Commissioner Ofincome Tax, “Aaykar Bhavan”, Patto, Panaji, Goa v. V. M. Salgaonkar Andbrothers Private Limited,Salgaonkar House, Vasco-Da-Gama,Mormugao, Goapan No. Aaacv5950B

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.47/2014AND TAX APPEAL NO.49/2014 COMMISSIONER OFINCOME TAX, “Aaykar Bhavan”, Patto, Panaji, Goa. Versus … APPELLANT V. M. SALGAONKAR ANDBROTHERS PRIVATE LIMITED,Salgaonkar House, Vasco-da-Gama,Mormugao, GoaPAN NO. AAACV5950B … RESPONDENT Ms Amira Razaq, Advocate for the Appellant. Mr Percy Pardiwala, Senior Advocate with Mr Ryan Menezes and MrNigel Fernandes, Advocates for the Respondent. CORAM:M. S. KARNIK & NIVEDITA P. MEHTA, JJ. DATE: 9[th] DECEMBER 2024 ORDER: (Per M. S. Karnik, J.) 1.he present appeals pertain to the Assessment Years 2006-07 and2007-08. he appeals were admitted in terms of an order of this Court on07.07.2014 and 11.07.2014 respectively. Following questions wereformulated by this Court:2007-08. he appeals were admitted in terms of an order of this Court on07.07.2014 and 11.07.2014 respectively. Following questions wereformulated by this Court: :In Income Tax Appeal No.47/2014 (A)Whether on the facts and circumstances of the case, thelearned ITAT is correct in holding that the AO should pass speakingorder giving inding that the value of stock will be allowed asdeduction when the same is returned to the party as per familysettlement? (B)Whether on the facts and circumstances of the case, thelearned ITAT is right in holding that the payments made by theassessee towards sales and marketing services rendered outside are notliable for deduction of TDS by the assessee? :In Income Tax Appeal No.49/2014 (A)Whether on the facts and circumstances of the case, thelearned ITAT is correct in holding that the AO should pass speakingorder giving inding that the value of stock will be allowed asdeduction when the same is returned to the party as per familysettlement? (B)Whether on the facts and circumstances of the case, thelearned ITAT is right in holding that the payments made by theassessee towards sales and marketing services rendered outside Indiaare not liable for deduction of TDS by the assessee? 2.A perusal of the averments made in paragraph 9 of the memo ofappeals in the respective income tax appeals reveals that according to theRevenue the tax efect involved in these appeals is Rs.1,99,09,905/- andRs.1,97,10,369/- respectively. he Revenue contended that in view of clause 3.1.l of Circular No.5 of 2024 dated 15.03.2024 even thoughmonetary threshold was not crossed, the appeal could be prosecuted. 3.Mr Percy Pardiwala, learned Senior Advocate for the respondent-assessee submitted that when the appeals were iled in May 2014, themonetary limits for iling appeals before the High Court was Rs.10 lakhs interms of a Circular issued by the Board being Instruction No.3 of 2011dated 09.02.2011. Paragraph 8 of the said Circular speciically providedthat adverse judgments related to the following issues should be contestedon merits notwithstanding that the tax efect entailed is less than themonetary limit speciied in paragraph 3 or there is no tax efect. herewere three circumstances mentioned in the said Circular, viz.:- (i)Whether the constitutional validity of the provisions of an Actor Rules are under challenge; or (ii)Where the Board’s Order, Notiication, Instruction or Circularhas been held to be illegal or ultra vires; or (iii)Whether the revenue audit objection has been accepted by thedepartment. 4.his instruction was superseded by another Instruction No.5 of 2014dated 10.07.2014 whereby the monetary limits in respect of appeals iledbefore the Tribunal was increased but the monetary limits in respect of theappeals to be iled before the High Courts and before the Supreme Courtremained the same. Both these Instructions speciically provided that the (i)Whether the constitutional validity of the provisions of an Actor Rules are under challenge; or (ii)Where the Board’s Order, Notiication, Instruction or Circularhas been held to be illegal or ultra vires; or (iii)Whether the revenue audit objection has been accepted by thedepartment. 4.his instruction was superseded by another Instruction No.5 of 2014dated 10.07.2014 whereby the monetary limits in respect of appeals iledbefore the Tribunal was increased but the monetary limits in respect of theappeals to be iled before the High Courts and before the Supreme Courtremained the same. Both these Instructions speciically provided that the instructions would apply only to appeals iled on or after the date of thecircular and in cases where the appeals were iled before the date of theinstruction, the cases will be governed by the instruction on the subjectoperating at the time when such appeal was iled. 5.hereafter, by Circular No.3 of 2018 dated 11.07.2018 not onlywere the monetary limits enhanced but one more exception wasintroduced, viz. where the addition relates to undisclosed foreignassets/bank accounts. his circular once again clariied that it would applyto appeals which would be iled henceforth but also additionally providedthat it will apply to pending appeals and such pending appeals below thespeciied tax limits should be withdrawn/not pressed. 