Commissioner of Income Tax vs T.V. Sundaram Iyengar and Sons Limited

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Income Tax Appellate Tribunal, Madras ''A'' Bench, dated

26.08.2005 in ITA No. 384/Mds/2000 in respect of the assessment year 1995-96.

The facts of this case are as follows: The assessee company owns one house property at Madurai and three house properties at Chennai. For

the assessment year 1995-96, the assessee company claimed a sum of Rs. 7,328/- being the depreciation on building and machineries relating to

the Guest House. The Assessing Officer disallowed the same on the ground that the provisions of Section 37(4) is very specific which disallow any

expenditure incurred on the maintenance of a residential accommodation in the nature of the guest house brought the same to tax. Aggrieved

against the same, the assessee filed an appeal to the Commissioner of Income Tax (Appeals) who held that the provisions of Section 37(4) being

specific should override the general provisions of Section 32 of the Income Tax Act and accordingly confirmed the disallowance and thus hedl the

appeal in favour of the revenue. Aggrieved by that order, the revenue and the assessee filed an appeal before the Tribunal and the Tribunal

following the decision of the Bombay High Court in the case of Century Spinning and Manufacturing Co. Limited reported in 189 ITR 660,

wherein it was held that the depreciation on guest house is an allowable expenditure, set aside the order of the lower authority and allowed the

issue in favour of the assessee. The correctness of the same is now canvassed before us by the revenue by formulating the following question of

law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that depreciation on a guest house is allowable as business

expenditure.

Though the Counsel for the revenue started arguing the case on merits, the learned Counsel for the assessee submits that the dispute in respect

of the disallowance is only a sum of Rs. 7,328/-. Hence the tax effect is much lower than the one fixed by the Central Board of Direct Taxes

Circular in F. No. 279/126/98ITJ dated March 27, 2000. In view of the circular, the impugned order need not be deliberately discussed and

decision rendered and can be disposed of based on the circular.

We have heard the argument of the learned Counsel on either side and perused the materials available on record.

In the Central Board of Direct Taxes Circular in F. No. 279/126/98ITJ dated March 27, 2000, the monetary limit prescribed for filing an

appeal by the revenue is Rs. 2.00 lakhs, however, with certain exceptions. The exceptions are not applicable to the facts of the present case and

admittedly, the tax effect in this case is lesser than the monetary limit prescribed in the said circular. Hence, it would not be proper on the part of

the revenue to file an appeal, which is against its own circular.

It may be noted that this Court considered a similar issue in the case of Commissioner of Income Tax Vs. Associated Electrical Agencies, ,

wherein this Court held as follows:

We are of the considered view that none of the exceptions stated in the circular are applicable to the facts of the present case. The circular was

stated to be issued by invoking the statutory power u/s 119 of the Income Tax Act. The appeal is filed u/s 260-A of the Income Tax Act. It is well

settled principle of law that each and every provision of a statute has to be given the same importance. One provision cannot be alleviated to a

higher pedestal than the other provision, of course, unless or otherwise specifically stated either in the scheme, the Act or in the provision itself that

a particular provision is subjected to or qualified by any other provision or the provision can be given effect to notwithstanding anything contained

in any other provisions by assigning overriding effect. Hence, the contention that notwithstanding the circular, which was issued u/s 119 of the

Income Tax Act, the appeal could be filed by the revenue u/s 260-A has to be rejected for the reason that if the contention is accepted, one of the

Section would become virtually otiose and that cannot be the intention of the law makers.

Thus, following the long line of case laws reported in Commissioner of Income Tax Vs. Rajasthan Patrika Ltd., , Commissioner of Income Tax Vs.

P.S.T.S. Thiruvirathnam and Sons, , to which one of us is a party (K. Raviraja Pandian, J.), Commissioner of Income Tax Vs. Digvijay Singh, and

Commissioner of Income Tax Vs. Camco Colour Co., , this Court held that the uniform line of judicial opinion is that if the tax effect is less than

what is stated in the circular, the Revenue need not agitate the issue on appeal and that the circular is binding on the Revenue.

The said judgment of this Court in the case of Commissioner of Income Tax Vs. Associated Electrical Agencies, has been relied by the Gujarat

High Court in the case of CIT v. Concord Pharmaceuticals (2008) 220 CTR 117 to reject the appeal of the revenue where the tax effect is less

than Rs. 2.00 lakhs. The apex Court in the case of State of Kerala and Others Vs. Kurian Abraham Pvt. Ltd. and Another, has laid down that the

circular issued by the CBDT is much binding on the revenue and that requires no support of judicial precedent.

Learned Counsel for the revenue fairly admitted that the tax effect is less than the monetary limit prescribed under the above said Circular dated

27.03.2000. The appeal is filed on 22.02.2006. Hence, the circular is binding on the revenue.

In view of the above and in view of the fact that every assessment of a unit is unique by itself, even assuming that the decision rendered by the

Tribunal is not in accordance with law and can be agitated in appropriate case before the appropriate forum, the appeal is dismissed. No costs.