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Director of Income Tax, New Delhi v. M/s S.R.M.B. Dairy Farming (P) Ltd.

Civil Appeal · 2017 INSC 1135Decided 23 Nov 2017
Civil Appeal No. 19650 of 2017
Justice Rohinton Fali Nariman · Justice Sanjay Kishan Kaul

Background

The Income Tax Department had filed appeals against the respondent even though the tax amount in dispute was below the monetary threshold set by CBDT Instruction No. 3 of 2011 (raising the earlier Rs. 4 lakh limit to Rs. 10 lakh), below which the Department is not supposed to pursue appeals. High Courts across the country had taken divergent views on whether this instruction, which the Revenue argued was only prospective, should also apply to appeals that were already pending in the High Courts when the new circular was issued. This divergence, including conflicting Supreme Court orders, created uncertainty that needed to be resolved.

Decision Breakdown

The Supreme Court held that the view taken by an earlier three-judge bench in the Surya Herbal Ltd. case should prevail over subsequent two-judge bench orders that had not considered it, meaning the monetary-limit circular does apply even to appeals that were already pending, not just to appeals filed after the circular's issuance. This application is subject to two caveats carried over from the Surya Herbal ruling (protecting cases involving a legal question of recurring importance or a challenge to the vires of a provision). Applying this to the facts, the Court held the Revenue's appeals, which fell below the monetary threshold and did not fall within the caveats, were liable to be dismissed. The appeals were accordingly dismissed.

Lesson Learnt

Government tax appeals below the monetary threshold set by its own circulars will be dismissed by courts even if the appeal was filed before a later, more generous threshold was announced: litigation monetary limits are given retrospective effect to pending cases too, subject to narrow exceptions for important legal questions.

Official source (sci.gov.in)View Judgment (PDF)

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