The Commissioner Of Income-Tax Salem v. M/S.ideal Garden Complex Private Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANANDTHE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA TAX CASE (APPEAL) NOS.1396 & 1397 OF 2008AND M.P.NO.1 OF 2008 The Commissioner of Income-TaxSalem. ... Appellant in both the TCs. Vs. M/s.Ideal Garden Complex PrivateLtd., No.7/54, Junction Yercaud RoadSalem. ... Respondent in both the TCs. Tax Case Appeals filed under Section 260-A of the Income TaxAct, 1961 against the order of the Income Tax Appellate Tribunal;"D" Bench, Chennai dated 18.8.2005 passed in W.T.A.Nos.95/Mds/2003and W.T.A.No.96/Mds/2003 respectively against the order of theCommissioner of Wealth Tax (appeals) Salem in WTA No. 2/02-03;WTA.No.3/02-03 dated 3.4.2003 for the Assessment year 1997-98 and1998-99 respectively and against the order of the DeputyCommissioner of Income Tax Company circle 1, Salem dated 27.3.2002in PAN.GIR.No.1DC10001/Coy-1/Salem, for the Assessment year 1997-98 and 1998-99 respectively. For Appellant : Mr. T. Ravikumar J U D G M E N T (Judgment of the Court was delivered by K. Raviraja Pandian, J.) The Revenue seeks the admission of the Tax Case for theassessment years 1997-98 and 1998-99 on the following substantialquestions of law:- (i) Whether the Tribunal was right in dismissing the appealpreferred by the Revenue without going into the merits of thecase on the ground that the disputed tax exceeds the monetarylimit prescribed in the CBDT circular dated 27.3.2000?(ii) Whether the right of appeal conferred under Section 254 https://hcservices.ecourts.gov.in/hcservices/ of the Income Tax Act could be restricted or whittled down bythe Central Board of Direct Taxes ?(iii) While the Tribunal took into consideration of thecircular issued by the CBDT whether it is empowered to neglectexemptions contained in the same and the subsequent clarifyingcircular issued by the CBDT ? (iv) Whether the Tribunal was right in holding that thecircular of CBDT restricts the right of appeal conferred underSection 254 of the Income Tax Act, even in spite of thejudgment of the jurisdictional High Court reported in 261 ITR406 ?v) Whether the Tribunal is right in not considering the issue asone involving the substantial question of law and ought not tohave dismissed the appeal without going into the merits of thecase?and vi) Whether or not on the admitted facts of the case that theincome of the assessee an income from the property in view ofthe judgment of the jurisdictional High Court reported in 214ITR 424? 2. The assessee company owned a commercial complex andreceived rent of Rs.14.61 lakhs for the period 1996-97 relatingto the assessment year 1998-1999. In the Income tax assessmentcompleted under Section 143(3)/147, it has been held that theincome from letting of commercial complex is assessable as incomefrom house property in terms of Sections 22 to 24 of the IncomeTax Act as against business income as claimed. Therefore, thevalue of commercial complex as reduced by debts owned by theassessee as on the valuation date is assessed to wealth tax. Asthere was reason to believe that net wealth chargeable to tax hasescaped assessment, proceedings were initiated under Section 17of the Wealth Tax Act. In response to the notice under Sections17 and 16(4) served, the assessee filed a return on 29.6.2000admitting "nil" value of the net wealth. 3. In the note appended to the statement of wealth, theassessee stated as under:-i) The building owned by the assessee has constructed on leaseholdland. Hence, the value of the building or superstructure alone isincluded.ii) Since the building is a business asset. WDV of the buildinghas been admitted as per Rule 14 of Schedule III to Wealth TaxAct. iii) Investment representing shares in companies and currentassets are not assets within the meaning of Section 2(ca) of theWealth Tax Act. 3. In the note appended to the statement of wealth, theassessee stated as under:-i) The building owned by the assessee has constructed on leaseholdland. Hence, the value of the building or superstructure alone isincluded.ii) Since the building is a business asset. WDV of the buildinghas been admitted as per Rule 14 of Schedule III to Wealth TaxAct. iii) Investment representing shares in companies and currentassets are not assets within the meaning of Section 2(ca) of theWealth Tax Act. 4. In response to notice under Section 16(2) served, theassessee's representative appeared and after hearing the case, thenet wealth of the assessee has been computed at Rs.17,19,535/-. 5. In respect of Income Tax assessment for the AssessmentYear 1992-93, the assessee has filed the returns of income whichwere processed under Section 143(1). During the previous yearrelevant to assessment year 1992-93, the assessee companycompleted construction of commercial complex building at a cost ofRs.40,65,287/- and claimed depreciation. 6. The Revenue is of the view that as the assessee's incomeis from letting out commercial complex, the same is assessable asincome from house property. The For escapement of income,proceedings were initiated under Section 147 and notice underSection 148 was issued with the prior approval of the JCIT, SalemRange, Salem. 7. The assessee objected to the proposal for assessment ofincome under the head "house property" since the proposed actionwas as a result of objection from audit party relying on thedecision of this Court in the case reported in 215 ITR 424 and thedecision relied on by the Audit Party was entirely on differentfacts the proposed reassessment was not justified. 