Income Tax Appellate Tribunal - Mumbai
Tata Sons Ltd., Mumbai vs Pr.Cit-2, Mumbai on 13 December, 2018
आयकर अपीलीय अधिकरण "E " न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL " E" BENCH, MUMBAI
श्री महावीर स हिं , न्याययक दस्य एविं श्री एन. के. प्रधान लेखा दस्य के मक्ष ।
BEFORE SRI MAHAVIR SINGH, JM AND SRI NK PRADHAN, AM
Aayakr ApIla saM . / ITA No. 1213/Mum/2018
(inaQa- a rNa baYa- / Assessment Year 2012-13)
Tata Sons Limited Asst. Commissioner of
24, Bombay House, Homi Income Tax, Cir.2(3)(1),
Mody Street, Fort, Mumbai - Vs. Room No. 552, Aayakar
400 001 Bhavan, M.K. Road,
Mumbai-400 020
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
स्थायी ले खा िं . / PAN No. AAACT4060A
अपीलाथी की ओर े / Appellant by : Ms. Arati Vissanji, AR
प्रत्यथी की ओर े / Respondent by : Shri R.Manjunatha Swamy, DR
ुनवाई की तारीख / Date of hearing: 25-09-2018
घोषणा की तारीख / Date of pronouncement : 13-12-2018
AadoSa / O R D E R
PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the revision order passed by the Principal Commissioner of Income Tax-2, Mumbai [in short PCIT], vide No. Nil dated 27.12.2017. The Assessment was framed by the Deputy Commissioner of Income Tax, Circle-2(3)(1), Mumbai (in short 'DCIT/AO') for the AY 2012-13 vide order dated 30.03.2016 under section 2 ITA No s . 1 21 3/ Mu m/ 2 01 8 143(3) read with section 144C(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The only issue in this appeal of assessee is against the revision order passed by PCIT under section 263 of the Act directing the AO to determine the expenses relatable to exempt income and disallowance of such expenses while computing the book profit under section 115JB of the Act. For this assessee has raised the following grounds without prejudice to each other: -
"1. In the facts and circumstances of the case and in law, it should be held that the Order u/s. 263 of the Income Tax Act, 1961 (the Act) dated 271h December, 2017 passed by the Pr. Commissioner of Income Tax-2, Mumbai directing the AO to determine expenses incurred in relation to exempt income and add such expenses in computing the books profits u/s. I ISJB of the Act is bad in law in view of the following reasoning's: -
(a) Keeping in view the directions contained at Page Nos. 11 and 12 vide Para No. 11 of the said Order i.e "to determine the expenses incurred in relation to exempt income and add such expenses while computing the book profit under Section 1 15.JB of the Act read with clause (t) of Explanation 1 to the said Section of the Act" which tantamounts to passing of the fresh order of assessment, resulting in exceeding his jurisdiction.
(b) The AO has determined expenses incurred in relation to exempt income by invoking Section 14A 3 ITA No s . 1 21 3/ Mu m/ 2 01 8 read with Rule SD. The Pr. C.I.T. has not established that expenses so determined are incorrect.
(c) Pursuant to the specific inquiry made by the AO in the course of assessment proceedings the appellant had made Written Submissions vide letters dated 22-01-2016 and 1103-20 16 on the following subject matters:
(i) Working of disallowance u/s. 14A
(ii) Working of Book Profit u/ s. 11 SJB
(iii)Justification for not considering disallowance u/s. 14A in computing Book Profit u/s. 1 15JB.
(d) The AO has not added disallowance made u/s.14A read with Rule 8D in computing book profit after considering written submissions.
(e) The AO has reproduced at Page 9 of the Order the relevant submissions of the appellant justifying that disallowance made under 14A cannot be added in computing book profit u/ s. 115JB of the Act.
(f) In the course of proceedings u/s. 263 of the Act, all the above referred submissions have been brought out and attention has been drawn to the decision of the Hon. FIAT, Delhi Bench 'H' (Special Bench) dated 16th June 2017 in the matter of Vireet Investment (P.) Ltd. holding that in computing book profit disallowance u/s. 14A is not to be added.4
ITA No s . 1 21 3/ Mu m/ 2 01 8
(g) The Pr. C.I.T. in his Order under appeal has not demolished the following well-settled propositions in law having relevance on the validity of the Order passed u/s. 263 of the Act:
(i) Distinction has to be drawn where the AO does not conduct the inquiry and where the AO conducts the inquiry which may be inadequate;
(ii) The conclusion drawn by the AO cannot be said to be erroneous where the extract from the assessment record demonstrates that the AO had called for details and after examining the same has accepted the contention of the appellant;
(iii) When two views are possible, the interpretation that favours the appellant should prevail;
(iv) Where AO had applied one of the possible views, Section 263 cannot be invoked.