6.Subsequently an amendment was made to paragraph 10 of CircularNo.3 of 2018 by an instruction dated 20.08.2018 and two furtherexceptions were added, viz., where the addition, is based on informationreceived from external sources in the nature of law enforcement agenciesand cases where prosecution has been iled by the Department and ispending in the Court. However, this instruction made it clear that themodiication shall come into efect only from 20.08.2018. 7.On 08.08.2019 the monetary limits were further enhanced.hereafter, on 15.03.2024 Circular No. 5 of 2024 superseded the earlierCirculars/Instructions and speciied fresh monetary limits in paragraph No.4. Further, the scope of the exceptions was considerably enhanced.Paragraph 3.1 sets out the circumstances in which the requirement towithdraw the appeal on account of the tax efect was lower than themonetary limits was inapplicable. 8.Ms Amira Razaq, learned counsel for the appellant-Revenuesubmitted that the CBDT has from time time issued instructions, circularsand directions regulating the iling of appeals on behalf of the Department,the tax efects and the exceptional cases in which monetary limits will notapply. In time, by Finance Act 18 of 2008, Section 268A was introducedinto the Income Tax Act 1961. he said Section 268A reads as follows:- “[Filing of appeal or application for reference by income-taxauthority. [Inserted by Act 18 of 2008, Section 51 (w.r.e.f.1.4.1999).] (1)he Board may, from time to time, issue orders, instructions ordirections to other income-tax authorities, ixing such monetarylimits as it may deem it, for the purpose of regulating iling ofappeal or application for reference by any income-tax authorityunder the provisions of this Chapter. (2)Where, in pursuance of the orders, instructions or directionsissued under sub-section (1), an income-tax authority has not iledany appeal or application for reference on any issue in the case of anassessee for any assessment year, it shall not preclude such authorityfrom iling an appeal or application for reference on the same issue in the case of - (a) the same assessee for any other assessment year; or(b)any other assessee for the same or any other assessment year. (1)he Board may, from time to time, issue orders, instructions ordirections to other income-tax authorities, ixing such monetarylimits as it may deem it, for the purpose of regulating iling ofappeal or application for reference by any income-tax authorityunder the provisions of this Chapter. (2)Where, in pursuance of the orders, instructions or directionsissued under sub-section (1), an income-tax authority has not iledany appeal or application for reference on any issue in the case of anassessee for any assessment year, it shall not preclude such authorityfrom iling an appeal or application for reference on the same issue in the case of - (a) the same assessee for any other assessment year; or(b)any other assessee for the same or any other assessment year. (3)Notwithstanding that no appeal or application for referencehas been iled by an income-tax authority pursuant to the orders orinstructions or directions issued under sub- section (1), it shall not belawful for an assessee, being a party in any appeal or reference, tocontend that the income- tax authority has acquiesced in the decisionon the disputed issue by not iling an appeal or application forreference in any case. (4)he Appellate Tribunal or Court, hearing such appeal orreference, shall have regard to the orders, instructions or directionsissued under sub-section (1) and the circumstances under which suchappeal or application for reference was iled or not iled in respect ofany case. (5) Every order, instruction or direction which has been issued bythe Board ixing monetary limits for iling an appeal or applicationfor reference shall be deemed to have been issued under sub-section(1) and the provisions of sub- sections (2), (3) and (4) shall applyaccordingly.]” 9.Ms Razaq submitted that in exercise of powers under Section 268A,the Board has issued Circulars No.5/2024 and 9/2024. She submitted thatthe said Circular was issued in supersession of the Board’s earlier CircularsNo.3/2018, 17/2019 and the Board’s letter dated 20.08.2018. Paragraphs3.1, 4.1 and 10 of the said Circular which are material were referred to bythe learned counsel reading thus:- “3.1 Monetary limits given in paragraph 4 with regard to ilingappeal/SLP shall be applicable to all cases including those relating toTDS/TCS under the Act with the following exceptions where thedecision to appeal/ile SLP shall be taken on merits, without regardto the tax efect and the monetary limits:- a. Where any provision of the Act or the Rules or notiication issuedthereunder has been held to be constitutionally invalid, or b. Where any order, notiication, instruction or circular of the Boardor the Government has been held to be illegal or ultra vires the Actor otherwise