Income Tax Appellate Tribunal - Hyderabad
M/S. Koya & Company Construction Pvt. ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
Misc. Appln. No.119/Hyd/2013
(in ITA No.180/Hyd/2006) : Asstt. Year 2003-04
Misc. Appln. No.120/Hyd/2013
(in ITA No.167/Hyd/2008) : Asstt. Year 2004-05
Misc. Appln. No.121/Hyd/2013
(in ITA No.168/Hyd/2008) : Asstt. Year 2005-06
Misc. Appln. No.122/Hyd/2013
(in ITA No.221/Hyd/2009) : Asstt. Year 2006-07
M/s. Koya Constructions Pvt. V/s. Dy. Commissioner of Income-tax,
Ltd., Hyderabad Circle 2(1), Hyderabad
( PAN - AACCK 3240 R )
(Applicant) (Respondent)
Applicant by : Shri K.C.Devadas
Respondent by : Shri M.Ravinder Sai DR
Date of Hearing 28.06.2013
Date of Pronouncement 23.08.2013
ORDER
Per Chandra Poojari, Accountant Member:
These four Miscellaneous Applications have been filed by the assessee seeking rectification in the common order of the Tribunal dated 22.3.2012 in ITA Nos.180/Hyd/2006, ITA No.167 and 168/Hyd/2008 of the assessee for the assessment years 2003-04 to 2005-06 and ITA No.221/Hyd/2009 of the Revenue for the assessment 2 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad year 2006-07, on the ground that certain mistakes apparent from record have crept into the same.
2. The learned counsel for the assessee reiterating the averments made in the present applications submitted that the issue involved in the relevant appeals before the Tribunal relates to allowability of deduction under S.80IA(4) of the Income-tax Act. The Tribunal after considering the entire facts and circumstances of the case observed that the assessee is a developer of infrastructure projects and is entitled for deduction under S.80IA(4) of the Act. While giving such findings, the Tribunal considered the infrastructure projects carried out by the assessee for these assessment years as projects eligible for deduction under S.80IA(4). Further, learned counsel submitted that the Tribunal has given a clear factual finding that the deduction under S.80IA(4) would be allowable proportionately based on the total turnover of the projects.
3. The learned Authorised Representative submitted that in spite of the clear-cut direction of the Tribunal, the Assessing Officer issued fresh show-cause notice to make further enquiries and proceeded to pass a consequential orders thereafter again declining to grant deduction under S.80IA(4) of the Act, which action of the Assessing Officer amounts to his sitting in judgment over the order of the Tribunal.
4. The Learned Departmental Representative relied on the order of the Tribunal and submitted that the Tribunal has remitted the issue back to the file of the Assessing Officer for fresh consideration. Being so, the Assessing Officer correctly proceeded to enquire about 3 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad each project, so as to determine the projects which are entitled for deduction under S.80IA(4) of the Act, while giving effect to the order of the Tribunal.
5. We heard both the parties and perused the material available on record. For the assessment years under appeal, the issue involved before the Tribunal relates to denial of deduction under S.80IA(4) of the Act. The Tribunal after considering the submissions of the learned counsel in the light of the grounds raised before the Tribunal, and appraising the various data furnished before the Tribunal in the paper-book, came to the conclusion that the assessee is a developer and is entitled for deduction under S.80IA(4) of the Act. For clarity, we reproduce the relevant paragraphs of the order of the Tribunal-
"24. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provisions of Section 80IA(4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 80IA (4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA (4A) are also made available under Section 80IA (4) itself. Further, the very fact that the legislature mentioned the words (i) "developing" or (ii) "operating and maintaining" or (iii) "developing, operating and maintaining"
clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-Tax Act. We find that where an assessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. We find that the word "owned" in sub- clause (a) of clause (1) of sub section (4) of Section 80IA of the Act refer to the enterprise. By reading of the section, it is clears that the enterprises carrying on development of infrastructure development should be owned by the company and not that the 4 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc.
25. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility.
26. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible for deduction under section 80IA (4) of the Act. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee's duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the 5 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA (4) of the Act. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer.
27. We also find that as per the provisions of the section 80IA of the Act, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word "contractor" is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word "contractor" is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor.
28. We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs. Laxmi civil Engineering works [supra] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80IA of the Act 6 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad after considering the Judgement of the Mumbai High Court in the case of ABG Heavy Engineering [supra]. The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under Section 80IA of the Act, which ultimately culminated into Amendment under section 80IA of the Act, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. We also find that, to avoid misuse of the aforesaid amendment, an Explanation was inserted in Section 80IA of the Act, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 80IA of the Act. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or sub-contract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources.
29. As per submission of the assessee's counsel broadly the technical nature of the work undertaken by the assessee is as follows:
i) Designing and Manufacturing of pipes: The assessee specially designed and manufactured Pre-stressed concrete pipes and it has been done in accordance with specific requirements.
ii) Design and manufacturing of pipe fittings or specials
iii) Transporting, Laying and Joining of pipes conforming with specifications. The activity involves earth work excavation, trench excavation, hard rook blasting, lowering and laying of 7 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad pipes, fitting of specials, fitting of rubber rings at the joints, testing pipe joints and pipeline.
iv) Construction of pump house, providing and fitting of pump sets. Supply and fitting of submersible pumps, centrifugal pumps, turbine pumps, submersible motors, motors for turbines and centrifugal pump sets, transformer, generator, panel boards etc. iv) Design and construction of raw water pumping stations, water treatment plant, treated water pumping station, treated water transmission main, construction of surge tank and pipe connection arrangement, booster stations, internal transmission main and feeder mains, construction of service reservoirs and master reservoirs.
v) Mobilisation of labourers, [preparation of plans technical expertise, supervision, co- ordination and control, set up manufacturing facility nearby the project site to manufacture project specific pipes as per the required specifications which requires well equipped machines, employment of skilled labour and technical experts, equipment to transport heavy pipes to laying sites, equipment to lift and lowering of pipes at the excavated sites, provide qualified and experience engineer for each project site etc to bring in to existence an infrastructure facility. Manufacturing of pipes to sites, excavation under various conditions of soil and rock, lowering and laying of pipes, jointing and testing of pipe joint and pipe line as a whole, construction of pump houses, storage tank/collection well, treatment plants, distribution plants etc and all these together develop in to a new infrastructure water supply facility.
30. Further, the order of Tribunal in the case of B.T. Patil cited supra is prior to amendment to sec 80IA(4), after the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the "or" between three activities was not there, after the amendment "or" has been inserted w.e.f. 1-4-2002 by Finance Act 2001.
31. Accordingly, the assessee is entitled for deduction under section 80IA of the Act on the projects which involve above activities. Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act if the contracts involves development, operating, maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of Act. In our opinion the contracts which contain above features to be segregated on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by 8 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from the contracts which involves development, operating, maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 80IA was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in ITA No. 2287/Mds/06 order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has taken the same view by inter-alia holding as follows:
"7. Moreover, the reasons for introducing the Explanation were clarified as providing a tax benefit because modernisation requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and rapid urban rail transport systems. For that purpose, private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other work contract has been encouraged by giving tax benefits. Thus the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the section but where a person makes the investment and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 80IA."
........"
6. Once the Tribunal has set aside the orders impugned in the appeals before it on the above issue and restored the matter to the file of the Assessing Officer with the above findings, the duty of Assessing Officer is to pass orders giving effect to the order of the Tribunal. The findings of the Tribunal, extracted above, are unambiguous, clear and categorical in as much as it has specifically directed that the assessee should not be denied deduction under S.80IA of the Act as the contracts involves, development, operating, maintenance, financial involvement, and defect correction and liability period, then such 9 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad contracts cannot be called as simple works contract. In our opinion the contracts which contain the above features to be segregated and on this deduction u/s. 80IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitled for deduction u/s. 80IA of the Act.