(v) Every loss of Revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of Revenue.
(vi) Pre requisite conditions for invoking revision proceedings that assessment order passed by the AC) is not only erroneous but also prejudicial to the interest of Revenue.
Without prejudice to the above and in the alternate
2. Computation of book profit u/s. 115JB of the Act 5 ITA No s . 1 21 3/ Mu m/ 2 01 8 2.1 In the facts and circumstances of the case and in law, it is humbly submitted that it should be held that the computation u/s. clause (f) of Explanation-1 to Section 115JB(2) is to be made without resorting to the computation as contemplated u/ s. 14A read with Rule 8D.
3. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted. "
3. Brief facts relating to this issue are that the assessee has claimed exempt income of ₹ 3403.90 crores on an investment of ₹ 38378.03 crores. The assessee company suo moto disallowed a sum of ₹ 873.24 crores as expenditure relatable to exempt income. The AO during the course of assessment proceedings framed under section 143(3) read with section 144C (3) of the Act and recomputed the disallowance under Rule 8D(2)(ii) & (iii) read with section 14A of the Act after going into the details amounting to ₹ 302.46 crores apart from the disallowance made by assessee suo moto. The AO recomputed the disallowance as under: -
Accordingly, the following the calculation u/s made for the purpose of disallowance under section 14A.
Description Amount Addition
as per (₹ in
Rule crores)
8D(2)( ₹
in
crores)
(i) The amount of expenditure directly relating to income which does not 0 0
form part of total income
(ii) In a case where the assessee has incurred expenditure by way of 41660
interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance 6 ITA No s . 1 21 3/ Mu m/ 2 01 8 with following formula, namely A X B/C Where A= amount of expenditure by way of interest other than the amount of interest included in caluse (i) incurred during the previous year;
B= The average value of investment, income from which does not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; C= the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year:
(ii) An amount equal to one-half percent of the average of the value of 185.07 investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year.
Total disallowance under section 14A. 1175.70 Thus total disallowance as per section 14A r.w Rule 8D works out to ₹ 1175.70 crores. It can be seen from the computation of total income that assessee has already disallowed a sum of ₹ 873.24 crores under section 14A. Hence, he sum of ₹ 302.46 cores (₹ 1175.70 crores -₹ 873.24 crores) is disallowed and added to the total income of the assessee.
4. The AO also noted the contention of the assessee regarding apportionment providing under section 14A of the Act and observed that no disallowance can be made while computing book profit under section 115JB of the Act. The AO recorded the same as under: -
"Computation of Book Profit under section 115JB - Disallowance under section 14A The assessee wishes to submit that the principles of apportionment provided under section 14A cannot be imported for the computation of Book Profits under section 115JB. The assessee wish to place reliance on the following decisions.
Reliance Industrial Infrastructure Ltd. vs. Addl. CIT (ITA Nos. 69 & 70/Mum/2009) Goetze India Ltd. vs. CIT (32/SOT/101) (ITAT Del) 7 ITA No s . 1 21 3/ Mu m/ 2 01 8 Quippo Telecom Infrastructure Ltd. Vs. ACIT (ITA No. 4931/Del/2010)"
5. Subsequently, the Pr. CIT-2, Mumbai issued show cause notice dated 27.11.2017 bearing No. Pr.CIT-2/263/2017-18 dated 04.12.2017, for revising the assessment dated 30.03.2016 passed by the AO due to the following reasons: -
"In this case during the assessment under section 143(3) read with section 144C an addition of ₹ 3,02,46,000/- was made under section 14A, calculated on the basis of methodology prescribed in Rule 8D. However, the same was not included in computing the book profit under the provisions of section 115Jb of the Act by the Assessing Officer in the assessment order dated 30.03.2016. the failure to add the aforesaid amount to book profit has rendered the assessment order dated 30.03.2016 erroneous in so far it is prejudicial to the interest of revenue."