constitutionally invalid, or c. Where the assessment is based on information in respect of anyofence alleged to have been committed under any other law receivedfrom any of the law enforcement or intelligence agencies such asCBI, ED, DRI, SFIO, NIA, NCB, DGGI, state law enforcementagencies such as State Police, State Vigilance Bureau, State Anti-Corruption Bureau, State Excise Department, StateSales/Commercial Taxes or GST Department, or d. Where the case is one in which prosecution has been iled by theDepartment in the relevant case and the trial is pending in any Courtor conviction order has been passed and the same has not beencompounded, or e. Where strictures/adverse comments have been passed and/or costhas been levied against the Department of Revenue, CBDT or theiroicers, or f. Where the tax efect is not quantiiable or not involved, such as thecase of registration of trusts or institutions under sections 10(23C),12A/12AA/12AB of the Act, order passed u/s 263 of the Act etc. he reference to cases involving sections referred here, where it is notpossible to quantify tax efect or tax efect is not involved, is for thepurpose of illustration only. g. Where addition relates to undisclosed foreign income/undisclosedforeign assets (including inancial assets)/undisclosed foreign bankaccount, or e. Where strictures/adverse comments have been passed and/or costhas been levied against the Department of Revenue, CBDT or theiroicers, or f. Where the tax efect is not quantiiable or not involved, such as thecase of registration of trusts or institutions under sections 10(23C),12A/12AA/12AB of the Act, order passed u/s 263 of the Act etc. he reference to cases involving sections referred here, where it is notpossible to quantify tax efect or tax efect is not involved, is for thepurpose of illustration only. g. Where addition relates to undisclosed foreign income/undisclosedforeign assets (including inancial assets)/undisclosed foreign bankaccount, or h. Cases involving organized tax evasion including cases of boguscapital gain/loss through penny stocks and cases of accommodationentries, or i. Where mandated by a Court's directions, or j. Writ matters, or k. Matters related to wealth tax, fringe beneit tax, equalization levyand any matter other than the Income Tax Act, or 1. In respect of litigation arising out of disputes related to TDS/TCSmatters in both domestic and International taxation charges:- i. Where dispute relates to the determination of the nature oftransaction such that the liability to deduct TDS/TCS thereonor otherwise is under question, or ii. Appeals of International taxation charges where the disputerelates to the applicability of the provisions of a DoubleTaxation Avoidance Agreement or otherwise. m. Any other case or class of cases where in the opinion of the Boardit is necessary to contest in the interest of justice or revenue andspeciied so by a circular issued by Board in this regard. 4.1 Appeals/SLPs, not falling in the exceptions as detailed in para 3above, shall not be iled in cases where the tax efect does not exceedthe monetary limits given hereunder: 10. his issues under section 268A of the Act and shall come intoefect from the date of issue of this Circular. his Circular will applyto SLPs/appeals to be iled henceforth before theSC/HCs/Tribunals." 10.Ms Razaq then submitted that so far as Circular 9/2024 dated17.09.2024 is concerned, the material portions which need to beconsidered read as follows:- “Reference is invited to Circular No 5/2024(F.No.279/Misc.142/2007-ITJ (PT.)), dated 15-3-2024 of CentralBoard of Direct Taxes (the 'Board') vide which monetary limits foriling of income tax appeals by the Department before Income TaxAppellate Tribunal, High Courts and SLP/appeals before SupremeCourt have been speciied. Further, exceptions to the monetarylimits were also speciied vide paras 3.1 and 3.2 of the said Circular. 2. As a step towards management of litigation, it has been decided bythe Board to revise the monetary limits for iling of appeals inIncome-tax cases as stated in Para 4.1 of the aforementioned Circularas follows: 3. Monetary limits given in paragraph 2 above with regard to ilingappeal/SLP shall be applicable to all cases including those relating toTDS/TCS under the Income-tax Act, 1961 with exceptions as perparas 3.1 and 3.2 of Circular No 5/2024, dated 15-3-2024, wherethe decision to appeal/ile SLP shall be taken on merits, withoutregard to the tax efect and the monetary limits. 4. It is clariied that an appeal should not be iled merely because thetax efect in a case exceeds the monetary limits prescribed above.Filing of appeal in such cases is to be decided on merits of the case.he oicers concerned shall keep in mind the overall objective ofreducing unnecessary litigation and providing certainty to taxpayerson their Income-tax assessments while taking a decision regardingiling an appeal. 5. he modiications shall come into efect from the date of issue ofthis Circular. his Circular will apply to SLPs/appeals to be iledhenceforth in SC/HCs/Tribunal. It shall also apply to the SLPS/appeals pending before Supreme Court/High Courts/Tribunal,which may accordingly be withdrawn." 