The Judgment of the Court was delivered by
Raju, J.:— The above writ petition has been filed for a writ of certiorarified mandamus to call for and quash the proceedings of the first respondent in Case No. 1411/(25) of 1979–80 CBE and consequently direct the first respondent to take up the revision petition dated May 7, 1979, on its file and hear and dispose of the same on the merits.
2. The petitioner is a joint stock company incorporated in Switzerland and had entered into a collaboration agreement dated February 16, 1963, with Messrs. Lakshmi Machine Works Limited, Coimbatore, a company registered under the Companies Act, 1956, for the manufacture of various kinds of textile machinery. The agreement concerned both the provision of technical assistance and also the service and training of technicians and specification of the terms of the collaboration agreement regarding consideration.
3. The nature of services to be rendered by the foreign company for which royalty was paid was also specified in clause 4 of the said financial agreement. Later, another agreement was also said to have been entered into for the purpose of manufacturing carding machines between the petitioner and Lakshmi Machine Works, under which also certain payments were to be made by the Indian company to the petitioner-company.
4. For the assessment year 1975–76, the petitioner was said to have returned a sum of Rs. 15,85,102 representing royalty received from the Indian company under the first agreement dated February 16, 1963, and the same was duly considered by the Income-tax Officer. With reference to the amount received under the second agreement dated April 5, 1974, the petitioner appears to have claimed that the sum of Rs. 3,16,456 remitted by the Indian company to the foreign company was not liable to income-tax under the Income-tax Act, 1961, and hence it did not disclose in its return the said sum. The Income-tax Officer, Company Circle-I, Coimbatore, by his order dated September 11, 1978, included for assessment the sum of Rs. 15,85,102 returned by the foreign company as royalty under the first agreement as also a sum of Rs. 2,10,970 being two-thirds of Rs. 3,16,456 received by it under the second agreement and while doing so, it rejected the claim of the petitioner that the payment under the second agreement was not liable to tax. Aggrieved, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals), Coimbatore, and disputed the inclusion of two-thirds of the amount received under the second agreement as not being subject to assessment in its entirety.
5. For the subsequent assessment years 1976–77 to 1980–81, the petitioner claims to have taken a stand that the payment towards royalty under the first agreement will not also be liable to be taxed. But the Income-tax Appellate Tribunal, before whom the matter was ultimately taken, appears to have held that only one-third of the amount payable as royalty in the first agreement was taxable and two-thirds thereof cannot be subjected to tax. In the light of the above circumstances, according to the petitioner, since the issue was earlier not agitated before the appellate authority in respect of the assessment year 1975–76, the petitioner filed a revision petition under section 264 of the Income-tax Act, 1961, to the Commissioner of Income-tax, Coimbatore, the first respondent herein, on May 7, 1979, and pointed out that the petitioner had not filed any appeal pertaining to the issue under consideration. The position about the other orders pertaining to the subsequent orders were also made known. In spite of all these, the first respondent by his proceedings dated August 20, 1983, rejected the petition on the ground that the petition was not maintainable in view of Section 264(4)(c) of the Income-tax Act, 1961, which prohibited the filing of any revision under section 264 where the order had been made the subject-matter of an appeal before the Commissioner of Income-tax (Appeals). The first respondent has passed the following order on the revision petition filed:
“The revision petition is directed against the inclusion of a portion of royalty assessed in the total income of the company. It is seen from the records that the assessment was the subject-matter of appeal before the Commissioner of Income-tax (Appeals). The issue taken up before the Commissioner of Income-tax (Appeals) relates to the assessment of technical know-how fees. Section 264(4)(c) of the Income-tax Act prohibits the Commissioner from exercising the revisionary powers, where the order has been made the subject-matter of an appeal to the Commissioner of Income-tax (Appeals) or the Appellate Tribunal. In view of this, the revision is not maintainable and deserves to be rejected.
The revision petition is, therefore, rejected as not maintainable.”
6. Accordingly, the above writ petition has been filed. The only issue that has been raised at the time of hearing by learned counsel for the petitioner is that the provisions of section 264(4)(c) are not an impediment to the consideration of the revision filed by the petitioner on the merits and the granting of relief in accordance with law, in the light of the circular order issued by the Board clarifying the position, according to which the jurisdiction of the Commissioner to entertain a revision petition from an assessee against an order should be considered to be barred only if an appeal against that order has been preferred by the assessee before the Tribunal and not where such an appeal has been preferred by the Department. Mr. Balasubramaniam, learned counsel appearing for the respondent, would contend that the fact that the order under challenge before the first respondent in the form of a revision has been made the subject of an appeal to the Commissioner (Appeals), is itself a sufficient ground to disable the first respondent from entertaining the revision for an adjudication on the merits of the claim made in such revision. That apart, learned counsel contended that the further appeal to the Tribunal would also stand in the way of the first respondent entertaining the revision and the fact that such an appeal was filed by the assessee or by the Department is wholly immaterial. Reliance was also placed on the, decision in C. Gnanasundara Nayagar v. Commissioner Of Income-Tax, Madras., [1961] 41 ITR 375 (Mad) and the decision in CWT v. Mrs. Kasturbai Wakhand, [1989] 177 ITR 188 (SC) in support of the stand taken for the respondent.