6. The assessee subsequently replied that this aspect has been considered by the AO in the original assessment order and he specifically referred to the observations of the CIT(A) which are already reproduced in this order. The assessee also contended that the AO has taken one of the possible view on this aspect because Hon'ble Delhi High Court in the case of CIT .v. Goetze (India) Ltd. (2014) 361 ITR 505 (Delhi) held that computing the book profit under section 115 JB of the Act, the necessary disallowances under section 14A of the Act are required to be made. But contrary decision of Hon'ble Delhi High Court i.e. later judgement in the case of CIT vs. Bhushan Steels And Strips Ltd in ITA No. 593 and 594 of 8 ITA No s . 1 21 3/ Mu m/ 2 01 8 2015 has held that no disallowance is to be made in relation to the expenses incurred for earning exempt income while computing the book profit under section 115JB of the Act. Even the Special Bench of ITAT Delhi in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017] 58 ITR(T) 313 (Delhi - Trib.) (SB) has taken the view that no disallowance of expenses relatable to exempt income is to be considered while computing book profit under section 115JB of the Act.
7. But the PCIT was not satisfied and directed the AO to determine the expenses incurred in relation to exempt income while computing the book profit under section 115JB(2) of the Act read with clause F of explanation I to the said section. The PCIT observed in para 8 to 11 as under: -
"8. It is observed that the Hon'ble Delhi High Court in its decision in the case of Goetz India Ltd, reported in 361 ITR 505 held that while computing Book Profit disallowance under section 14A is required to be made. However, in its later judgment the Hon'ble Delhi High Court in the case of Bhushan Steel Ltd, (ITA No. 593 & 594/2015) has taken a contrary view. It is noticed that the latter decision has been rendered without considering the binding decision of coordinate bench of equal strength. The Hon'ble Special Bench of ITAT Delhi, in its decision in the case of the case of Vireet Investment (P.) Ltd., reported in 62 taxmann.com 415 (Delhi - Trib.) (SB) has noted that the Delhi High Court in two different cases, had taken a contrary view on the issue of applicability of provisions of section 14A read with Rule 80 In the computation of Book Profit, 9 ITA No s . 1 21 3/ Mu m/ 2 01 8 and took the view favourable to the assessee. In view of the aforesaid contrary judgments, the issue is not finally settled against the Revenue. However, there is no controversy regarding the position of law that the expenses related to exempt income are required to be added in computation of book profit under section 115JB.
9. As already mentioned in para S of this order, as per the provisions of clause (f) of Explanation 1 to section 115JB(2), the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof or section 11 or section 12 apply / is/are required to be added to the book profit. Further, as per section 14A(1), for the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. The incomes which do not form part of the total income are enumerated in Chapter III in section 10 to 136. From the aforesaid provisions of law, it is absolutely clear that the expenses related to exempt income are required to be added in computation of book profit under section 115JB.
10. In the instant case, the Assessing Officer determined the expenses relatable to exempt income invoking the provisions of section 14A read with Rule 8D for computation of total income under the normal provisions of the Act. However, no such 10 ITA No s . 1 21 3/ Mu m/ 2 01 8 exercise was undertaken by the Assessing Officer to correctly determine the expenses incurred for earning the exempt income which was required to be disallowed and added to the Book profit in accordance with clause (f) of explanation 1 to the said section of the Act. The assessment order dated 30.03.2016 is, therefore, found erroneous on this issue in so far It is prejudicially to the interest of revenue.
11. In view of the aforesaid judicial decisions and provisions of law the assessment order dt 30.03.2016 is set aside being erroneous and prejudicial to the interest of Revenue on the aforesaid issue. The Assessing Officer is directed to determine the expenses incurred in relation to exempt income and add such expenses while computing the book profit under section 115JB(2) of the Act read with clause (f) of Explanation 1 to the said section of the Act. Necessary opportunity of hearing will be provided to the assessee before passing the fresh assessment order. The Assessing Officer may take into consideration the binding judicial decisions on the aforesaid issue which may become available at the time of passing of the fresh assessment order."
Aggrieved, now assessee came in second appeal before Tribunal.
