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2016 (3) TMI 755

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..... to be binding till it is corrected by a higher Court. This principle laid down in respect of a coordinate Court would apply with greater force on subordinate Courts and Tribunals. We are also conscious of the fact that we are not final and our orders are subject to appeals to the Supreme Court. However, for the purposes of certainty, fairness and uniformity of law, all authorities within the State are bound to follow the orders passed by us in all like matters, which by itself implies that if there are some distinguishing features in the matter before the Tribunal and, therefore, unlike, then the Tribunal is free to decide on the basis of the facts put before it. However till such time as the decision of this court stands it is not open to the Tribunal or any other Authority in the State of Maharashtra to disregard it while considering a like issue. In case we are wrong, the aggrieved party can certainly take it up to the Supreme Court and have it set aside and / or corrected or where the same issue arises in a subsequent case the issue may be reurged before the Court to impress upon it that the decision rendered earlier, requires reconsideration. It is not open to the Tribunal to .....

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..... ember, 2015, the Tribunal dismissed the petitioner's appeal relating to the Assessment Year 2008-09 on the issue of applicability of Section 14A of the Act to disallow a portion of the interest paid on borrowed funds in respect of investments made in tax free securities. This when it has own funds in excess of investments made in the securities and further these securities are held as stock in trade. This dismissal of the appeal, submit the petitioner, inspite of the issue being concluded on both the grounds in its favour by the binding decisions of this Court. 3. However, Mr. Suresh Kumar the learned Counsel for the Revenue urged that as there is an alternative remedy of an statutory appeal available under Section 260A of the Act from impugned order of the Tribunal this court should not exercise its extraordinary jurisdiction under Article 226 of the Constitution of India. It is submitted that issue raised in this petition could be examined in appeal. It is true that an order passed under Section 254(1) of the Act by the Tribunal, such as the impugned order is amenable to an appeal to this Court under Section 260A of the Act. Normally we would have directed the petitioner t .....

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..... 377; 1067.93crores. This after disregarding the petitioner's contention that Section 14A of the Act would not apply in respect of its tax free securities as it had ample interest free funds available and the same was utilized from a common pool consisting of interest bearing funds and interest free funds to purchase the tax free securities. This only on the ground that the petitioner was not able to indicate / lead evidence that the investments made in tax free securities came out of its interest free funds. In the circumstances the Assessing officer invoked Section 14A of the Act r/w Rule 8D of the Income Tax Rules (Rules) to disallow an amount of ₹ 3.39crores on account of interest and ₹ 0.27crore as other expenses aggregating to ₹ 3.66crores under Section 14A of the Act as being an expenditure incurred for earning tax exempt income of ₹ 5.81crores. (c) Being aggrieved with the order dated 22nd December, 2010 of the Assessing Officer, the petitioner preferred an Appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 21st November, 2011, the CIT(A) dismissed the petitioner's appeal upholding the order of the Assessing Offi .....

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..... overed by an earlier decision of this Court in Godrej and Boyce Manufacturing Co. Ltd(supra), when in fact it has not decided the issue; (b) There is no conflict between the decisions of this Court in Godrej and Boyce Manufacturing Co. Ltd.(supra) and HDFC Bank Ltd(supra). This is for the reason that this Court has in Godrej and Boyce Manufacturing Co. Ltd.(supra) has not ruled on the issue of disallowance of interest under Section 14A of the Act on the ground of presumption where sufficient interest free funds are available to make investment in tax free instruments. This issue was only decided later by this Court for the first time in the petitioner's own case in HDFC Bank Ltd.(supra). (c) In view of the fact that there is only one decision viz. HDFC Bank Ltd(supra) of this court reigning, it was not open to the Tribunal to disregard a decision of this court by merely holding the decision in HDFC Bank Ltd. (supra) was per incuriam. This on the ground that in HDFC Bank Ltd. (supra) attention was not invited to the decision of this Court in Godrej and Boyce Manufacturing Co. Ltd.(supra). This is more particularly so when Godrej and Boyce Manufacturing Co. Ltd. (supra) has .....

