2010 (8) TMI 702 - HC - Income Tax

Tax impact - old references which are still undecided. The Department is not justified in proceeding with the old references wherein the tax impact is minimal. Thus, there is no justification to proceed with decades old references having negligible tax effect, answer of reference in the negative in favour of the assessee and against the Revenue

Summary

Issues:
Reference under section 256(2) of the Income-tax Act, 1961 regarding tax impact.

Analysis:
The judgment pertains to a reference under section 256(2) of the Income-tax Act, 1961. The counsel for the appellant acknowledged that the tax impact in question amounted to Rs. 1,80,000. The court referred to a decision by a Division Bench of the Madhya Pradesh High Court in CIT v. Ashok Kumar Manibhai Patel and Co. [2009] 317 ITR 386(MP) and another case involving CWT v. Dr. Ajad Kumar Jain (HUF), Sagar. The court cited the decision in CIT v. Pithwa Engineering Works [2005] 276 ITR 519 (Bom) to emphasize the importance of considering the tax impact in determining whether to proceed with a reference. The court highlighted the Board's Circular dated March 27, 2000, which suggested not filing references if the tax effect is less than Rs. 2 lakhs. The court, in line with this principle, decided to dismiss the present reference due to the minimal tax impact of Rs. 1,80,000, as per the counsel's statement.

This judgment underscores the significance of considering the tax impact in deciding whether to pursue references under the Income-tax Act, 1961. It emphasizes the need to adopt a pragmatic approach, especially in cases with minimal tax effects, to alleviate the burden on the judicial system and prioritize cases with substantial tax implications. The court's decision aligns with the principle laid down in previous cases and the Board's Circular, highlighting the need for efficient allocation of resources and judicial time based on the financial significance of the tax impact involved.