8. Before us, the learned Counsel for the assessee Ms. Arati Vissanji argued on behalf of assessee and reiterated the same arguments made 11 ITA No s . 1 21 3/ Mu m/ 2 01 8 before PCIT during revision proceedings. On the other hand, the learned Sr. DR Shri R Manjunatha Swamy only relied on the following case laws: -
(i) Deniel Merchants P. Ltd. & Anr Vs. ITO & Anr in Special Leave to Appeal (C) No(s). 23976/2017 dtd. 29.11.2017.
(ii) Horizon Investment Co. Ltd. Vs. CIT in ITA No. 1593/Mum/2013 dated 27.06.2014.
(iii) Arvee International Vs. ACIT (2006) in ITA No. 3543/Mum/2003 dated 13th January, 2006.
(iv) CIT vs. Amitabh Bacchan (2016 384 ITR 200 (SC) dated 11.05.2016.
(v) CIT vs. Ballarpur Industries Ltd. (2017 TaxPub(DT) 4015 (Bom-HC) dated 31.07.2017.
9. We have heard rival contentions and gone through the facts and circumstances of the case. We have also gone through the case laws relied on both the sides. We find from the facts of the case that the AO has specifically taken a view not to apportion any expense to the exempt income while computing the book profit under section 115JB of the Act. This view is expressly taken by AO in his order. Accordingly, we are of the view that this is one of the permissible view because the Hon'ble Delhi High Court in the case of Goetze (India) Ltd. (supra) and CIT vs. Bhushan Steels And Strips Ltd (supra) has taken a contrary view. We also find that the Special Bench of ITAT Delhi has considered this issue and also considered the decisions of Hon'ble Delhi High Court in the case of Goetze (India) Ltd. (supra) and Bhushan Steels And Strips Ltd. (supra) and held as under: -
12ITA No s . 1 21 3/ Mu m/ 2 01 8 "6.20 Thus, it cannot be said that Hon'ble Delhi High Court has not considered this issue and merely allowed the revenue's appeal on concession. The substantial question of law framed by Hon'ble Delhi High Court clearly shows that the specific issue was whether disallowance u/s 14A was required to be made while computing book profit u/s 115JA/ 115JB. The Hon'ble Delhi High Court has not only recorded assessee's plea of merely not contesting the issue in view of specific provisions but has recorded that the counsel fairly conceded. The expression "fairly" implies that Hon'ble High Court was also of the view that the provisions of section 14A were applicable with full force to the corresponding provisions u/s 115J.
6.21 Ld. Principal CIT(DR) has, in this regard, referred to the decision of Hon'ble Supreme Court in the case of K.Y. Pilliah & Sons (supra), wherein in para 10, it has been observed as under:
10. The form of the second question needs some explanation. The Income-tax Officer worked out the gross profit on the estimated turnover of Rs. 12 lakhs at 6.5% and that the profit amounted to Rs. 78,000. The assessees had by their return disclosed a gross profit of Rs. 36,858. Inadopting the rate of 6.5% on the estimated turnover, the Income-tax Officer added to the income returned Rs. 41.142 been the additional profit, and levied tax thereon.
13ITA No s . 1 21 3/ Mu m/ 2 01 8 It was not suggested that there were any other admissible outgoings which could not debited against that amount. The question whether Rs. 41,142 were liable to be taxed .. falls to be. determined under the first question. The second question only relates to the amount of Rs. 7,000 which was the cash credit item which represented an unexplained entry in the books of account of the assessees. In respect of that amount, the Income-tax Officer held that the explanation of the assessee was untrue and the Appellate Assistant Commissioner and the Tribunal agreed with the view. The Income-tax Appellate Tribunal is the final fact finding authority and normally to should record its conclusion on every disputed question raised before, it setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department. The criticism made by the High Court that the Tribunal had "failed to perform its duty merely affirming, the conclusion of 14 ITA No s . 1 21 3/ Mu m/ 2 01 8 the Appellate Assistant Commissioner" is apparently unmerited. On the merits of the claim for exclusion of the amount of Rs.
