JUDGMENT
K.S. Paripoornan, J.
1. The Revenue is the petitioner herein. This is a petition filed under Section 256(2) of the Income-tax Act, 1961, praying that this court may be pleased to refer the following questions of law, formulated in para 9 of the O. P. for the decision of this court :
“1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that there was no error in the assessment order passed by the Income-tax Officer in the matter of allowing extra shift allowance which required the intervention of the Commissioner under Section 263 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in cancelling the order under Section 263 passed by the Commissioner of Income-tax withdrawing the extra shift allowance allowed by the Income-tax Officer in the assessment order ? ”
2. The respondent is an assessee to income-tax. The matter relates to the assessment year 1977-78, the corresponding previous year ending on
March 31, 1977. The controversy is regarding the allowance of extra shift allowance in respect of the entire machinery in the factory of the respondent. The Income-tax Officer allowed the same in entirety. The Commissioner of Income-tax initiated suo motu revision proceedings. After giving an opportunity to the assessee, he held that the extra shift allowance can be allowed only in respect of such machinery as has worked during the previous year relevant to the assessment year. In taking the said view, the Commissioner of Income-tax relied on the decision of the Calcutta High Court in Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851. The order of assessment was set aside. The Income-tax Officer was directed to make a fresh assessment according to law. The respondent/assessee filed an appeal before the Appellate Tribunal against the revisional order of the Commissioner of Income-tax. The main plea of the assessee before the Tribunal was that the Income-tax Officer was justified in granting extra shift allowance on all the machinery in the concern of the assessee in view of the Circular of the Board (F. No. IO/83/63-ITA (II)) dated September 28, 1970. It was argued that the said circular is binding on all officers of the Department and that the Income-tax Officer was justified in giving effect to the said circular. In this view of the matter, the order of the Income-tax Officer is not erroneous, nor can the same be considered to be one prejudicial to the Revenue. The Appellate Tribunal held that this circular was not brought to the notice of the Calcutta High Court in the decision in Anantapur Textiles Ltd.’s case [1979] 116 ITR 851 and further held that the circular is binding on all authorities subordinate to the Board. It was further held that the Income-tax Officer was justified in allowing extra shift depreciation on the entire plant and machinery in the concern of the assessee in the light of the circular and that no error was committed in the matter. The Revenue filed an application before the Appellate Tribunal under Section 256(1) of the Income-tax Act to refer two questions of law for the decision of this court. By order dated September 19, 1984, the said application was rejected. Thereafter, the Revenue has filed the present petition, under Section 256(2) of the Act, praying that this court may be pleased to direct the Appellate Tribunal to refer the two questions of law, formulated in para 9 of the O.P. for the decision of this court.
3. We heard counsel for the Revenue, Mr. Menon, as also counsel for the respondent, Mr. Jose Joseph and Mr. Mayankutty Mather. The main plea of counsel for the Revenue was that the Appellate Tribunal was in error in relying upon the circular of the Board of Revenue dated September 28, 1970, and in holding that the assessee is entitled to the extra shift allowance on the entire machinery, as claimed by it. It was argued that the circular of the Board of Revenue is only an administrative direction and
it will not override the law. The decision of the Calcutta High Court in Anantapur Textiles Ltd.’s case [1979] 116 ITR 851 has correctly interpreted the law and it should have been followed. The Appellate Tribunal was in error in reversing the order of the Commissioner of Income-tax.
4. We see no force in this plea. . The Board of Revenue is competent to issue circulars under Section 119 of the Income-tax Act. The circulars so issued have got the force of law. All officers of the Department are bound by the said circulars. The benevolent circulars issued by the Board are in the nature of administrative relief. They really “supplant” the law. The circular can afford administrative relief even beyond the relevant terms of the statute. It can deviate from the provisions of the Act. The courts have held that such circulars are binding on the officers of the Department. It is not open to the Department to contend, even in cases where the circular goes beyond the terms of the section, that the circular has no legal effect or should not be given effect to. The circulars would go to the assistance of the assessees. It is settled law that the circulars cannot impose any burden on the taxpayer. But, by the issue of a circular, the rigour of the law can be relaxed by giving administrative relief. Apart from the fact that such circulars are binding on the officers of the Department, even if the circulars are relied on for the first time in the High Court during the course of hearing, the assessee will be entitled to the benefit afforded by the circular. The court is bound to take note of the circular. These propositions are well settled by a series of decisions of the Supreme Court as well as of High Courts (Vide Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198 at p. 203 (SC), Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC), Tata Iron & Steel Co. Ltd. v. N.C. Upadhyaya [1974] 96 ITR 1 (Bom), F. C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati), Navnitlal Ambalal v. CIT [1976] 105 ITR 735 (Bom), CWT v. Gammon India P. Ltd. [1981] 130 ITR 471 (Bom) and Addl. CIT v. Mrs. Avtar Mohan Singh [1982] 136 ITR 645 (Delhi)). This court has also taken the same view in a series of decisions. They are: Rajarajeswari Weaving Mills v. 1TO [1978] 113 ITR 405, CIT v. B.M. Edward, India Sea Foods [1979] 119 ITR 334 [FB] and CIT v. T. S. Venkiteswaran [1979] 120 ITR 675. It is too late in the day for the Revenue to contend that the circular issued by the Board of Revenue is only an administrative direction or that it will not bind the Department or that it shall not be given effect to, since it goes beyond or deviates from the terms of the statute. As stated, the circular “supplants” the law and not “supplements” the law.
5. In the light of the above position in law, we are satisfied that the Appellate Tribunal was justified in giving effect to the Circular dated September 28, 1970. In our opinion, no referable question of law arises out of the order of the Appellate Tribunal. We hold that there is no merit in this O.P. It is dismissed.
