TMI Blog2008 (2) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... gi for the respondent. JUDGMENT CHANDRAMAULI KUMAR PRASAD J.- In all these references, common questions of law with little variation of facts, arise and as such, they were heard together and are being disposed of by this common judgment. Tax Cases Nos. 2 and 3 of 1991 2. The assessee, M/s. Alkem Laboratories (P.) Limited, is a private limited company deriving income from manufacturing and sale of medicines. The assessee claimed deduction under two heads, viz., Rs. 70,000 on account of repairs of rental premises and Rs.10,998 spent on plumbing work. The Assessing Officer disallowed both the claims as he was of the opinion that these two items were capital expenditure of the assessee. The assessee then preferred an appeal, inter alia, contending that the expenses it claimed were purely of the nature of repairs and no new assets having come into being, the deduction is fit to be granted. The Commissioner of Income-tax (Appeals) allowed the deduction of the amount spent on the repairs but did not express any opinion in respect of the amount spent in plumbing work. While doing so, the Commissioner of Income-tax (Appeals) observed that repairing expenditure incurred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the aforesaid question has been referred for our opinion. 8. At the outset, Mr. A.K. Rastogi, appearing on behalf of the assessee, points out that the Central Board of Direct Taxes, vide instruction No.1903, dated October 28, 1992, and Instruction No.1777, dated November 4, 1987, had put monetary limits of Rs. 25,000 for Departmental appeals (in income-tax matters) before the Appellate Tribunal, Rs. 50,000 for filing reference to the High Court and Rs.1,50,000 for filing appeal to the Supreme Court. He further points but that later on, the aforesaid instructions were superseded by the Central Board of Direct Taxes, vide Instruction dated March 27, 2000, and it decided that appeals will be filed in cases where tax effect exceeds the revised monetary limit given as under: (i) Appeal before the Appellate Tribunal, in income-tax matters) Rs. 1,00,000 (ii) Appeal under section 260A/ reference/under section 256(2) before the High Court 2,00,000 (iii) Appeal before the Supreme Court 5,00,000" 9. In partial modification of the above instructions, by notification dated October 24, 2005, it has been decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s circular dated March 27, 2000, is very much applicable even to the 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. We, for the above reasons, do not think it necessary to answer the reference made to this court for the assessment year 1975-76 having negligible tax effect. Accordingly, reference stands returned unanswered with no order as to costs." 12. Mr. S.K. Sharan, standing counsel appearing on behalf of the Revenue, states that he has instruction to press these references. He submits that once the references have been made, the same are to be answered and cannot be returned without opinion. 13. Having appreciated the rival submissions, I am not inclined to return the references unanswered. The instruction of the Central Board of Direct Taxes fixing the monetary limit for filing appeals and references are administrative in nature, Whereas the references made and called statutory in nature. In my opinion, the administrative instructions issued by the Central Board of Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be rejected. We do not find any infirmity in disposing the appeal on the merits." 16. The Delhi High Court in the case of CIT v. Blaze Advertising (Delhi) P. Ltd. [2002] 255 ITR 460 has held that the circular issued by the Board, in no way, prohibits or curtails, the power of the Tribunal for making reference. 17. The Supreme Court in the case of CIT v. Hero Cycles P. Ltd. [1997] 228 ITR 463, has held that the circular issued by the Central Board of Direct Taxes can bind the Income-tax Officer, but shall not bind the appellate authority or the Tribunal or the court or even the assessee. 18. The Punjab and Haryana High Court had the occasion to consider this question in the case of CIT v. Abishek Industries Ltd. [2006] 286 ITR 1 and contrary to the view of the Bombay High Court in the case of Pithwa Engineering Ltd. [2005] 276 ITR 519 held that once the reference is before the court, the same has to be decided on its own merits. The relevant portion of the judgment reads as follows (page 29): "Accordingly, we do not deem it appropriate to restrain from discharging our judicial function, in hearing and deciding the appeal on the merits. As far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under section. 37 are satisfied, then such expenses are required to be deducted while computing the income. Therefore, in my opinion, certain expenses may not be admissible under section 30(a)(i) of the Act but can be admissible under section 37(1) of the Act. 25. Various precedents support the view which I have taken. The Kerala High Court had the occasion to consider this question in the case of CIT v. High Land Produce Co. Ltd. [1976] 102 ITR 803 in which it has been held as follows (page 807): "The residuary nature of the provision in section 37(1) will, therefore, have to be given its full play. Bearing in mind the reason for the introduction of the words within the brackets 'not being expenditure of the nature described in sections 30 to 36' we have to remember that those words do not preclude certain species of liabilities but only exclude consideration of liabilities which would fall under any of those sections. We shall explain. Taking for instance, the liability for gratuity, the nature of the liability is a liability towards gratuity. It is towards that liability provision has been made under section 36(1)(v) of the Act. If the submission of counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and profession. Section 37 is a general section which provides for deduction of expenditure not included in any of the sections 30 to 36 of the Act. The scope of section 37 of the Act came up for consideration before the Kerala High Court in CIT v. High Land Produce Co. Ltd. [1976] 102 ITR 803, wherein it was held that the provisions of section 37 of the Act cannot be given a restricted meaning. Mere fact that the claim does not fall in any of the sections 30 to 36 will not automatically make the claim unsustainable under section 37(1) of the Act as well. Section 37 being a general section, is for grant of deduction on certain accounts not enumerated in sections 30 to 36 of the Act." 29. The Allahabad High Court had the occasion to consider this question in the case of Girdhari Dass and Sons v. CIT [1976] 105 ITR 339 and answered the question in the following words (page 343): "We, accordingly, answer the question by saying that the sums of Rs.10,859, Rs. 9,865 and Rs.1,000 were admissible allowance not under section 30(a)(i) but under section 37 of the Act." 30. Accordingly, the question is answered in the affirmative against the Revenue and in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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