The Commissioner Of Income Tax, City-Vii,Mumbai v. M/S National Organic Chemicals Industries Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 203 OF 2002 The Commissioner of Income Tax, City-VII,Mumbai ..Appellant Vs. M/s National Organic Chemicals Industries Ltd...Respondent .... Mr. Suresh Kumar, Advocate for Appellant. ....CORAM : M.S. SANKLECHA & N.M. JAMDAR, JJ.DATED : 11 AUGUST 2015 P.C.: This appeal under Section 260A of the Income Tax Act, 1961 (the 'Act') challenges the order dated 5 October 2001 for theAssessment Year 1988-89. 2.The appeal was admitted on 13 August 2004 on thefollowing substantial question of law: “(A)Whether on the facts and incircumstances of the case, the penalty paid by theassessee to the extent of Rs.8 lakhs to the customsauthorities is allowable as the business expenditureunder Section 37 of the Income Tax Act, 1961?” S.S.DESHPANDE 3.It is an undisputed position that the disputed claim in theappeal is valued at Rs.9.88 lacs therefore follows that the tax effectin the present appeal is less than Rs.10 lacs. 4.This Court in CIT Vs. Vijaya Kavekar[1] while dealing withappeals filed by the revenue dismissed a pending appeal having lowtax effect i.e. less than Rs.10 lacs by pacing reliance upon CentralBoard of Direct Taxes (the 'CBDT') Instruction NO.3/2011. ThisCourt held that the circular/instruction issued by CBDT would applyto pending appeals. 5.The CBDT has now issued Instruction No.5/2014 whereinit has also been specifically provided that where the tax effect is lessthan Rs.10 lacs, the revenue should not file appeal unless it fallswithin exclusion clause provided therein. Nothing has been shownto us to indicate that the issue arising in the present appeal wouldfall within the exclusion clause under Instruction No.5/2014.Therefore we are inclined to dismiss this appeal. 1. 350 ITR 237 6.However, Mr. Suresh Kumar, the learned Counsel for therevenue urges that the aforesaid two questions would have acascading effect and therefore in view of the decision of the ApexCourt in CIT Vs. Surya Herbal Ltd.[2], the present appeal should bedisposed of on merits. We find that the questions which arise forour consideration in the present appeal would not give rise to anycascading effect. So far as Question raised herein is concerned, itseeks to disallow payment of penalty to the Customs Department onthe ground that it is not an allowable expenditure. This would nothave any cascading effect as a question of penalty and allowing it asexpenditure would be considered independently in each assessmentyear depending upon the facts existing during the year underconsideration. 7.In view of the fact that we are not considering the appealon merits, the substantial question of law as formulated is left opento be decided in an appropriate case. 2. 350 ITR 300 8.In view of the above, as the tax effect is less than Rs.10lacs, we dismiss the present appeal. No order as to costs. [N.M. JAMDAR, J] [M.S. SANKLECHA, J.]