7,000, there is no question of law which could be said to arise out of the order of the Tribunal. The assessees had credited Sampangappa with two sums of Rs. 6,000 and Rs. 1,000 in the months of November and December, 1950, respectively. It was clear that Sampangappa had not advanced at the material time any amount to the assessees. The explanation of the assessees was, therefore, untrue.' Thus, it is evident that in every case it is not necessary that long drawn reasoning should be given before arriving at any conclusion more particularly when both the parties are agreed on certain provision of law. We, therefore, reject the assessee's contention that the decision of Ho'nble jurisdictional High Court in Goetze (India) Ltd's. case (supra) does not constitute a binding precedent more particularly in respect of subordinate courts including Tribunal functioning within its jurisdiction.
However. Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:--
"ITA 593/2015 15ITA No s . 1 21 3/ Mu m/ 2 01 8 PR. CIT ..........Appellant Through: Mr. N.P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate.
versus BHUSHAN STEEL LTD Respondent Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate.
ORDER 29.09.2015 ** ** ** 1. ** ** **
7. Question No. 6 concerns deletion of addition of Rs. 89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax ('MAT') under Section 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs. 89,00,000 was not justified. The view taken by the 1TAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax 255 ITR 273 (SC) which held that "the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J." The Court declines to frame a question on the above issue."
Thus, this decision is also on the same issue taking contrary view. Under such circumstances the issue before us is as to follow which decision.
Ld. CIT(DR) in course of hearing filed the decision of Tribunal in the case of Goetze (India) Ltd. (supra) and referred to para 6 of the said decision which is reproduced hereunder:--
"6. Coming to the sustenance of disallowance of Rs.88,290/- u/s 115JB, the Commissioner of Income-tax (Appeals) has upheld the 16 ITA No s . 1 21 3/ Mu m/ 2 01 8 disallowance under clause (f) of Explanation to section 115JB(2) of the Act. Under section 115JB of the Act, the assessee is required to pay tax on its book profit subject to certain conditions. The books profit is to be determined u/s 115JB(2) as per Part II & III of Schedule VI to Company's Act, 1956.
Explanation (I) to section II5JB(2) defines the expression "book profit" and means the net profit as shown in the P&L A/c for the relevant previous year prepared under sub-
section (2) as increased by the amounts specified in clause (a) to (h) of the Explanation I. Clause (f) of the Explanation 1 refers to the amount or amounts or expenditure retable to any income to which section 10 (other than provisions contained in clause 38 thereof or section 11 or section 12 apply. For applying the provisions of clause
(f) of Explanation to section 1I5JB(2), there should be nexus between the amount of expenditure relatable to the income exempt u/s 10 of the Act. The dividend income is exempt u/s 10(33) for assessment year 2001-
02. Since the expenditure incurred has not been identified and no nexus has been established with the dividend income, the expenditure could not be disallowed under clause (f) of the Explanation. As per the decision of Hon 'ble Supreme Court in the case of Apollo Tyres Ltd., the Assessing 17 ITA No s . 1 21 3/ Mu m/ 2 01 8 Officer is not entitled to tinker with the book profits as determined as per provisions of Company's Act unless the amount is specified in clauses (a) to (h) of the Explanation. The amount of Rs.88,290/- has not been established to have nexus with the dividend income. The amount of Rs.88,290/- has been estimated at 1% of the income. In our view, no disallowance could be made. Accordingly, we direct the Assessing Officer to delete the amount of Rs.88,290/- from the bookprofit."
Thus, he submitted that the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 122 Taxman 562 was duly considered by Tribunal before taking contrary view in the matter. But Hon'ble Delhi High Court did not accept the Tribunal's reasoning Ld. CIT(DR) further submitted that the decision in the case of Bhushan Steel has been rendered without taking into consideration the decision in the case of Goetze (India) Ltd. (supra) of co-ordinate bench of equal strength as both sides had not, brought to the notice of the Bench the said decision in the case of Goetze (India) Ltd. (supra) and, therefore, does not constitute binding precedent. Ld. CIT(DR) vehemently contended that when decision in Bhushan Steel Ltd's case (supra) was rendered, the issue was no more res-integra in view of Goetze (India) Ltd's. case (supra). Ld. CIT(DR) submitted that Revenue had filed Review Petition before 18 ITA No s . 1 21 3/ Mu m/ 2 01 8 Hon'ble High Court in the case of Bhushan Steel Ltd. (supra) which has been dismissed in- limine at the threshold on the ground of delay in filing the said Review Petition and, therefore, does not constitute a binding precedent. In support of his contention he has relied on the commentary of Kanga & Palkhivala, vol. I, Vllth Edn.,page 43 which is reproduced hereunder:--
