· The only question for consideration before the Court was whether the Department could take a contrary view than the tax effect Circular and insist for arguing the matter on merits.
· The Court, after referring to the provisions of section 119 and section 268A of the Act, the tax effect Circulars issued by the CBDT on 09.02.2011 and 10.12.2015, and the various judgments cited by both the parties, was inclined by the Departmental Representative towards Article 141 of the Constitution of India.
· The counsel for the Department put forth an argument that in spite of a decision of the Supreme Court on an issue, the lower authorities may take a contrary view if they merely resort to the Circular issued by CBDT regarding the tax effect involved in a case.
· The Court held that the Circular issued by the CBDT under Section 268A of the Act is binding on the Department, and thus, the appeal cannot be preferred contrary to the instructions given therein.
· The Court further took note of the provisions of Article 141 of the Constitution of India, which provides that the law declared by the Supreme Court is binding on all the Courts within the territory of India.
· In this regard, the Court held that if an issue has been decided by the Apex Court, then the ratio propounded therein is to be applied as a precedent. If the ITAT or the CIT(A) take a view contrary to the settled law, then the rider imposed by the CBDT on filing of appeals cannot be applied, and therefore, the Department could prefer an appeal in such cases.
· Thus, the Court concluded that the Circular issued by CBDT is binding on the Department and appeal cannot be filed if it is barred as per the Circular. It was, however, clarified that if the issue decided by the CIT(A) or the ITAT was contrary to the judgments of the Supreme Court, the Department could prefer an appeal in such matters.
· The Court further suggested the Department to incorporate this conclusion in its Circular, to avoid further controversy on this issue.
For further reading, refer the attachment.
Further Reading