4. It is clariied that an appeal should not be iled merely because thetax efect in a case exceeds the monetary limits prescribed above.Filing of appeal in such cases is to be decided on merits of the case.he oicers concerned shall keep in mind the overall objective ofreducing unnecessary litigation and providing certainty to taxpayerson their Income-tax assessments while taking a decision regardingiling an appeal. 5. he modiications shall come into efect from the date of issue ofthis Circular. his Circular will apply to SLPs/appeals to be iledhenceforth in SC/HCs/Tribunal. It shall also apply to the SLPS/appeals pending before Supreme Court/High Courts/Tribunal,which may accordingly be withdrawn." 11.Ms Razaq submitted that Circular No.9 was issued in furtherance ofthe earlier Circular No.5/2024 and introduced revised tax efects ormonetary limits for pursuing/instituting fresh appeals. he exceptions to the monetary limits as per clauses 3.1 and 3.2 of the said CircularNo.5/2024 were referred to but were neither superseded by otherexceptions nor modiied. 12.In this view of the matter Ms Razaq submitted that the substantialquestions of law on which both the present appeals were admitted clearlyshow that the dispute between the assessee and the Department relates tothe nature of the transaction i.e. whether the payments made by theassessee towards sales and marketing services rendered outside India toMarriott International in terms of their contract, are amenable to tax inIndia and whether the assessee is liable to deduct such tax before paymentof funds abroad to Marriott International. She submitted that the saidsubstantial questions of law would involve interpretation of the contractbetween the parties as well as the provisions of the Income Tax Act 1961and the Double Taxation Avoidance Agreements in place between Indiaand the USA. 13.It is therefore submitted that the substantial questions of law in boththe appeals would be within the exceptions carved out in paragraph 3.1(l)(i) and (ii) of the Circular No.5/2024. It is urged that without prejudice tothe exceptions mentioned in paragraphs 3.1 and 3.2, as on the date ofissuance of the said Circular No.5/2024, both the appeals in question werewell within the monetary limits speciied in the said circular. 14.Countering the submissions of the assessee that after notiication ofCircular No.5/2024 and raising of monetary limit to Rs.2 Crores, thepresent appeals ought to be withdrawn without reference to the exceptionsin Circular No.5/2024 and that only the exceptions as existing on the dateof the institution of the appeals (i.e. Instruction 3/2011 and 5/2014) oughtto be considered, Ms Razaq urged that the submission is misconceived forthe following reasons:- i) he Board's Instructions no 3/2011 admittedly stand supercededby the subsequent Circulars. he Circulars no. 5/2024 and 9/2024presently hold the ield and govern the subject matter of ilingappeals by the Departmental authorities. ii) Without prejudice to the above, apart from the exceptionscontained at para 8 of the said Instruction 3/2011 (which arereferred to by the assessee in its written submissions), the saidInstruction 3/2011 at para 5 had introduced another exception tothe monetary limits as follows: "...However, in case of a composite order of any High Courtor appellate authority, which involves more than oneassessment year and common issues in more than oneassessment year, appeal shall be iled in respect of all suchassessment years even if the 'tax efect' is less than theprescribed monetary limits in any of the year(s), if it is decidedto ile appeal in respect of the year(s) in which 'tax efect'exceeds the monetary limit prescribed." ii) Without prejudice to the above, apart from the exceptionscontained at para 8 of the said Instruction 3/2011 (which arereferred to by the assessee in its written submissions), the saidInstruction 3/2011 at para 5 had introduced another exception tothe monetary limits as follows: "...However, in case of a composite order of any High Courtor appellate authority, which involves more than oneassessment year and common issues in more than oneassessment year, appeal shall be iled in respect of all suchassessment years even if the 'tax efect' is less than theprescribed monetary limits in any of the year(s), if it is decidedto ile appeal in respect of the year(s) in which 'tax efect'exceeds the monetary limit prescribed." iii) he present appeals arise out of a composite order of the ITATfor the Assessment Years 2006-07 and 2007-08 and involve thequestion of taxability of the transaction relating to payments made toMarriott International USA by the Assessee, which was an issue of arecurring nature every year and as such has a cascading efect; thuscoming within the exception laid down in the said Instruction no.3/2011. iv) he Boards' Instruction no. 3/2011 was Superseded by theBoard's Instruction no. 5/2014 dated 10th July 2014. However, theappeals iled before 10th July 2014 were saved (vide para 11). hepresent appeals were iled - TXA no. 47/2014 on 7th May, 2014 andTXA no. 49/2014 also on 7th May, 2014.” 