1997 (7) TMI 53 - HC - Income Tax

Summary

Issues:
1. Rectification of Tribunal's order regarding interest on sticky loans.
2. Jurisdiction of Tribunal to rectify orders under section 254(2).
3. Taxability of interest on sticky loans on accrual basis.

Detailed Analysis:
1. The Tribunal passed an order in an appeal regarding interest on sticky loans, which was challenged by the Revenue. The Revenue filed an application for reference to the High Court with two questions. Subsequently, the Tribunal rectified its order under section 254(2) based on a Supreme Court judgment, including the interest on sticky loans in the assessee's income. The Tribunal then referred only one question to the High Court, as the first question became irrelevant due to the rectification. The assessee challenged this rectification order, but the Tribunal dismissed the challenge.

2. The assessee then filed another application for reference to the High Court, questioning the Tribunal's jurisdiction to rectify the order and the taxability of interest on sticky loans on an accrual basis. The Tribunal referred three questions to the High Court, including the jurisdiction under section 254(2) and the taxability of interest on sticky loans. The assessee argued that the Tribunal should not have modified its original order based on a Supreme Court judgment, citing a case where the Orissa High Court held that a Tribunal cannot rectify an order based on a judgment not previously considered.

3. The High Court held that the Tribunal was justified in rectifying the mistake in the order under section 254(2) based on the Supreme Court judgment. The court emphasized that judgments of the Supreme Court are binding and must be followed by all Tribunals and courts. The High Court also noted that a subsequent Supreme Court judgment reiterated the position in law. Therefore, the Tribunal had the jurisdiction to rectify the mistake and the taxability of interest on sticky loans on an accrual basis was upheld based on the Supreme Court judgments.

In conclusion, the High Court answered all three questions in favor of the Tribunal, affirming its jurisdiction to rectify orders under section 254(2) and the taxability of interest on sticky loans on an accrual basis as per the Supreme Court judgments cited.