43. Circumstances that Destroy or Weaken the Binding Force of Precedent.
A precedent losses all or some of its binding force in the following circumstances:
(i) if it is reversed or overruled by a higher court - reversal occurs when the same decision is taken on appeal and is reversed by the higher court, while overruling occurs when the higher court declares in another case that the earlier case was wrong decided;
(ii) when it is affirmed or reversed on a different ground, depending on the circumstances of such affirmation or reversal;
(iii) when the legislature enacts a state that is inconsistent with the precedent;
(iv) when it is inconsistent with the earlier decisions of a higher court or a court of the same rank;
(v) if it is a precedent sub silentio or not fully argued;
(vi) when it is rendered per incuriam, i.e., in ignorance of a statutory provision or binding precedent - however, the rule of per incuriam is of limited application, and if the provision of the Act was noticed and considered, then the judgment cannot be ignored as being per incuriam merely on the ground that it has erroneously reached the conclusion; and
(vii) when it is an erroneous decision, i.e, a decision conflicting with the fundamental principles of law.
Ld. Principal CIT(DR) further relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 wherein hon;ble court while summarizing the general principles with regard to precedents, inter-alia, observed as under:-
19ITA No s . 1 21 3/ Mu m/ 2 01 8
(iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions.
Ld. Principal CIT(DR) has also relied on following decisions :-
- CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom.)
- Indian Oil Corpn. Ltd. v. State of Bihar [1987] 167 ITR 897 (SC)
- Kunhayammed v. State of Kerala [2000] 245 ITR 360/113 Taxman 470 (SC) Ld. Principal CIT(DR) has submitted following written submissions in this regard :-
'The assessee had filed a compilation of case laws on 20/04/2017 and the Deptt. had to reply to the above.
The reply of the Deptt. is as follows:--
1. The decision of the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna v. State of Maharashtra and another AIR 2014 SC 1745 has held as follows in para 12 of the judgment :-
"if the third sentence of para 48 is discordant to Niranjan Singh, the view of the co-ordinate bench of earlier vintage must prevail, and this discipline demands and constrains as also to adhere to Niranjan Singh, ergo, we reiterate............"
Again in para 15 of the judgment it has been stated as follows.:-
15 "It cannot be over - emphasized that the discipline demanded by a precedent or the disqualification or dimunition of a decision on the application of the per incuriam rule of great importance, Since without it, certainity of law, consistency of rulings and comity of courts would become a costly casualty A decision or judgement can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgement can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgement of a co-equal or larger Bench, or if the decision of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the 'ratio decidendi' and not to 'obiter dicta'. It is often encountered in High Courts that two are more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of 'per incuriam'.
Thus, both paras 12 and para 15 cited above, in the Supreme Court judgement in Sandeep Kumar Bafna 's case (supra) hold very clearly that 20 ITA No s . 1 21 3/ Mu m/ 2 01 8 the earlier decision is to be followed and not the later one of co-qual bench
- when given in ignorance of the earlier decision -which in the present case
- makes it very clear that the decision rendered in the case of Goetze should be followed and not the later decision given in the case of Bhushan Steel.
Further, the Hon'ble Supreme Court in the case of Mamaleshwar Prasad v. Kanhaiya Lal (Dead) AIR 1975 SC 907 observed as follows :-
"Certainity of the law, consistency of rulings and comity of Courts all flowering from the same principle converge to the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule that, in exceptional instances where by obvious inadvertence or over sight a judgement fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the sway of binding precedents. It should be a glaring case, an obtrusive omission. "
Although the above observations are not 'ratio' but then as held in the case of (1) Kharawala v. ITO 147 ITR pages 67, 85 :-
The observation of the Supreme Court on the true interpretation of sub- section (1) cannot, therefore, be regarded as mere passing observations. At the highest, they may be treated as an obiter dictum, that is to say the expression of opinion on a point which it was not necessary for the decision of the case. Even if they are conceivably regarded as obiter dictum it is settled that if an opinion is expressed by the supreme court on the interpretation of a section after careful consideration and such opinion is deliberately and advisedly given, the opinion would be binding on the High Court See Mohandas Issardas v. A.N. Sattanathan [1955] 56 BLR 1156; AIR 1955 Bom 113. Under these circumstances, were are unable to accede to this submission made on behalf of the Revenue. (2) CIT v. AP Riding Club 168 ITR pages 393, 404 It is now-settled that even the obiter dictum of their Lordships of the Supreme Court is binding on the High Courts under article 141 of Constitution of India.
