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TMI Blog1993 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose. The development rebate determined by the Income-tax Officer included a sum of Rs. 61,155 relatable to the cost of meters installed by the assessee-company at the residential or office premises of its consumers. However, the order of the Income-tax Officer was revised by the Commissioner of Income-tax ("the Commissioner") under section 263 of the Act, as the Commissioner was of the opinion that the development rebate on the cost of meters installed by the assessee company at the residential or office premises of the consumers had been erroneously allowed by the Income-tax Officer in violation of the provisions of section 33(6) of the Act. After issuing a show-cause notice to the assessee and on hearing the assessee's representative, the Commissioner directed the Income-tax Officer to withdraw the development rebate in respect of the cost of meters in question, as the meters were installed in the residential and office premises of the consumers. The assessee took the matter in appeal before the Tribunal. Before the Tribunal, it was contended on behalf of the assessee that section 33(6) of the Act was applicable only in case of machinery and plant such as air-conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position, according to counsel, the conclusion arrived at by the Tribunal cannot be sustained. The submissions of learned counsel for the assessee, on the other hand, are as follows : 1. The Tribunal was correct in holding that section 33(6) of the Act applies only to machinery and plant installed in the office and residential accommodation, etc., belonging to the assessee or in the occupation of the assessee. 2. The Tribunal having taken such a view in regard to the interpretation of section 33(6) of the Act, even if the High Court comes to different conclusion on the interpretation of section 33(6) of the Act, it should accept the interpretation given by the Tribunal, that being an interpretation beneficial to the assessee. Reliance was placed in this connection on the decisions of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 and CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236. 3. That similar controversy having been decided by the Calcutta High Court in CIT v. Tinnevelly Tuticorin Tea Investment Co. Ltd. [1989] 179 ITR 550, and there being no decision of any other High Court to the contrary, this court is bound to follow the decision of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position that what is binding on the courts is the ratio of a decision. There is a clear distinction between the ratio of a 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 principle of binding precedent. This will take us to the question whose decision binds whom. 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." In that view of the matter, all courts in India are bound to follow the decisions of the Supreme Court. Though there is no provision like article 141 which specifically lays down the binding nature of the decision 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 judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctum. 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, 1378, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 if 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax matters that whatever our own view may be, we should follow the view taken by another High Court on the interpretation of a section." Referring to the observations in Maneklal Chunilal and Sons Ltd. [1953] 24 ITR 375 (Bom) quoted above, it was further observed (at page 290) : "This is the practice of this court, and, as we have already stated, it has been generally followed by this court, barring certain exceptions like where inadvertently the decision was not brought to its notice or where in the decision of the other courts some relevant provision of law had been omitted to be considered. The decision of the Gujarat High Court is a very elaborate one, considering all the relevant provisions of law. This is, therefore, not a case in which we should depart from the aforesaid policy of this court." Reliance was also placed on the decision of this court in CIT v. Tata Sons Private Ltd. [1974] 97 ITR 128, particularly, on the following observations (at page 131) : " The practice and the policy established is that in these matters 'whatever our own view may be we must accept the view taken by another High Court on the interpretation of the section of a statute which is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations in the light of the questions which were before the court for determination in those cases, we find it difficult to accept these observations as the ratio decidendi of those decisions. These are observations by way of obiter dicta which, at best, may have persuasive efficacy but not the binding character of precedent. This is also evident from the decision of this court in CIT v. Jayantilal Ramanlal and Co. [1982] 137 ITR 257, where, at page 265, after referring to earlier decisions it was observed : "We are aware that the practice is not uniform among the High Courts, but nevertheless we are of opinion that it is a desirable one. Unless the judgment of another High Court dealing with an identical or comparable provision can be regarded as per incuriam, it should ordinarily be followed." (emphasis supplied). This court, in the above case, discussed the real issue before it at great length in the light of the facts of the case and ultimately decided to answer the question in line with the decisions of the Kerala and Punjab and Haryana High Courts. The aforesaid observations leave no scope for doubt that the court merely observed what according to it is desirable and did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te decision of the case. The question which was necessary for the determination of the case would be the 'ratio decidendi' ; the opinion of the Tribunal, on the question which was not necessary to decide the case would be only an 'obiter dictum'. " It was rightly held by Chagla C. J. (at page 1161 of 56 BLR), (at page 116 of AIR 1955 Bom) : "It cannot be suggested that the doctrine of 'obiter dicta' was so far extended as to make the courts bound by any and every expression of opinion either of the Privy Council or of the Supreme Court, whether the question did or did not arise for the determination of the higher judicial authority." In the above decision, a distinction has also been drawn between obiter dictum and casual observations made by the court. Even in regard to the decisions of the Supreme Court, it was clearly held that it would be incorrect to say that every opinion of the Supreme Court would be binding on the High Courts in India. The only opinion which would be binding would be an opinion expressed on a question that arose for the determination of the Supreme Court. The above decision of this court and various observations of Chagla C. J. therein fully support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Act itself contemplates independent decisions of various High Courts on the question of law referred to them. It has visualised the possibility of conflict of opinion between different High Courts on the same question of law 'and has also made specific provision to take care of such a situation in suitable cases. In fact, in the light of the clear language of section 260 of the Act, every High Court is required to give its own opinion on a particular question of law. It should not follow, as a matter of course, only with a view to achieve uniformity in the matter of interpretation, the decision of another High Court, if such decision is contrary to its own opinion. Because, such action will be contrary to the clear mandate of section 260 of the Act. It will amount to abdication of its duty by the High Court to give "its decision" on the point of law referred to it. We are, therefore, of the clear opinion that decision of one High Court is not binding on another High Court. We reiterate the propositions laid down by us in paragraph 17 (at page 738). Before we proceed to decide the question of law referred to us on the merits, it is necessary also to decide the second submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and argued forcefully, or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation. In the instant case, as we are not satisfied with the interpretation given by the Tribunal or the Calcutta High Court to section 33(6) of the Act, in our opinion, accepting those decisions by applying the test of beneficial interpretation does not arise. We now turn to the merits of case before us and for that purpose to the question of law referred to us. The facts of the case have already been set out above. The controversy is in a very narrow compass. The answer hinges on the interpretation of section 33(6) of the Act. Section 33(6) as it stood at the material time, so far as relevant, is in the following terms : "33.(6) Notwithstanding anything contained in the foregoing provisions of this section, no deduction by way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st day of March, 1965, in any office premises or any residential accommodation, including any accommodation in the nature of a guest house: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We find force in this submission of learned counsel for the assessee. It may be mentioned that sub-section (6) was inserted in section 33 by the Finance Act, 1965, with effect from April 1, 1965. The Board, by its circular No. 3-P (LXXVI-57) 1965, dated October 11, 1965, while explaining the above provision made it clear that the effect of this provision was that development rebate will not be admissible in respect of machinery or plant such as air-conditioners, frigidaires, room heaters, electric fans, etc., installed in any office premises or residential accommodation including guest houses. This circular of the Board makes it clear that the plant and machinery referred to in section 33(6) of the Act would mean only the plant and machinery of the types set out in its circular which are of use to the occupants of the office, residence or guest house. Electric meters, definitely, do not fall in this category. The meter is in fact necessary only for the purpose of measuring the consumption of electricity. It has no independent use of its own. In fact, it is not for the use in the office, residence, etc. It is a necessary adjunct to the supply line of electricity and the last point ..... X X X X Extracts X X X X X X X X Extracts X X X X
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