8. It was also the case of the assessee that the buildingi.e. the superstructure alone is owned by the company and the landbelongs to Sri A.Sethu and it has been taken on lease and on whichthe building has been constructed which is duly reflected in thebalance-sheet. In view of various conditions which do not giveabsolute right over the property and the assessee is not the ownerof the land, the income cannot be treated as income from property.Further, it was argued that the main object of the company is totake land on lease and construct building and let it out ascommercial complex and accordingly, the income should be assessedunder the head "business income" In support of the claim, theassessee quoted the case laws in the case of Boopalan CommercialComplex and Industries Pvt. Ltd., Vs. CIT (72 ITD 262 (Bag) andM/s. Sanmar Holdings Ltd Vs. ITO decided by the Madras Bench ofITAT. After considering the objection of assessee and by relyingon the decision of this Court reported in 215 ITR 424, the incomehas been taken as income from house property. Aggrieved over thesame, the assessee preferred an appeal before the Commissioner ofWealth Tax (Appeals). 9. The Commissioner of Wealth Tax (Appeals) allowed theappeal directing the assessing officer to treat the income as thatof business instead of income of house property placing reliance on Rule 14 of Schedule III to the Wealth Tax Act. The Revenueaggrieved over the same, preferred an appeal to the Income TaxAppellate Tribunal. 10. It is seen that at the time of hearing, the assessee'scounsel submitted that the tax effect involved in this appeal isless then Rs.1,00,000/- and hence, the Department is precludedfrom filing appeal against such cases as per the Circular ofCentral Board of Direct Taxes, dated 27.3.2000. Accepting the pleaof the assessee, the Tribunal, in its order dated 18.8.2005,dismissed the Revenue's appeal. In so doing, it followed thedecision reported in 275 ITR 244 (CIT Vs. A.K.AGARWAL & OTHERS)and 276 ITR 519 (CIT Vs. PITHWA ENGINEERING WORKS) wherein it washeld that the aforementioned circular is applicable even to oldreferences which are still undecided. Aggrieved by the saidorder, the Revenue is on appeals before this Court seekingadmission. 10. It is seen that at the time of hearing, the assessee'scounsel submitted that the tax effect involved in this appeal isless then Rs.1,00,000/- and hence, the Department is precludedfrom filing appeal against such cases as per the Circular ofCentral Board of Direct Taxes, dated 27.3.2000. Accepting the pleaof the assessee, the Tribunal, in its order dated 18.8.2005,dismissed the Revenue's appeal. In so doing, it followed thedecision reported in 275 ITR 244 (CIT Vs. A.K.AGARWAL & OTHERS)and 276 ITR 519 (CIT Vs. PITHWA ENGINEERING WORKS) wherein it washeld that the aforementioned circular is applicable even to oldreferences which are still undecided. Aggrieved by the saidorder, the Revenue is on appeals before this Court seekingadmission. 11. It may be noted that this Court considered a similarissue in the decision rendered on 16.8.2007 in T.C.No.222 of 2004.Based on Instruction 1979 in Circular F No.279/126/98 ITJ dated27.3.2000, referring to the statutory power under Section 119 ofthe Income Tax Act, 1961 under which the circular was issued, thisCourt held that"10.We are of the considered view that none of theexceptions stated in the circular areapplicable to the facts of the present case.The circular was stated to be issued byinvoking the statutory power under Section 119of the Income-tax Act. The appeal is filedunder Section 260-A of the Income-tax Act. Itis well settled principle of law that each andevery provision of a statute has to be giventhe same importance. One provision cannot bealleviated to a higher pedestal than the otherprovision, of course, unless or otherwisespecifically stated either in the scheme, theAct or in the provision itself that aparticular provision is subjected to orqualified by any other provision or theprovisioncanbegiveneffecttonotwithstanding anything contained in anyother provisions by assigning overridingeffect. Hence, the contention thatnotwithstanding the circular, which was issuedunder Section 119 of the Income- tax Act, theappeal could be filed by the revenue underSection 260-A has to be rejected for thereason that if the contention is accepted, one of the Section would become virtually otioseand that cannot be the intention of the lawmakers. " 12. Thus, following the long line of case laws reported in258 ITR 300 (COMMISSIONER OF INCOME-TAX Vs. RAJASTHAN PATRIKALIMITED), 261 ITR 406 (COMMISSIONER OF INCOME-TAX Vs.P.S.T.S.THIRUVIRATHNAM AND SONS), to which one of us is a party(K.Raviraja Pandian,J.), 292 ITR 314\ (COMMISSIONER OF INCOME-TAXVs. DIGVIJAY SINGH) and 254 ITR 565 (COMMISSIONER OF INCOME-TAXVs. CAMCO COLOUR CO.), this Court held that the uniform line ofjudicial opinion is that if the tax effect is less than what isstated in the circular, the Revenue need not agitate the issue onappeal and that the circular is binding on the Revenue. 13. In the light of the said view expressed by this Court andon the admitted fact that the tax effect is also negligible andless than Rs.1,00,000/- and the case not falling under any of thestipulations of the circular, we do not find any justification toadmit these appeals. Consequently, the same are dismissed. KbSd/Asst.Registrar /true copy/ To Sub Asst.Registrar 1. The Assistant Registrar,Income Tax Appellate Tribunal,Bench D' Rajaji Bhavan,Besant Nagar, Chennai 90. 2. The Commissioner of Income Tax,Salem. 3. The Deputy Commissioner of Income Tax,Company Circle I, Salem. 4. The Income Tax Officer, Salem. 5. The Secretary, Board of Revenue, New Delhi. 6. The Commissioner of Wealth Tax (Appeals) 3, Gandhi Road, Salem 636 007 + 2 ccs to Mr. N. Muralikumaran, Advocate SR No. 46828/08, 46829/08 T.C.(A)Nos.1396 & 1397of 2008 SV(CO)SR/22.9.2008