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..... for no interference by this Court in its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India. Consideration : 7. In our system of Jurisprudence the theory of Precedents and the hierarchical structure are an inherent part of our dispute resolution/justice obtaining apparatus i.e. Courts / Tribunal. The theory of precedent ensures that what has been done earlier would be done subsequently on identical facts. To wit, like cases are to be treated alike. Thus, the doctrine of precedent ensures certainty of law, uniformity of law and fairness meeting some of the essentials ingredients of Rule of Law. In fact, the Supreme Court in Union of India vs. Raghuvir Singh 1989 (2) SCC 754 while setting out the objectives of the doctrine of Precedent observes at para 7, 8 and 9 thereof as under: 7. India is governed by a judicial system identified by a hierarchy of courts, where the doctrine of binding precedent is a cardinal feature of its jurisprudence. .... 8. Taking note of the hierarchical character of the judicial system in India, it is of paramount importance that the law declared by this Court should be certain, clear and consistent. It is c .....

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..... rt to disregard a decision of the Court of Appeal. It is needles to add that in India under article 141 of the Constitution, the law declared by the Supreme Court shall be binding on all Courts within the territory of India and under art. 144 all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. (emphasis supplied) 9. Although both the above decisions are rendered in the context of the decision of the Supreme Court, the same principle with equal force would apply to the decisions of the High Court within the State over which it exercises jurisdiction. This issue is long settled by the Apex Court in East India Commercial Co. Ltd. Calcutta and Anr. vs. Collector of Customs, Calcutta 1962 SC SC 1893 wherein it has been held as under: 29. ... This raises the question whether an administrative tribunal can ignore the law declared by the highest court in the State and initiate proceedings in direct violation of the law so declared. Under Art.215, every High Court shall be a court of record and shall have all the powers of such a court including the power to punish for contempt of itself. Under Art. 226, it has a plenar .....

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..... i.e. the principle of law that decides the dispute which can be relied upon as precedent and not any obiter dictum or casual observations. (See Girnar Tea vs. State of Maharashtra 2007(7) SCC 555 and Shin Estu Chemical Co. Ltd v. Aksh opticfibre Ltd 2005 (7) SCC 234). 11. Keeping the aforesaid position of law in mind, we shall now examine the impugned order of the Tribunal. The issue before the Tribunal as raised by the petitioner was that Section 14A of the Act would have no application to disallow interest expenditure on fund borrowed in respect of the tax free returns on the securities, for the following two reasons : (a) The petitioner was possessed of sufficient interest free funds of ₹ 2153 crores as against the investment in tax free securities of ₹ 52.02 crores. Consequently, there is a presumption that the investment which has been made in the tax free securities has come out of the interest free funds available with the petitioner. This is so as it has been held by this Court in the petitioner's own case for an earlier Assessment year being HDFC Bank Ltd.(supra). This decision on the above issue has been accepted by the Revenue. This is evidenced by .....

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..... ized is that merely because a decision has been cited before the Court and a reference to that has been made in the order of the Court such as in the case of Godrej and Boyce Manufacturing Co. Ltd. (supra) reference was made to CIT Vs. Reliance Utilities and Power Ltd. 313 ITR 340 by itself would not lead to the conclusion that Reliance Utilities and Power Ltd. (supra) has been considered and the opinion on the same has been rendered in the case of Godrej and Boyce Manufacturing Co. Ltd.(supra). The test to decide whether or not two decisions are in conflict with each other is to first determine the ratio of both the cases and if the ratio in both the cases are in conflict with each other, then alone, can it be said that the two decisions are in conflict. We find that no such exercise has been done. If it was done, the Tribunal would have noted that this Court in Godrej and Boyce Manufacturing Co. Ltd. (supra) has not decided the issue of applicability of Reliance Utilities and Power Ltd. (supra) inasmuch as it has restored the entire issue to the Assessing officer after upholding the constitutional validity of Section 14A of the Act. 14. The only basis for proceeding on the bas .....

