TMI Blog2003 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... d 77 of 2000, 84 of 2001 and 166 of 2000 are at the instance of the Revenue and I.T.A. No. 69 of 1999, I.T.R. No. 135 of 1999, I.T.A. Nos. 180 and 183 of 2000, I.T.A. No. 173 of 2001 and I.T.A. Nos. 143, 151 and 161 of 2002 are by the assessees. Since the question involved in all these cases relates to the eligibility for deduction of the service charges paid by the respective assessees-Government owned companies-to the Government as per certain Government orders under section 37 of the Income-tax Act, 1961 (for short "the Act"), though four different assessees are the respondents, we are disposing of all these cases by this common judgment. Conflicting views have been expressed by different Benches (Members different) of the Appellate Tribunal, Cochin Bench. Hence, ITRs/IT appeals by the assessees and the Revenue on the same question. The Travancore Titanium Products Ltd. is involved in I.T.R. No. 20 of 1998, I.T.A. No. 13 of 2000, I.T.A. No. 84 of 2001, I. T. A. No. 151 of 2002 and I.T.A. No. 161 of 2002. The assessment years concerned are 1991-92, 1992-93, 1993-94, 1994-95 and 1995-96, respectively. M/s. Kerala Agro Machinery Corporation Ltd. is involved in I.T.A. No. 70 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 of the Income-tax Act. The Assessing Officer rejected the said claim, as according to him, the service charges represented nothing but part of the day-to-day functioning and statutory responsibility of the Government and that such services had been rendered for other public sector undertakings as well. In other words, according to the Assessing Officer, no special services are rendered by the Government to the assessee-companies for demanding amounts by way of service charges. The Assessing Officer accordingly took the view that the service charges could not be allowed as expenditure laid out wholly and exclusively for the purpose of the business. In appeal by the assessee, the Commissioner of Income-tax (Appeals) dismissed the appeal and confirmed the order of the Assessing Officer. In further appeal by the assessee, the Tribunal observed that the payment had been made pursuant to the order passed by the Government on December 7, 1991 and that the Government had spelt out the services rendered by it to the company and the service charges had been paid for the services actually rendered by the Government and so the payment was for the purpose of the business. The Tribunal also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases. In a case where a Bench of co-ordinate jurisdiction is unable to agree with the decision of another Bench of co-ordinate jurisdiction the appropriate procedure to be followed is to write to the President of the Tribunal, who in turn will place the matter before a larger Bench for decision. In the instant case the Benches of coordinate jurisdiction by simply stating that each assessment year is independent and the matter has to be decided in the light of the facts and circumstances of each case, have independently considered the matter ignoring the binding decision rendered by the co-ordinate Bench. In this case the Cochin Bench of the Tribunal consisting of Sri G. Santhanam, Accountant Member, and Smt. P.K. Ammini, Judicial Member, based on a Government letter referred to in page 35 of the paper book, has held that the service charges paid by the assessee-companies to the Government is a permissible deduction. The said letter shows that the liability to pay service charges is a recurring liability of the assessee-companies based on Government orders. When the Tribunal has decided the issue based on the said Government letter, without anything more, it applies to subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same should be only on a procedure known to law. A subordinate court is bound by the enunciation of law made by the superior courts. A co-ordinate Bench of a court cannot pronounce judgment contrary to declaration of law made by another Bench. It can only refer it to a larger Bench if it disagrees with the earlier pronouncement." The Supreme Court further observed as follows: "We are indeed sorry to note the attitude of the Tribunal in this case which, after noticing the earlier judgment of a co-ordinate Bench and after noticing the judgment of this court, has still thought it fit to proceed to take a view totally contrary to the view taken in the earlier judgment thereby creating a judicial uncertainty in regard to the declaration of law involved in this case. Because of this approach of the latter Bench of the Tribunal in this case, a lot of valuable time of the court is wasted and the parties to this case have been put to considerable hardship." This was again reiterated by the Supreme Court in District Manager, APSRTC v. K. Sivaji [2001] 98 FJR 45; [2001] 2 SCC 135 by observing that judicial discipline required that the judge either follow the earlier decision or refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business. The