7. I have carefully considered the submission of learned counsel appearing on either side. I am of the view that no interference with the order of the first respondent under challenge in this writ petition is called for. The provisions of sub-section (4) of section 264 of the Income-tax Act, 1961, and, particularly, clause (c) provide that the Commissioner shall not revise any order under this section, where “the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal.” The decision in C. Gnanasundara Nayagar v. Commissioner Of Income-Tax, Madras., [1961] 41 ITR 375 (Mad), which is that of a Division Bench of this court construing a pari materia provision, namely, section 33A(2), proviso, clause (c), it was held that an order of assessment cannot be revised by the Commissioner on an application by the assessee if an appeal has been preferred against that order to the Appellate Tribunal and the bar against revision remains unaffected by the scope of the appeal preferred to the Tribunal, whether it is restricted by the assessee of his own choice or whether it is restricted by the Tribunal. That the relief claimed in the application for revision was not the subject-matter of the appeal to the Tribunal does not alter the position that the order of assessment was the subject of the appeal. Their Lordships further held that the word “order” in clause (c) of the proviso to section 33A(2) referred to the order appealed against and not to the relief claimed in the appeal. That apart, it is by now well-settled that the “subject of an appeal” means the subject of an effective appeal and cases of withdrawal or dismissal of an appeal on the ground of maintainability or on the ground of bar of limitation, would constitute no such impediment and that subject of an appeal should be considered to mean an appeal disposed of on the merits.
8. The decision in CWT v. Mrs. Kasturbai Wakhand, [1989] 177 ITR 188 (SC), dealing with a similar provision in section 25(1)(b) of the Wealth-tax Act, 1957, is an authority for the proposition that it matters little as to who filed the appeal, whether the appeal was by the assessee or by the Department. In contrast to the said settled legal position, learned counsel for the petitioner would contend otherwise by placing merely a circular, said to have been issued and found published in the Commentary on the Law of Income Tax by Sampath Iyengar (8th edition, at page 5783). A portion of the circular as published no doubt discloses the fact, by way of an inter-departmental communication, that the addressee of the circular has been invited to notice the legal position in the view of the Board, that the jurisdiction of the Commissioner to entertain a revision petition from an assessee against an order could be considered to be barred only if an appeal against the order has been preferred by the assessee before the Tribunal and not where such an appeal has been preferred by the Department. On a careful consideration of the matter, I am of the view that a view expressed in an inter-departmental circular by an administrative authority can hardly provide a safeguard or formula for the construction of a statutory provision which contains necessarily, in my view, a prohibition or restriction on the powers of the statutory revisional authority from entertaining a revision under certain stated circumstances. The principles referred to above would go to show that it matters little as to who approached the Tribunal and the fact remains that under the statute the fact that the order sought to be revised has been made the subject of an appeal to the Commissioner of Appeals or to the Tribunal would disentitle the Commissioner to entertain the revision for disposal on the merits.
9. The question which looms large for consideration in this writ petition would be as to whether a statutory provision and a restriction contained therein can be qualified merely because of an expression of a particular view of the scope or consequence of the statutory provisions in an inter-departmental circular. I am afraid, I cannot agree to the stand taken for the petitioner that the circular should go into the consideration and adjudication in the matter and, at any rate, the circular cannot provide any guidance in the matter of construction to be placed on the scope of the provisions by this court. If any administrative circular orders of a superior authority in the hierarchy of the Department are disobeyed by a subordinate authority, it may expose such subordinate authority to disciplinary jurisdiction or give room for the person aggrieved to move the higher authority which issued the circular, for redress of alleged violation of such circular orders and inter-departmental communications cannot confer any rights or provide any legal basis to claim any right enforceable before courts exercising jurisdiction under article 226 of the Constitution of India. The Commissioner exercising quasi-judicial powers under section 264(4)(c) of the Act cannot be controlled by any circular or direction issued by an administratively superior authority. De hors the circular, on the scope of the provisions, I am satisfied that the facts and circumstances of the case, namely, the filing of the appeal by the petitioner as also the appeal by the Department before the Tribunal would attract the prohibition contained in clause (c) of sub-section (4) of section 264 and thereby disable the Commissioner from exercising his revisional jurisdiction in favour of the petitioner in the matter in question. The view taken by me has the support of the judicial pronouncements referred to above. Consequently, I see no patent error of law or infirmity in the order of the Commissioner warranting interference of this court under article 226 of the Constitution of India. The writ petition, therefore, shall stand dismissed. No costs.