its instructions of 2008 applied and in accordance with such provisions, the appeal was maintainable. However, the revised limits contained in the Instructions of 2011 should be applied when the appeal was taken up for hearing after the passing of the revised Instructions of 2011. In other words, the counsel contended that the revised limit contained in the instruction of 2011 would be applicable to all the pending appeals irrespective of the date of filing.

In support of such contentions, the counsel relied upon a decision of the Division Bench. In the said decision, the Division Bench, by relying upon a decision of the Bombay High Court 2009-TIOL-772-HC-MUM-IT and certain other decisions of Delhi High Court held that the instructions of 2011 would also apply to pending appeals which were filed prior to the issue of the instructions of 2011.

The referring Division Bench, however, did not accept the contention of the counsel, but having regard to the fact that an earlier Division Bench of this Court having taken a different view in the case of Sureshchandra Durgaprasad Khatod (HUF), decided to refer the matter to a Larger Bench.

Having heard the counsels, the Larger Bench held that,

++ the only question that falls for determination in this Reference is whether the Instruction of 2011 would apply to all the pending appeals irrespective of the fact whether those appeals were filed after the coming into operation of the Instructions of 2011 or not, and whether the pending appeals at the instance 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;

++ after hearing the counsels and after going through the provisions of Section 268A of the Income Tax Act as well as the relevant Instructions, we find that those two instructions having been issued by the CBDT in exercise of powers conferred under section 268A of the IT Act, are really pieces of delegated legislation and consequently, have the force of law;

++ it is now well-settled law that if the language employed in a piece of legislation is clear and unambiguous, it is not for the Court to interpret the same in a different way simply because the Court thinks that it would be wiser to adopt another reasonable view instead of the one specifically mandated in the statutory provisions;

++ 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.";

++ 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;

++ 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;

++ 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 instructions of the CBDT;

++ as regards the decision of a Division Bench of this Court dated 24th August 2012 in the case of Sureshchandra Durgaprasad Khatod (HUF), it appears that the said Division Bench, in arriving at a different conclusion solely relied upon a Division Bench decision of the Aurangabad Bench of the Bombay High Court in the case of the Commissioner of Income Tax v. Smt. Vijaya V. Kavekar. In the said case, the said Division Bench, after considering the earlier instructions and relying upon a decision of the Bombay High Court in the case of 2009-TIOL-772-HC-MUM-IT, arrived at certain conclusions, which were relied upon by the Division Bench of this Court;

++ with great respect to the Division Bench of this Court in the case of The Commissioner of Income Tax vs. Sureshchandra Durgaprasad Kathod [HUF] as well as of the Division Bench of the Bombay High Court and other High Courts quoted above, we are unable to agree with the view taken therein because in those decisions, the well-settled principle laid down by the Supreme Court relating to literal construction, as reiterated in the case of B. Premchand vs. Mohan Koikal reported in AIR 2011 SC 1925, was not followed;

++ in our opinion, in the absence of any ambiguity, there is no scope of interpreting the said provision in a different way by ignoring the literal meaning of the words used in the said delegated statutory provisions. As pointed out by the Supreme Court, where the language is clear, the intention of the legislature has to be gathered from the language used. In other words, we should read the statute as it is without distorting or twisting its language;

++ moreover, from the provisions contained in Section 268A of the Act, which confers power upon CBDT to issue instruction, it appears that it simply enables CBDT from time to time, to 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 the concerned Chapter. From the language of the enabling provisions of the statute, it is clear that no power has been conferred to the CBDT to make the pending appeals or references filed in accordance with the then existing law infructuous by issuing any such direction or instruction with retrospective effect;

++ 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];

++ we have gone through the decisions cited by the counsel. We find that in none of those decisions, the High Court considered the above proposition of law laid down by the Supreme Court. Thus, the ultimate conclusion arrived at by the different High Court was in conflict with the existing law of the land as pointed out above. We are thus unable to follow those decisions;

++ the counsel for the Revenue, on the other hand, also placed some decisions of the other High Courts including the Full Bench decision of the Punjab and Haryana High Court in the case of CIT III Ludhiana vs. M/S Varindera Construction Co. taking the view that the said circular is not applicable to the pending appeals. We follow the above conclusion, however, based on the reason assigned by us in this judgment;

++ we, therefore, answer the reference in the negative. Let the appeal be placed before the referring Bench for deciding it in accordance with law.

(See 2014-TIOL-572-HC-AHM-IT-LB)