7. According to the learned Authorised Representative, the Assessing Officer has not properly understood the order of the Tribunal and the same has been too widely interpreted and there appears to be misconceptions about the nature thereof and the binding effect of the order of the Tribunal. In this regard, it may be appropriate to point out the well settled legal position that an Assessing Officer is bound to follow the order of the Tribunal.
8. It is necessary to first decide the last submission of learned counsel that this Tribunal, while interpreting of an all-India statute like the Income-tax Act, is bound to follow the decision of any other High Court and to decide accordingly even if its own view is contrary thereto, in view of the practice followed by this court in such matters. Because, if we are to accept this submission, it will be an exercise in futility to examine the real controversy before us with a view to decide the issue.
9. At the outset, it may be appropriate to point out the well settled legal position that what is binding on the courts is the ratio of a decision. There is a clear distinction between on the courts is the ratio of the decision, obiter dicta and observations from the point of view of precedent value or their binding effect. It will be necessary in this case to explain this distinction. But before we do so, we may discuss the 10 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad principle of binding precedent. This will take us to the question whose decision binds whom.
10. For deciding whose decision is binding on whom, it is necessary to know the hierarchy of the courts. In India, the Supreme Court is the highest court of the country. That being so, so far as the decisions of the Supreme Court are concerned, it has been stated in article 141 of the Constitution itself that :
"The law declared by the Supreme Court shall be binding on all courts within the territory of India."
11. In that view of the matter, all courts in India are bound to follow the decisions of the Supreme Court.
12. Though there is no provision like Article 141 which specifically lays downs the binding nature of the decisions of the High Courts, it is a well accepted legal position that a single judge of a High Court is ordinarily bound to accept as correct judgments of courts of co-ordinate jurisdiction and of the Division Benches and of the Full Benches of his court and of the Supreme Court. Equally well settled is the position that when a Division Bench of the High Court gives a decision on a question of law, it should generally be followed by a co- ordinate Bench in the subsequent case wants the earlier decision to be reconsidered, it should refer the question at issue to a larger Bench.
13. It is equally well settled that the decision of one High Court is not a binding precedent on another High Court. The Supreme Court in Valliama Champaka Pillai v. Sivathanu Pillai(AIR 1979 1937), dealing with the controversy whether a decision of the erstwhile Travancore High Court can be made a binding precedent on the Madras High Court on the basis of the principle of stare decisis, clearly 11 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad held that such a decision can at best have persuasive effect and not the force of binding precedent on the Madras High Court. Referring to the States Reorganisation Act, it was observed that there was nothing in the said Act or any other law which exalts the ratio of those decisions to the status of a binding law nor could the ratio decidendi of those decisions be perpetuated by invoking the doctrine of stare decisis. The doctrine of stare decisis cannot be stretched that far as to make the decision of one High Court a binding precedent for the other. This doctrine is applicable only to different Benches of the same High Court.
14. It is also well-settled that though there is no specific provision making the law declared by the High Court binding on subordinate courts, it is implicit in the power of supervision conferred on a superior Tribunal that the Tribunals subject to its supervision would confirm to the law laid down by it. It is in that view of the matter that the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs (AIR 1962(SC) 1893 (at p.1905) :
"We, therefore, hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and they cannot ignore it......."
15. This position has been very aptly summed up by the Supreme Court in Mahadeolal Kanodia v. Administrator General of West Bengal(AIR 1960 SC 936) (at p.941) :
"Judicial decorum no less than legal propriety forms the basis of judicial procedure. If one thing is more necessary in law than any other thing, it is the quality of certainty. That quality would totally disappear if judges of co-ordinate jurisdiction in a High Court start overruling one another's decisions. If one Division Bench of a High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view, the result would be utter confusion. The position would be equally bad where a judge sitting singly in the High 12 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad Court is of opinion that the previous decision of another single judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench."