15.Ms Razaq then submitted that the Hon’ble Supreme Court whileinterpreting the said Instruction 3/2011 in the case of Commissioner ofIncome Tax v/s. Surya Herbal Ltd. - [2011] 14 taxmann.com 142 (SC) (3JBench) had expressly laid down that the said Instruction 3/2011 shouldnot be applied when the matter has a cascading efect. hus, the saidInstruction no.3/2011 relied upon by the assessee also protects the right ofthe revenue to institute appeals in matters involving common issues arisingin more than one assessment year. he issue regarding the nature of thetransaction and the issue of taxability of the payments to MarriottInternational by the assessee has been arising every year including theassessment years in question in the present appeals and thus has a cascadingefect. 16.It is then submitted that Instructions no. 5/2014 were superseded byinstruction no. 21/15, which was in turn followed by Circular 3/2018. hesaid Circular no. 3/2018 vide clause 5 also saved appeals involvingcommon questions without reference to the tax efect. 17.Ms Razaq submits that Circular 5/2024 supersedes the earliercirculars no. 3/2018, 17/2019 and the Board's letter dated 20th August,2018 (vide para 2). he exception relating to appeals involving compositeorders involving common issues in more than one assessment year standsomitted in the present Circulars 5/2024 and 9/2024. he exceptionsintroduced by Circular no.5/2024 are maintained in the Circularno.9/2024 which merely enhances the tax efects. 18.It is urged that the assessee’s case falls within the exception to themonetary limits carved out in clause 3.1 (l)(i) and (ii) of CircularNo.5/2024. As on the date of issuance of the said Circular 5/2024, thepresent appeals were well within the monetary limit speciied and thusmaintainable. 19.Learned counsel for the Revenue submitted that the import of thesubmissions of the assessee would be that from the cut of date (i.e.Circular 9/2024 dated 17.09.2024) all pending appeals falling below themonetary limits regardless of the exceptions in clauses 3.1 and 3.2 ofCircular 5/2024, ought to be withdrawn. It thus attempts to bifurcate the 18.It is urged that the assessee’s case falls within the exception to themonetary limits carved out in clause 3.1 (l)(i) and (ii) of CircularNo.5/2024. As on the date of issuance of the said Circular 5/2024, thepresent appeals were well within the monetary limit speciied and thusmaintainable. 19.Learned counsel for the Revenue submitted that the import of thesubmissions of the assessee would be that from the cut of date (i.e.Circular 9/2024 dated 17.09.2024) all pending appeals falling below themonetary limits regardless of the exceptions in clauses 3.1 and 3.2 ofCircular 5/2024, ought to be withdrawn. It thus attempts to bifurcate the availability of the beneit of the exceptions to the Revenue betweenpending appeals and future appeals on such cut of date. his would meanthat while pending appeals raising the same points of law are to bewithdrawn, future appeals based on the same exceptions are maintainable.his would result in an anomalous situation, whereby appeals to be iled bythe Department in future will stand saved regardless of tax efect in case ofthe exceptions carved out in Circular 5/2024 but not those iled priorthereto. his would also involve reading words into para 5 of the saidCircular 9/2024 which discloses an intention to cover all modiicationsintroduced by the Circulars 5/2024 and 9/2024 and makes the sameapplicable to pending as well as future appeals. Para 5 reads thus:- "5. he modiications shall come into efect from the date of issue ofthis Circular. his Circular will apply to SLPs/appeals to be iledhenceforth in SC/HCs/Tribunal. It shall also apply to the SLPs/appeals pending before Supreme Court/High Courts/Tribunal,which may accordingly be withdrawn.” 20.Ms Razaq submitted that both the Circulars are to be readholistically and harmoniously. Emphasis is placed on Clauses 2, 3 and 5 ofCircular 9/2024 which according to her should be read together. 21.Without prejudice to the aforesaid, it is submitted that assessee’ssubmissions are also legally untenable as prima facie, the Board’s CircularNo.9/2024 expressly includes “pending” appeals (vide clause 5). Emphasis is then placed on the expression “supersession” which came up forconsideration before the Hon’ble Supreme Court in State of Orissa andOrs. v/s. Titaghur Paper Mills Company Limited and Anr. - AIR 1985 SC1293. he issue in the said case was that one of the notiications issuedunder the Sales Tax had been superseded by a subsequent notiication. heHon’ble Supreme Court held that the expression “in supersession of allprevious notiications” amounts to repeal and replacement of the previousnotiications by new notiications. he Supreme Court inter alia held asfollows:- “"...........In the Notiications dated Dec. 29, 1977, the word"supersession" is used in the same sense as the