The main legal point established in the judgment is the application of Instruction No.3 of 2011 and the retrospective effect of the circular issued by the Central Board of Direct Taxes.

D.G. KARNIK, J.

1. In paragraph 11 of the memo of appeal, the appellant has stated: 'The Appellant submits that the disputed claim in the Appeal is valued at Rs.6,69,770/-and accordingly Court fee of Rs.10,000/has been paid on this Appeal.' It is not disputed before us that the claim in this appeal is less than Rs.10 Lacs.

2. Instruction No.3 of 2011 issued by the Central Board of direct Taxes says that the appeal shall not be filed in the High Court under section 260A of the Income Tax Act where the tax effect does not exceed a sum of Rs.10 Lacs. Since in the present appeal the tax effect does not exceed Rs.10 Lacs, the appeal is required to be dismissed.

3. Mr. Sharma, learned A.S.G. however submits that the appeal has been filed prior to the issuance of circular dated 9th February, 2011, therefore, the circular does not apply to the present case. In the case of “Commissioner of Income Tax V/s Polycott Corporation” [(2009) 138 ITR 144 (Bom)] a Division Bench of this high Court, while interpreting similar Instruction No.2 of 2005, issued by the Central Board of Direct Taxes, regarding the earlier limit fixed for filing appeal before the High Court, has held that the circular would have a retrospective effect. In “Commissioner of Income Tax V/s Smt. Vijaya V. Kavekar” [Tax Appeal No.78 of 2007 with Tax Appeal No.76 of 2007], decided on 29th July, 2011 [Coram: Smt. Nishita Mhatre & M.J.Joshi, JJ] a Division Bench of this Court, while interpreting the very circular which is involved in this appeal i.e. Circular No.3 of 2011, has held that the circular has a retrospective operation and instructions contained in the circular would apply even to the pending cases. Therefore, the contention of Mr. Sharma that the circular does not apply to the pending cases is rejected.

4. Mr. Sharma then contended that the appeal has a cascading effect and, therefore, the appeal should be entertained. In support, he has relied upon decision of the Supreme Court in the case of “C.I.T. Central-III V/s Surya Herbal, Ltd.” decided on 29th August, 2011. In that case, the supreme Court observed:

"Liberty is given to the Department to move the High Court pointing out that the Circular dated 9th February, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. Tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view in such cases, if attention of the High Court is drawn, the High Court will not apply the Circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in two weeks. The special leave petition is, accordingly disposed of.”

5. We have carefully considered the facts of the present case and in our view this appeal does not involve any cascading effect and it is not pointed to us that several appeals arise the point which is involved in this appeal.

6. The questions of law as framed in the appeal memo are:

“i] Whether on the facts and circumstance of the case the tribunal was justified in reversing the order of the CIT(A)?

ii] Whether on the facts and in the circumstances of the case the ITAT was right in directing the Assessing Officer to allow deduction of interest payment on funds introduced in the firm, (in the form of loan), against remuneration received from the firm?”

7. Question No.1 appears to be a question of fact. It is not shown to us that the second question is involved in many appeals. In the circumstances, the submission of learned A.S.G. that a decision in the appeal would have a cascading effect also cannot be accepted. Mr. Sharma states that the circular is subsequent to the filing of the appeal and, therefore, cascading effect could not be shown. This very submission was advanced by Mr. Sharma and the matter was adjourned once to enable Mr. Sharma to point out whether similar question is involved in any other appeal. Till today, the learned counsel was unable to point out a s