16. The above decision was followed by the Supreme Court in Baradakanta Mishra v. Bhimsen Dixit (AIR 1972 SC 2466), wherein the legal position was reiterated in the following words (at page 2469):
"It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunal subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably suffer.
17. Having decided whose decision binds whom, we may next examine what is binding. It is well settled that it is only the ratio decidendi that has a precedent value. As observed by the Supreme Court in S. P. Gupta v. President of India (AIR 1982 SC 149) (at p.231) : "It is elementary that what is binding on the court in a subsequent case is not the conclusion arrived at in a previous decision, but the ratio of that decision, for it is the ratio which binds as a precedent and not the conclusion." A case is only an authority for what it actually decides and not what may come to follow logically from it. Judgments of courts are not to be construed as statutes (see Amar Nath Om Parkash v. State of Punjab (1985) 1 SCC 345 ). While following precedents, the court should keep in mind the following observations in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai (AIR 1976 SC 1455 ) (at p.1467-68) :
"It is trite, going by Anglophonic principles, that a ruling of a superior court is binding law. It is not of scriptural sanctity but 13 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad is of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decision, exalting the doctrine of precedents into a prison- house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting those matters which may lurk in the record. Whatever be the position of a subordinate court's casual observations, generalisations and subsilentio determinations must be judiciously read by courts of co- ordinate jurisdiction."
18. Decision on a point not necessary for the purpose of the decision or which does not fall to be determined in that decision becomes an obiter dictum. So also, opinions on questions which are not necessary for determining or resolving the actual controversy arising in the case partake of the character of obiter. Obiter observations, as said by Bhagwati J. (as his Lordship then was) in Addl. District Magistrate, Jabalpur v. Shivakant Shukla(AIR 1976 SC 1207), would undoubtedly be entitled to great weight, but "an obiter cannot take the place of the ratio. Judges are not oracles." Such observations do not have any binding effect and they cannot be regarded as conclusive. As observed by the Privy Council in Baker v. The Queen [1975] 3 All ER 55 (at page 64), the court's authoritative opinion must be distinguished from propositions assumed by the court to be correct for the purpose of disposing of the particular case. This position has been made further clear by the Supreme Court in a recent decision in CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297, at page 320, where it was observed :
"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the question involved in the case in which it is rendered and, 14 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasoning."
19. In the above decision, the Supreme Court, also quoted with approval, the following note of caution given by it earlier in ( AIR 1971 SC 530) (At 578) :
"It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment."
It is thus clear that it is only the ratio decidendi of a case which can be binding - not obiter dictum. Obiter, at best, may have some persuasive efficacy.
20. From the foregoing discussion, the following propositions emerge:
(a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein.
(b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extend beyond its territorial jurisdiction.15 MA No.119 to 122/Hyd/2013
( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad
(c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court may be summed up as follows :
(i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court.
It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a larger Bench to examine the question (see Food Corporation of India v. Yadav Engineer and Contractor(AIR 1982 SC 1302).
(ii) A Division Bench of a High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High Court. If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench.
(iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred it reached after full consideration of the earlier decisions.
(d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at 16 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Tribunal within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.
21. In the light of the foregoing discussion, the decision of the Tribunal is binding on the Assessing Officer and he cannot pick up a word or sentence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. A judgment must be read as a whole. Being so, the Assessing Officer cannot sit in judgment over the order of the Tribunal, and he is required to give just effect to the order of the Tribunal. If he has any grievance, he is at liberty to appeal against that order of the Tribunal before higher forum.
22. It is needless to say that the income-tax authorities are required to exercise their powers in accordance with law, as per the 17 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad power given to them in specific sections. If the powers conferred on a particular authority are exercised by another authority without mandate of law, it would create chaos in the administration of law and hierarchy of administration would mean nothing. Judgment of a higher forum cannot be substituted by the decisions of the lower authorities. Judicial discipline requires that there cannot be any amount of disregard to the superior authority in the hierarchy by the Assessing Officer. When once the Tribunal decides an issue in one way, the only course available to the Assessing Officer is to follow the order of the Tribunal in true spirits, and it is not permissible for the Assessing Officer to take a different view, or to sit in judgment over the order of the Tribunal by interpreting the same in the manner he wanted.