word "repeal" orrather the words "repeal and replacement". he Shorter OxfordEnglish Dictionary, hird Edition, at page 2084, deines the word'supersession' as meaning "he action of superseding or condition ofbeing superseded". Some of the meanings given to the word'supersede' on the same page in that Dictionary which are relevantfor our purpose are "to put a stop to; to render superluous orunnecessary; to make of no efect; to annul; to take the place of(something set aside or abandoned); to succeed to the place occupiedby; to supply the place of thing". Webster's hird New InternationalDictionary at page 2296 deines the word "supersession" as "the stateof being superseded: removal and replacement". hus, by using inthe Notiications dated Dec. 29, 1977, the expression 'insupersession of all previous notiications' all that was done was torepeal and replace the previous notiications by newnotiications................." In the case of Calcutta Municipal Corporation v. PawanKumar Saraf and another, reported in (1999) 2 SCC-400, the apexCourt observed that when Section 13(3) says that the certiicate ofDirector, CEL shall supersede the report, it means that the reportwould stand annulled or obliterated. he word "supersede" in lawmeans "obliterate, set aside, annul, replace, make void orineicacious or useless, repeal". 22.Ms Razaq therefore submitted that the Circulars 5/2024 read with9/2024 replace all earlier Circulars referred to therein with all legalconsequences. he same shall apply to future as well as pending appeals asapparent from a literal reading of the said Circulars (para 5 of Circular9/2024). he Circulars when read together are suiciently clear andunambiguous and do not leave any room for reading in any words orconining their scope and import only to the monetary limits whileexcluding the exceptions carved out in respect of pending appeals. Hencejust as the monetary limits are to be applied to pending appeals, so also thebeneit of the exceptions carved out in paras 3.1 and 3.2 of Circular5/2024 would be available to the Revenue to pursue pending mattersfalling thereunder in appropriate cases. 23.In conclusion, Ms Razaq submitted that although the present appealsare below the monetary efects set down in Circular 9/2024, the same standsaved within the exceptions carved out in paragraph 3.1 (l) (i) and (ii) ofthe Circular 5/2024. 24.Before we proceed further, it would be signiicant to notice thedecision of the High Court of Rajasthan in he Commissioner of IncomeTax-I, New Central Revenue Building, Statue Circle, Jaipur, (Raj.) v/s.Satish Kumar Agarwal – D. B. Income Tax Appeal No.8/2011. Afterreferring to the relevant provisions of the Income Tax Act and the circularson the subject, heir Lordships in paragraphs 17 to 20 observed thus:- “17. Circular 9 of 2024 albeit, enhanced the monetary limits butretained the exceptions in Para 3.1 & 3.2 of Circular 5 of 2024.From perusal of Para 5 of Circular 9 of 2024, it is evident that thecircular shall apply to the appeals to be iled henceforth and also tothe appeals pending before the Supreme Court, High Court and theTribunal. hereby making monetary limit speciied in it andexceptions in Para 3.1 & 3.2 of Circular 5 of 2024 applicable to allthe pending appeals. In other words, Circular 5 of 2024 wasapplicable prospectively but Circular 9 of 2024 while enhancing themonetary limit, retaining the exceptions of Circular 5 of 2024 madeit applicable to the pending appeals also. 18.he contention of learned counsel for the appellant that theCircular give retrospective efect only to the monetary limit lacksmerit. In case the argument is accepted, the result would be ofadding words to the clear and plain language of Para 5 of Circular 9of 2024. 19.he reliance of the counsel for the appellant on the exceptionscarved out in Circular 3 of 2018 cannot be sustained. Circular 3 of2018 was superseded by Circular 5 and the exceptions of Circular 5 with the enhanced monetary limits in Circular 9 of 2024 were madeapplicable to pending appeals. 20.he appeals are dismissed as non-maintainable in view of theCircular 9 of 2024.” 25.Learned counsel for the Revenue submitted that the observationsmade in he Commissioner of Income Tax-I, New Central RevenueBuilding, Statue Circle, Jaipur, (Raj.) v/s. Satish Kumar Agarwal (supra)are not in support of the assessee. However, for the reasons hereaftermentioned we are also inclined to take a view that the present tax appealsdeserve to be dismissed as withdrawn. We do not ind favour in thesubmission of the learned counsel for the Revenue that in view of theexceptions, though the monetary threshold was not crossed, the appeal/scould be prosecuted. with the enhanced monetary limits in Circular 9 of 2024 were madeapplicable to pending appeals. 20.he appeals are dismissed as non-maintainable in view of theCircular 9 of 2024.” 