The 'obiter dicta' of Supreme Court has to be followed. Hence, both the cases of Sandeep Kumar Bafna and Mamaleshwar Prasad v. Kanhaiya Lal - make it very clear that the earlier decision constitutes the 'binding precedent' and should be followed in preference . to the later decision given in ignorance of the earlier decision of co-equal strength.
Hence, it is requested that the Hon 'ble Special Bench may kindly follow the earlier decision of Goetze in preference to the later decision of Bhushan Steel.' 21 ITA No s . 1 21 3/ Mu m/ 2 01 8 Per contra, Ld. Senior Counsel, without prejudice to his submission that the decision in the case of Goetze (India) Ltd. (supra) on this issue was by of concession, submitted that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the decision being later in point of time is binding on the lower courts. In support of this proposition of law he has relied on following decisions :-
1. Bhika Ram v. Union of India [1999] 238 ITR 113 (Delhi).
2. Govindanaik G. Kalaghtigi v. West Patent Press Co. Ltd.: AIR 1980 Kar 92 (FB).
3. Vasant Tatoba Hargude v. Dikkaya Muttaya Pujari : AIR 1980 Bom.
341.
4. Peedikkakumbhi Joseph v. Special Tahsildar : 2001 (1) KLT 747 (FB).
5. Datamatics Financial Services Ltd. v. Jt. CIT [2005] 95 ITD 23 (Mum. -
Trib.) The second proposition advanced by Ld. Senior Counsel is that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the lower Court shall follow the judgment which appears to it to state the law more elaborately and accurately, in this regard he has relied on following decisions :-
1. Indo Swiss Time Ltd. v. Umrao AIR 1981 Punj. & Har. 213
2. Amar Singh Yadav v. Shanti Devi AIR 1987 Pat 191
3. T.P.Naik v.Union of India AIR 1998 MP 83 Third proposition advanced by Ld. Senior Counsel is that a lower authority/Court cannot declare a judgment of a higher Court as per incurium. In this regard he has relied on following decisions:-
1. Cassel & Co. Ltd. v. Broome [1972] 1 All ER 801 (HL)quoted in ITO v. Modern International ITA No. 1253/Kol/2011.
2. CIT v. B.R. Constructions [1993] 202 ITR 222/[1994] 73 Taxman 473 (AP) (FB).
Thus, we are pitted against two decisions of Hon'ble jurisdictional high court taking divergent views and, under such circumstances we have to decide which decision to follow. We find from the decisions relied upon by Ld. Senior Counsel more particularly in the case of Bhika Ram (supra) that later pronouncement 22 ITA No s . 1 21 3/ Mu m/ 2 01 8 by a bench of co-equal strength should be followed even if earlier decision was not considered. We are not convinced with the submission of ld. Senior Counsel that Tribunal can decide which decision state the law more elaborately and accurately. We are of the view that decision in the case of Cassel & Co. Ltd. v. Broome (supra) should guide the course of action wherein it has been observed as under:--
"Though a judgment rendered per incuriam can be ignored even by a lower court, yet it appears that such a course of action was not approved by the House of Lords in Cassell & Co. Ltd. v. Broome [1972] 1 All ER 801,wherein the House of Lords disapproved the judgment of the Court of Appeal treating an- earlier judgment of the House of Lords as per incurium. Lord Hailsham observed (at page 809) :
'It is not open to the Court of appeal to give gratuitous advice to judges of first instance to ignore decisions of the House of Lords in this way'.
