THE HONOURABLE MR v. M/s.Bharat Heavy Electricals Ltd., Complex Cooperative Labour Contract Society Ltd.E&R Sector, Dr.Ambedkar

IN THE HIGH COURT OF JUDICATURE AT MADRASDated: 30.10.2007CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANT.C.(Appeal) No.1371 of 2007The Commissioner of Income TaxTiruchirapalli... AppellantversusM/s.Bharat Heavy Electricals Ltd., Complex Cooperative Labour Contract Society Ltd.E&R Sector, Dr.Ambedkar NagarKailasapuram, Trichy-14... Respondent-----Appeal presented to the Highcourt against the order of the Income TaxAppellate Tribunal Madras 'c' Bench Chennai dated 16.03.2007 passed in ITANo. 2018/MDS/2006 against the order of the Commissioner of Income Tax(Appeals) No.4, Williams Road, Cantonment Tiruchirapalli-1 dated 6-7-2006in ITA 565/05-06 against the order of the Income Tax Officer Ward iv (1)Trichy dated 9.01.2006 in PAN No. AAAAB0131 E for the assessment year2003-04.For appellant :Mr.T.RavikumarStanding Counsel for Income TaxJUDGMENT(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.)The Revenue seeks the admission of the Tax case for the assessmentyear 2003-04 on the following substantial questions of law:(i) Whether on the facts and in the circumstances of the case, theincome Tax Tribunal is right in law in not considering the merits ofthe case but merely dismissing the appeal on the ground of low taxeffect?(ii) Whether on the facts and in the circumstances of the case,the Income Tax Tribunal is right in law in not considering the https://hcservices.ecourts.gov.in/hcservices/ judgments of the High Court which clearly state that irrespective ofthe low tax effect, the matter is to be decided on merits?(iii) Whether on the facts and in the circumstances of the case,the Income Tax Tribunal is right in law in not considering the factthat the assessee had not established the nexus between the interestdebited and the interest earned in order to claim netting? and(iv) Whether on the facts and in the circumstances of the case,the Income Tax Tribunal is right in law in not considering the judgmentof the Supreme Court in the case of CIT Vs. Dr.V.P.Gopinathan reportedin 248 ITR 449 wherein the Hon'ble Supreme Court had observed that onlygross interest from bank could be taxed and netting provisions may notapply?2. It is seen that the assessee is a Cooperative Labour ContractSociety registered under the Tamil Nadu Cooperative Societies Act witheffect from 10.7.1978. It is stated that the object of the Society is topromote economic interest of the labour members of the Society, to findsuitable employment by obtaining contract from public bodies andencouraging thrift and self help among the members. 3. In the return filed by the society for the Assessment Year 2003-04, admitting an taxable income of Rs.13,130/-, the assessee claimeddeduction under Section 80-P of the Income Tax Act, 1961, to an extent ofRs.3,44,701/-. The assessee claimed deduction under Section 80-P(2)(a)(vi) on the interest from the members amounting to Rs.2,98,041/-. TheAssessing Authority held that the interest from members, interest fromdeposits and sale of empty containers was not allowed for the deductionallowable under Section 80-P, since its receipts were not relatable orattributable to the primary object of the society, which is collectivedisposal of labour of its members. 4. On appeal, the Commissioner of Income Tax (Appeals) held that ifthe amount given as a loan to the members was borrowed from outsiders at aparticular rate and given as a loan to the members, then the assessee wasentitled to claim deduction for the interest paid. Hence, the AppellateAuthority held that it was not the gross receipt of interest which wasliable to be taxed, but the net interest income alone would be taxable.Hence, both on accounting as well as legal principles, the Commissioner ofIncome Tax (Appeals) held that the amount of interest paid to the membersshould be treated as allowable expenditure against the interest receipts.However, the first appellate authority rejected the plea of the assesseeon other counts. 5. The Revenue preferred an appeal before the Income Tax AppellateTribunal on the question of taxability of the interest income. It is seenthat at the time of hearing, the assessee's counsel submitted that the taxeffect involved in this appeal is less then Rs.1,00,000/- and hence, theDepartment is precluded from raising any appeal against such cases. https://hcservices.ecourts.gov.in/hcservices/ Accepting the plea of the assessee, the Tribunal, in its order dated16.3.2007, dismissed the Revenue's appeal. In so doing, it followed thedecision reported in 275 ITR 244 (CIT Vs. KODANAND TEA ESTATES CO.) andheld that the Revenue's appeal pertained to the assessment year 2003-04which was after the Circular of the Board dated 1.4.2000. Aggrieved by thesaid order, the Revenue is on appeal before this Court seeking admission.6. It may be noted that this Court considered a similar issue in thedecision rendered on 16.8.2007 in T.C.No.222 of 2004. Based onInstruction 1979 in Circular F No.279/126/98 ITJ dated 27.3.2000,referring to the statutory power under Section 119 of the Income Tax Act,1961 under which the circular was issued, this Court held that"10.We are of the considered view that none ofthe exceptions stated in the circular are applicableto the facts of the present case. The circular wasstated to be issued by invoking the statutory powerunder Section 119 of the Income-tax Act. The appealis filed under Section 260-A of the Income-tax Act.It is well settled principle of law that each andevery provision of a statute has to be given thesame importance. One provision cannot be alleviatedto a higher pedestal than the other provision, ofcourse, unless or otherwise specifically statedeither in the scheme, the Act or in the provisionitself that a particular provision is subjected toor qualified by any other provision or the provisioncan be given effect to notwithstanding anythingcontained in any other provisions by assigningoverriding effect. Hence, the contention thatnotwithstanding the circular, which was issued underSection 119 of the Income- tax Act, the appeal couldbe filed by the revenue under Section 260-A has tobe rejected for the reason that if the contention isaccepted, one of the Section would become virtuallyotiose and that cannot be the intention of the lawmakers. "7. Thus, following the long line of case law reported in 258 ITR 300(COMMISSIONER OF INCOME-TAX Vs. RAJASTHAN PATRIKA LIMITED), 261 ITR 406(COMMISSIONER OF INCOME-TAX Vs. P.S.T.S.THIRUVIRATHNAM AND SONS), to whichone of us is a party (K.Raviraja Pandian,J.), 292 ITR 314 (COMMISSIONER OFINCOME-TAX Vs. DIGVIJAY SINGH) and 254 ITR 565 (COMMISSIONER OF INCOME-TAXVs. CAMCO COLOUR CO.), this Court held that the long line of judicialopinion is that if the tax effect is less than what is stated in thecircular, the Revenue need not agitate the issue on appeal and that thecircular is binding on the Revenue. In the light of the said view expressed by this Court and on theadmitted fact that the tax effect is also negligible and less than https://hcservices.ecourts.gov.in/hcservices/ Rs.1,00,000/- and the case not falling under any of the stipulations ofthe circular, we do not find any justification to admit this appeal.Consequently, the same is dismissed. sd/-Asst.Registrar/true copy/Sub Asst.RegistrarksvTo:1. The Asst. Registrar, The Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai.2. The Commissioner of Income Tax (Appeal 4), Williams Road, Cantonment, Tiruchirapalli.3. The Income Tax Officer Ward(IV), Trichy.4. The Commissioner of Income Tax Tiruchirapalli.+ cc to Mr. N. Muralaikumaran, Advocate, Sr.65291.BV(CO)RP 4/12/2007.T.C.(Appeal) No.1371 of 2007