25.Learned counsel for the Revenue submitted that the observationsmade in he Commissioner of Income Tax-I, New Central RevenueBuilding, Statue Circle, Jaipur, (Raj.) v/s. Satish Kumar Agarwal (supra)are not in support of the assessee. However, for the reasons hereaftermentioned we are also inclined to take a view that the present tax appealsdeserve to be dismissed as withdrawn. We do not ind favour in thesubmission of the learned counsel for the Revenue that in view of theexceptions, though the monetary threshold was not crossed, the appeal/scould be prosecuted. 26.Para 5.1 of the Circular No.5/2024 sets out how the tax efect will becalculated in case of appeals iled in the regular assessment order, thediference between the tax on the total income assessed and the tax thatwould have been chargeable had such total income been reduced by theamount of income in respect of the issues against which appeal is intendedto be iled. 27.Para 5.4 sets out the manner of calculating the tax efect of casesinvolving TDS/TCS and it is provided that the cumulative efect of allorders passed for an assessment year of a deductor shall be taken into account and shall include interest under Section 201(1A) of the Act.Paragraph 10 of the said instruction makes it abundantly clear that suchCircular will apply to SLPs/appeals to be iled henceforth before theSupreme Court/High Courts/Tribunals and hence would apply onlyprospectively. he Board issued a fresh instruction on 17.09.2024 beingCircular 9/2024 whereby only the monetary limits provided in Circular5/2024 are enhanced. Para 2 of the Circular says that as a step towardsmanagement of litigation, it has been decided by the Board to revise themonetary limits for iling of appeals in Income-tax cases as stated in para4.1 of the March Circular. 28.Para 5 of the Circular 9/2024 clariies that the modiication of themonetary limits shall come into efect from the date of issue of the Circularand the limits would apply to the SLPs/appeals pending before theSupreme Court/High Courts/Tribunal. It is further clariied that therevision of the monetary limits would also apply to the SLPs/appealspending before the Supreme Court/High Courts/Tribunal which may,accordingly be withdrawn. 29.It is the submission of the assessee that having regard to the tenor ofthe said Circulars, which Circulars are binding on the Revenue, the presentappeals would have to be withdrawn as admittedly the tax efect is less thanthe revised monetary limits speciied in the Circular 9/2024 which revision of limits has a retrospective efect. 28.Para 5 of the Circular 9/2024 clariies that the modiication of themonetary limits shall come into efect from the date of issue of the Circularand the limits would apply to the SLPs/appeals pending before theSupreme Court/High Courts/Tribunal. It is further clariied that therevision of the monetary limits would also apply to the SLPs/appealspending before the Supreme Court/High Courts/Tribunal which may,accordingly be withdrawn. 29.It is the submission of the assessee that having regard to the tenor ofthe said Circulars, which Circulars are binding on the Revenue, the presentappeals would have to be withdrawn as admittedly the tax efect is less thanthe revised monetary limits speciied in the Circular 9/2024 which revision of limits has a retrospective efect. 30.In our opinion, the exceptions in terms of which the revenue seeks toprosecute the present appeals would have no application for two reasons.First of all, the exception which the revenue seeks to rely upon was createdfor the irst time in the Circular dated 15.03.2024 and para 10 of the saidCircular makes it abundantly clear that the Circulars would apply toappeals that would be iled henceforth which also stands to reason as aCircular which carves out additional exceptions can only have prospectiveefect because it is only on the issuance of such a circular that the variousexceptions detailed in para 3.1 were enunciated. As noted earlier, initiallythe exceptions were only of three categories but subsequently increased toive and, thereafter, the present Circular increased the same to thirteen.he decision whether an appeal should be iled irrespective of the monetarylimits involved has to be made when the appeal is iled and it is only theexceptions that are then prevalent that would be applicable. Any exceptionintroduced thereafter would have no application whatsoever indetermining whether an appeal should be iled. his would be a normalway of construing the circular and, in any event, the language of Para 10makes it abundantly clear that such was the intention. In fact whenever theBoard has enhanced the scope of the exception, it has always made itprospective. However, when it comes to increasing the monetary limits, theBoard, having regard to the avowed objects of reducing litigation, has made it explicitly clear both in Circular No. 9 of 2024 as well as in Circular No.3of 2018 that the enhanced monetary limits will apply even in respect of allpending appeals. We are therefore of the view that having regard to theCirculars, the present appeals must be dismissed as withdrawn and theRevenue cannot prosecute the appeals by relying upon any exceptioncreated in para 3.1(l) of the Circular dated 15.03.2024 which by virtue ofpara 10 is to be applied only to appeals to be iled henceforth. heargument of the Revenue that both the Circulars dated 15.03.2024 and17.09.2024 have to be read in a holistic manner and both must be givenretrospective efect is contrary to the plain terms of the said Circulars. 