23. In the case of Winter Misra Diamond Tools Ltd. V/s. Collector of Central Excise (1996) 83 ELT 670 Tri Del, considering the role of a subordinate authority while implementing the orders of the superior appellate/judicial authorities, following the decision of the Apex Court in the case of Union of India V/s. Kamalakshi Finance Corporation Ltd. (1991) 55 ELT 433(SC), it was held as follows-
"45. At the same time, the appellants are correct in pointing out that once the Assistant Collector has passed an order and it is confirmed by the Collector (Appeals) and no appeal is filed against the order of the Collector (Appeals), the order attains finality. Therefore, the Department was bound to follow the Assistant Collector's order of 17/4/1989 as confirmed by the Collector (Appeals)' order dated 28-8-1991 and finalise all the pending matters in the light of these orders. These will include cases in which the assessment was made provisional as well as those in which cases demand/show cause notices had been issued but not disposed of till then as all the subordinate authorities were bound by the orders of the superior appellate/judicial authorities in view of the Hon'ble Supreme Court's decision in the case of Union of India v. Kamlakshi Finance Corporation Ltd. reported in 1991 (55) E.L.T. 433 (S.C.). However, we need not labour this point any further in view of our findings on merits recorded above."18 MA No.119 to 122/Hyd/2013
( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad
24. It is trite that when a statute requires an act to be done in a specific manner, it has to be done in that manner only. The Assessing Officer could not expect it being done in some other manner. It is also trite principle of law that if a particular authority has been designated to do particular act, just it is that authority alone would could apply his/her independent mind to discharge his duties and further, a lower authority cannot sit in judgment over the decision of a superior forum. Being so, in our opinion, when the Tribunal on earlier occasion in its order cited supra, has given direction to the Assessing Officer to grant deduction under S.80IA(4) on the projects, the duty of the Assessing Officer to grant deduction in respect of projects carried out by the assessee, if those are not in the nature of works contracts. It has also given a categorical finding that as the contracts involve development, operating, maintenance, financial involvement and defection correction and liability period, such contracts should be treated as eligible for deduction under S.80IA(4).
25. It is needless to mention here that the Tribunal has not rejected the claim of the assessee under S.80IA and on the other hand, it was held that the assessee is entitled for deduction under S.80IA of the Act, as noted in para 31 of its order, if the assessee has carried on infrastructure projects, and it is for the purpose of analyzing such other projects, if any, which are not in the nature of works contracts, and to quantify the deduction, the issue was remitted back to the file of the Assessing Officer. If the Assessing Officer fails to properly understand or appreciate the directions of the Tribunal, all that can be done at this stage is to mention that the assessee has liberty to explore and pursue the remedies available under law, as the Assessing Officer is duty bound to pass the consequential orders in 19 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad conformity with the order of the Tribunal cited (supra) and he has no discretion or choice to overlook the order of the Tribunal. For this, we place reliance on the decision of the jurisdictional High Court in the case of State of Andhra Pradesh V/s. CTO and Another (169 ITR 564), wherein it has been held as follows-
"The Tribunal's functioning within the jurisdiction of a particular High Court in respect of whom the High Court has the power of superintendence under article 227 are bound to follow the decisions of the High Court unless, on an appeal to the Supreme Court, the operation of the judgment is suspended. It is not permissible for the authorities and the Tribunals to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court on the pretext that an appeal has been filed in the Supreme Court which is pending or that steps are being taken to file an appeal. If any authority or the Tribunal refuses to follow any decision of the High Court on the above grounds, it would be clearly guilty of committing contempt of the High Court and is liable to be proceeded against."
