Law: Income Tax Act, 1961

Section: 119

(a) Income-tax----Central Board of Revenue---Circulars---Power intended to ensure proper administration of statute---Circulars having effect of relaxing rigour of law---Providing for uniform application of law consonant with concept of income---Not to be treated as inconsistent with provisions of statute--­Binding on Authorities---Indian Income Tax Act, 1961, S.119. (b) Income-tax--- ----Income---Accrual of income---Method of accounting---Banks---Financial institutions---Interest on "sticky" advances---Not brought into profit and loss account but taken to, separate suspense account---Accepted mode of treatment of notional income in accounting practice---Is for proper determination of income in terms of S.145---Circular or C.B.D.T. permitting such interest to excluded from income for three years such interest is not actually received---Thereafter, interest will be added as income only when actually received---Indian Income Tax Act, 1961, Ss. 119 & 145---[Kerala Financial Corporation v. CIT (1994) 210 ITR 179 (SC) overruled; CIT v. UCO Bank i93) 201 ITR 162; CIT v. Tamil Nadu Industrial Investment Corporation i. (No. 1) (1996) 218 ITR 616 and CIT v. Tamil Nadu Industrial Investment Corporation Ltd. (No.2) (1996) 218 1TR 620 reversed. The Central Board of Direct Taxes under section 119 of the Income Tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however; the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest.. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus, be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities.…

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