The Supreme Court on Tuesday allowed Congress leaders Rahul Gandhi and Sonia Gandhi to place on record the CBDT (Central Board of Direct Taxes) circular that was issued on December 31, 2018, and effectively cleared them in a tax case, but which was recalled on January 4.

A bench led by Justice AK Sikri also permitted them to file their affidavits on the CBDT circular that reportedly clarified taxes on valuations in their case. The document has to be submitted within four weeks, said the court that also asked the IT department to file its response to the affidavit within a week thereafter. The controversial CBDT circular was used by the Congress Party on January 3 to vindicate the party’s position in the Associated Journals Ltd (AJL) that was pending before the Supreme Court.

“This vindicates our position that there never was an issue about issuance of such shares as a taxable event as it was being projected by way of harassment. We thank the CBDT for this clarification,” Congress’ legal department chairman Vivek Tankha had said.

The circular clarified section 56(2)(viia) of the Income Tax Act, 1961 for issuing shares by a company in which public are not substantially interested. After the Congress’ press conference, the circular was withdrawn. The December 31 circular was withdrawn by the CBDT on January 4 by issuing a fresh circular stating that the interpretation of the term “receives” used in the Section 56(2)(viia) was “subjudice”.

A revenue department official told HT then that the circular was issued for “clarity” to the field staff. Senior advocate P Chidambaram, appearing for the Gandhis, said the CBDT on December 31 issued a circular clarifying of the I-T Act for issue of shares by a company. “This circular December 31, 2018, clarified the point of receive of share. However, interestingly four days later, the CBDT withdrew the circular saying the matter is sub-judice,” he said.

First Published: Jan 08, 2019 23:46 IST