It is recognized that the rule of per incuriam is of limited application and will be applicable only in the rarest of rare cases. Therefore, when a learned single judge or a Division Bench doubts the correctness of an otherwise binding precedent, the appropriate course would be to refer the case to a Division Bench of Full Bench, as the case may be, for an authoritative pronouncement on. the question involved as indicated above. The above-said two questions are answefed as indicated above. "23
ITA No s . 1 21 3/ Mu m/ 2 01 8 In such a scenario, in our humble opinion, proper course would be to follow the decision of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In this case the facts were like this. The relevant assessment year was 1960-61. In that regard the Income-tax Officer issued a notice under section 22(2) of the Indian Income-tax Act, 1922 on June 1, 1960, served on assessee on June 13, 1960, requiring the assessee to submit its return on or before July 18, 1960. Assessee sought extension of time for submitting its return which was extended by ITO for two months with rider for no further extension. The assessee failed to furnish the Return of Income within the extended time. Thereafter, a notice under section 28(3) of the 1922 Act was served on the assessee on January 16, 1961. On the very next day, viz., January 17, 1961, the assessee filed its return for the assessment year in question. The assessment was completed by ITO on October 31, 1962. Meanwhile, on April 1, 1962, the Income-tax Act, 1962( came into force. As under the provisions of section 297(2)(g) of the Act the proceedings for the imposition of the penalty had to be initiated and completed under the Act, a fresh notice was served on the assessee. The ITO determined the tax due from the assessee for the assessment year at Rs. 1,25,512,10, and on that basis, the penalty payable by the assessee was fixed at Rs. 12,734.10. It may be pointed out that on February 2, 1961. a provisional assessment was made by the ITO under section 23B of the 1922 Act. Immediately thereafter , the assessee deposited Rs. 92,294.55. In determining the penalty due from the assessee, the ITO took into consideration not the amount 24 ITA No s . 1 21 3/ Mu m/ 2 01 8 demanded under section 156 of the Act but the amount assessed under section 143 of the Act. In the back drop of these facts the controversy before Hon'ble Supreme Court was whether the penalty was to be levied on the tax assessed under section 143 or as demanded under section 156 being tax assessed minus the amount paid under the provisional assessment order. Hon'ble Supreme Court before resorting to the interpretation of term in addition to the amount of the tax, if any, payable by him as appearing in section 271(l)(a)(i) observed as under:--
"On the other hand, it two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well- accepted rule of construction recognized by this court in several of its decisions. "
Hon'ble Supreme Court held as under: -
'We must first determine what is the meaning of the expression "the amount of the tax, if any, payable by him" in section271(l)(a)(i).
Does it mean the amount of tax assessed under section 143 or the amount of tax payable under section 156. The word "assessed" is a term often used in taxation law. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax "assessed". A tax payable is not the same thing as tax assessed. The tax payable is that amount for which is a demand notice is issued under 25 ITA No s . 1 21 3/ Mu m/ 2 01 8 section 156. In determining the tax payable, the tax already paid has to be deducted.
Hence, there can be no doubt that the expression "the amount of the tax, if any, payable by him" referred to in the first part of section 271(1)(a)(i) refers to the tax payable under a demand notice.' We have ; therefore, to follow the later decision of Ho'nble Delhi High Court in the case of Bhushan Steel (supra).
6.22 In view of above discussion, we answer the question referred to us in favour of asssessee by holding that the computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962."
10. We have noted that the Special bench in the case of Vireet Investments (P.) Ltd. (supra) has finally taken the view that the view beneficial to the assessee is to be taken while deciding the issue in term of the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. [1973] 88 ITR 192. In view of the above given facts and circumstances of the case, we are of the view that the AO has considered the issue during the original assessment proceedings and form a view permissible under law that no disallowance relatable to exempt income can be made under section 14A read with Rule 8D of the Rules while computing the book profit under section 115JB of the Act. We find that this issue is squarely covered in favour of assessee and against Revenue by the decision of Special Bench of this ITAT Delhi in the case 26 ITA No s . 1 21 3/ Mu m/ 2 01 8 of Vireet Investments (P.) Ltd. (supra) and considering the facts in entirety, we quash the revision proceedings as the assessment order is neither erroneous nor prejudicial to the interest of the Revenue.
Accordingly, we quash the revision order and allow this appeal of the assessee.
11. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 13-12-2018.
Sd/- Sd/-
(एन. के. प्रधान/ NK PRADHAN) (महावीर स ह
िं /MAHAVIR SINGH)
(लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER)
मुिंबई, ददनािंक/ Mumbai, Dated: 13-12-2018 सदीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS आदे श की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A)
4. आयकर आयुक्त / CIT
5. ववभागीय प्रयतयनधध, आयकर अपीलीय अधधकरण, मुिंबई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शािसार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मिंुबई / ITAT, Mumbai