31.In any event, in our opinion the Revenue’s case does not fall in theexception carved out in para 3.1(l) of the Circular dated 15.03.2024 forthe following reasons. According to us, Clause 3.1 (l) excludes appealsarising out of proceedings taken against a deductor for failure to deduct taxat source and recovery of the tax from the payer that was omitted to bededucted. If there is an obligation to deduct tax at source on a payer interms of the provisions contained in Chapter XVII-B of the Act and thepayer fails to discharge such obligation, it is liable for several consequences.he irst and the foremost being that it could be treated as a Respondent indefault for failing to deduct taxes and, accordingly, the tax which ought tohave been deducted could be recovered from it by passing an order undersection 201. Consequently, there would be a levy of interest in terms of section 201(1A) as well as a levy of penalty under section 271C, if suchfailure was without reasonable cause. he amount of tax that could havebeen recovered from the payer would be equivalent to the amount that hewould have had to deduct. Another collateral consequence that would lowis that the payer would sufer a disallowance of the expenditure that he hadclaimed as a deduction having regard to the provisions of section 40(a)(i)or section 40(a)(ia). In such circumstances for the assessment years that oneis concerned with in the present appeals, the consequence would be thatthe expense that was claimed as a deduction on which tax was not deductedwould be disallowed. 32.he present appeals raise one of the question as to whether therespondent is entitled to a deduction of the expenses incurred by it by wayof making a payment to Marriott International Inc. because it had notdeducted tax at source under section 195 on such payment. In ouropinion, this issue would not fall within the scope and ambit of clause (l).his is brought out by the manner in which the tax efect has to bedetermined. he appeals arising from regular assessments where an expenseis disallowed or a claim for an allowance is disallowed or an amount issought to be assessed as income is dealt with in para 5.1. In thesecircumstances, the tax efect is calculated by taking the diference of tax onthe total income assessed and the tax would have been chargeable had suchtotal income been reduced by the amount of income in respect of the issues against which the appeal is intended to be iled. he following examplerelied upon by the learned Senior Advocate for the assessee appealed to us.Learned Senior Advocate submitted that for example, say in the case of anassessee, it incurred an expenditure of Rs.20/- which it claims as adeduction and returns a total income of Rs.100/-. If the expenditure soclaimed is disallowed, by invoking section 40(a) (i) for a failure to deducttax at source, then, the assessee would be assessed on an income ofRs.120/-. If the prevalent rate of tax is 30%, the tax efect would becalculated by applying the rate of 30% on Rs.120/- i.e. Rs.36 andsubtracting from it the tax on the total income returned of Rs.100/- i.e.Rs.30/- and, accordingly, the amount of Rs.6/- would be determined to bethe tax efect. On the other hand, in the case of a litigation pertaining toTDS, suppose on the aforesaid payment of Rs.20/- tax at the rate of 15%would have to be deducted, then, in terms of clause 5.4 of the 15.03.2024circular the tax efect would be calculated at Rs.3/-. We ind force in thesubmissions of the learned Senior Advocate that this is indicative of the factthat what is covered by para 3.1.l are cases springing out of a litigationfrom orders passed under section 201, 201(1A) etc. In the present appeals,the original order which was passed arises from an assessment framed undersection 143(3) and, therefore, the exclusion contemplated in para 3.1.lwould not apply and, accordingly, the appeals must be dismissed aswithdrawn. 33.Further, it is signiicant to notice that the litigation that commencesfrom orders passed under section 143(3) and orders passed under section201 is also under diferent provisions. Section 246A(1) gives a right to anassessee to ile an appeal if it is aggrieved by any of the orders speciiedtherein. Clause (a) of the said provision refers to inter alia an order ofassessment under section 143(3). he right to ile an appeal from an orderpassed under Section 201(1) is to be found in clause (ha). his again isindicative of the fact that the Act treats litigation commencing fromdisallowance in an assessment under section 143(3) and failure to deducttax at source separately and, accordingly, the exception carved out in theinstruction dated 15.03.2024 have to be construed accordingly. 34.Consequently, we have no hesitation in dismissing the appeals aswithdrawn. NIVEDITA P. MEHTA, J. M. S. KARNIK, J.