At this juncture, it is pertinent to mention the observations of the High Court, by placing reliance on the judgment of the Bombay High Court in the case of Subramanian ITO V/s Siemens India Ltd. (156 ITR 11), which are as follows-
"Reference may also be invited to the decision of the Bombay High Court in Subramanian, ITO v. Siemens India Ltd. [1985] 156 ITR 11. The question that arose for consideration in this case is whether the Income-tax Officer is bound by the decision of a single Judge or a Division Bench of the Court within whose jurisdiction he is operating even if an appeal has been preferred against such decision and is pending. The following observations of the Bombay High Court may be extracted :
"So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is (functioning), irrespective of the pendency of any appeal or special leave application against that judgment. He would equally be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is (functioning), 20 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the Income- tax Appellate Tribunal has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee."
(Emphasis supplied)
26. It is, however, pertinent to emphasise and mention here that having decided the appeals of the assessee, being ITA Nos.180/Hyd/2006 & ITA Nos.167 and 168/Hyd/2007 and Revenue's appeal being ITA No.221/Hyd/2009 before it, with its common order dated 22.3.2012, the Tribunal is ceased of its jurisdiction over those appeals, except to the limited extent of rectifying any mistake therein in terms of provisions of S.254(2) of the Act. In the present Miscellaneous Applications and the arguments made before us in support thereof, the assessee has not pointed out any mistake in the order of this Tribunal dated 22.3.2012, which warrants rectification in terms S.254(2) of the Act. All that the assessee speaks of is about the grievance that it has suffered on account of the consequential orders passed by the Assessing Officer for the years under consideration, while giving effect to the order of this Tribunal dated 16.3.2012. Those consequential orders passed by the Assessing Officer constitute independent proceedings, and not part of the proceedings which led to the passing of the order of the Tribunal dated 22.3.2012 on the second appeals of the assessee, and they, if the assessee is aggrieved, may give rise to first appellate proceedings there against or further appellate proceedings by the assessee. However, the grievance of the assessee on account of alleged mistakes in such consequential orders, either on account of interpretational differences or even on account of disrespect/disregard to the directions of the Tribunal, shall not vest any power or jurisdiction back with the Tribunal, to oversee the 21 MA No.119 to 122/Hyd/2013 ( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad correctness of the correctness of the consequential orders passed, much less, to give directions to revise or rectify the same, even if there is any mistake in the same. If the consequential orders passed by the Assessing Officer are de hors the directions of the Tribunal, or if there is any grievance to the assessee on account of such consequential orders, as already noted above, the remedy for the assessee lies elsewhere, viz. in the fresh proceedings commencing with such consequential orders and not in the proceedings that culminated with the order of this Tribunal dated 22.3.2012.
27. In the absence of any specific mistake which warrants any rectification within the scope of the provisions of S.254(2) of the Act, in the order of the Tribunal dated 22.3.2012, we do not find reason to rectify our earlier order and accordingly, the Miscellaneous Applications of the assessee are disposed of, with the observations as above.
28. In the result, all the four Miscellaneous Applications of the assessee are disposed of as above.
Order pronounced in the court on 23.08.2013
Sd/- Sd/-
(Asha Vijayaraghavan) (Chandra Poojari)
Judicial Member Accountant Member
Dt/- 23rd August, 2013
Copy forwarded to:
1. M/s. Koya Constructions Pvt. Ltd., 12-2-831/38, 72, MIGH, Mehdipatnam, Hyderabad 500 028.
22 MA No.119 to 122/Hyd/2013( in ITA No.180/Hyd/2006 & 167-168/Hyd/2009 & 221/Hyd/2009) M/s. Koya Constructions Pvt. Ltd., Hyderabad
2. Dy. Commissioner of Income-tax 2(1), Hyderabad
3. Commissioner of Income-tax(Appeals) III Hyderabad
4. Commissioner of Income-tax II Hyderabad
5. Departmental Representative, ITAT, Hyderabad.
B.V.S.