Tribunal, it must be noted, has observed that the payment had been made pursuant to the order passed by the Government 011 December 7, 1991, and that the Government order had spelt out the services rendered by it to the company and service charges had been paid for the services actually rendered by the Government and so the payment was for the purpose of business. The Tribunal also noted that in the prior years such payment had been allowed as business expenditure. It is also seen from the order of the Tribunal that they have largely relied on a letter received from the Secretary to the Government addressed to the Deputy Commissioner of Income-tax (Assessment), Special Range, Kawadiar, Thiruvananthapuram. The said communication in fact refers to four Government orders, the earliest of which is G.O. (MS) No. 48/88/ID dated March 25, 1988, and from the communication it further appears that subsequent Government orders of February 2, 1989, January 5, 1990 and the Government letter No. 47291/H3/91/ID dated December 7, 1991, are all details of enhancement of the service charges initially provided. Excepting the fact that the Tribunal has considered only the content o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Government had demanded these service charges from these companies, but they have demanded the said amount for which they had rendered special services to the companies by deputing Government employees who are unconnected with the business of the Government companies and by incurring other expenses for the efficient management, production, etc., of the business of the company. Here, it must be noted that the Tribunal did not consider the matter in these perspectives. Probably it is for the reason that the departmental representatives, who appeared before the Tribunal did not present the matter in the manner in which it was presented by senior counsel appearing for the Revenue before us. However, having regard to the fact that the State Government is a major shareholder in the Government companies with which we are concerned in these cases certainly it is one of the relevant matters to be borne in mind while considering the question of deduction of the service charges paid by these companies to the Government. According to us, since what is demanded under the Government order is service charges certainly it is necessary to find out the services rendered by the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1991-92 (I.T.A. No. 894/C of 1994) pointing out that each assessment year is independent and the matter has to be considered in the light of the facts and circumstances of that year. According to us, the Bench consisting of Sri K.P.T. Thangal and Dr. O.K. Narayanan were not justified in taking a different view after having noted that the decision in I.T.A. No. 894/C of 1994 was rendered based on the Government order which is applicable for all the years under consideration. The appropriate course, according to us, for that Bench was to refer the matter to the President for being considered by a larger Bench. Coming to the case of Travancore Cochin Chemical Ltd. also this is what is happened. The same is the case with M/s. Travancore Cochin Chemicals Ltd., Udyogamandal, also where the Bench consisting of Sri K.P.T. Thangal and Sri M.M. Cheri an decided the issue relying on the decision of the Tribunal in I.T.A. No. 894/C of 1994 in the case of Travancore Titanium Products Ltd. (I.T.A. Nos. 39 of 2000, 77 of 2000 and 166 of 2000). However, another Bench of the Tribunal consisting of Sri K.P.T. Thangal and Dr. O.K Narayanan has taken a different view in the case of the very sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rameters regarding the grant of deduction under section 37 of the Act in Ram Bahadur Thakur Ltd. v. CIT (I.T.R. No. 16 of 1999) judgment dated January 31, 2003 ([2003] 261 ITR 390). We notice that different Benches of the Tribunal have taken different views. In these circumstances, we are of the view that a detailed consideration of the basic facts leading to the demand of service charges by the Government from these companies have to be ascertained for a satisfactory adjudication of the eligibility for deduction of the same under section 37 of the Act. Since neither the Assessing Officer nor the two appellate authorities had seen the Government orders particularly the earliest Government order dated March 25, 1988, referred to in the letter extracted in the Tribunal's order in I.T.A. No. 894/C of 1994, we are of the view that the Assessing Officer must be directed to consider the matter afresh with reference to those Government orders and the circumstances under which those Government orders happened to be issued. In this view of the matter we set aside the orders of the Assessing Officer and the two appellate authorities on the question of deduction of service charges under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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