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..... ng out of assessee's own funds in case the same are in excess of the investments made in the securities (notwithstanding the fact that the assessee concerned may also have taken some funds on interest) applies, when applying Section 14A of the Act. Thus, the decision of this Court in HDFC Bank Ltd. (supra) for the first time on 23rd July, 2014 has settled the issue by holding that the test of presumption as held by this Court in Reliance Utilities and Power Ltd. (supra) while considering Section 36(1)(iii) of the Act would apply while considering the application of Section 14A of the Act. The aforesaid decision of this Court in HDFC Bank Ltd. (supra) on the above issue has also been accepted by the Revenue inasmuch as even though they have filed an appeal to the Supreme Court against that order on the other issue therein viz. broken period interest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities and Power Ltd. (supra) in its application to Section 14A of the Act. Therefore, the issue which arose for consideration before the Tribunal had not been decided by this Court in Godrej and Boyce Manufacturing Co. Ltd.( .....

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..... in HDFC Bank Ltd. (supra) while deciding on application of Section 14A of the Act to disallow interest claimed as expenditure. Besides reliance is also placed upon a decision of this Court in the case of the petitioner itself before this Court in Income Tax Appeal No.860 of 2012 rendered on 24th September, 2014 wherein question (b) as formulated by the Revenue raised the same issue namely applicability of the Godrej and Boyce Manufacturing Co. Ltd. (supra) while interpreting Section 14A of the Act in the context of the test of presumption as arising in the appeal before the Tribunal. For the purposes of this order, we are not taking into account the above decisions as they were not cited at the hearing before the Tribunal. Thus we are only examining whether the action of the Tribunal is within the bounds of its authority on the basis of the materials placed before it leading to the impugned order and we unfortunately find it is not so. This is for the reason that it failed to follow the binding precedent in HDFC Bank Ltd. (supra). 18. The alternative submission (b) which was put forth by the petitioner before the Tribunal that the investment in securities are its stock in trade. .....

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..... d the issue on merits. 21. The impugned order of the Tribunal seems to question the decision of this Court in HDFC Bank Ltd. (supra) to the extent it relied upon the decision of this Court in Reliance Utilities and Power Ltd. (supra). This is by observing that the decision in Reliance Utilities and Power Ltd.(supra) it must be appreciated was rendered in the context of Section 36(1)(iii) of the Act and its parameters are different from that of Section 14A of the Act. This Court in its order in HDFC Bank Ltd.(supra) consciously applied the principle of presumption as laid down in Reliance Utilities and Power Ltd. (supra) and in fact quoted the relevant paragraph to emphasize that the same principle / test of presumption would apply to decide whether or not interest expenditure could be disallowed under Section 14A of the Act in respect of the income arising out of tax free securities. It is not the office of Tribunal to disregard a binding decision of this court. This is particularly so when the decision in Reliance Utilities and Power Ltd. (supra) has been consciously applied by this Court while rendering a decision in the context of Section 14A of the Act. 22. We also note t .....

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..... ed earlier, requires reconsideration. It is not open to the Tribunal to sit in appeal from the orders of this Court and not follow it. In case the doctrine of precedent is not strictly followed there would complete confusion and uncertainty. The victim of such arbitrary action would be the Rule of law of which we as the Indian State are so justifiably proud. 24. It is in the above circumstances that we are of the view that we have to exercise our powers under Article 227 of the Constitution of India. This is in view of the manner in which the impugned order of the Tribunal has chosen to disregard and/or circumvent the binding decision of this Court in respect of the same assessee for an earlier assessment year. This is a clear case of judicial indiscipline and creating confusion in respect of issues which stand settled by the decision of this Court. 25. It is in the above view, that we set aside the impugned order of the Tribunal dated 23rd September, 2015 in its entirety and restore the issue to the Tribunal to decide it afresh on its own merits and in accordance with law. However the Tribunal would scrupulously follow the decisions rendered by this Court wherein a view a ha .....

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