TMI Blog1999 (3) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's Misc. petition. 3. We have heard ld. D.R. gone through the record and the Special Bench's decision as also case-law cited above and find that cases of Saraya Sugar Mills (P.) Ltd. and Swadeshi Cotton Mills Co. Ltd. are relevant and, in view of the facts and circumstances of the case, there is no force in the Misc. petition of the assessee, which fails. Per Bali - Ground No. 1 in ITA No. 153/Chd./1991 related to the action of the departmental authorities in confirming the disallowance of Rs. 10,090 on account of fine and penalties. The Tribunal in its order dated 26-2-1997 which was a combined order in ITA Nos. 115, 153 and 154/91, upheld the action of the departmental authorities relying on the decision of the Special Bench of the Tribunal as in Bisleri (I)(P.) Ltd.'s case. The assessee moved a miscellaneous petition on 10-3-1997 praying that in view of the Special Bench decision, the disallowance of Rs. 10,090 was not justified as in the said decision, the Special Bench relying on the Supreme Court decision in the case of Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429/3 Taxman 52 has held that penalty under section 36(3) of the Sales-tax Act and damages und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee which should be rejected. 3. I have very carefully gone through the proposed order of my ld. brother but I am unable to accept the same and I give my reasons for the same as under. 4. The short question which was required to be decided in the present Misc. petition was as to whether in view of the Special Bench decision in Bisleri (I)(P.) Ltd.'s case the amount of Rs. 10,090 on account of fine and penalties paid under section 14B of the Provident-Fund Act was an allowable deduction from the profits of the assessee or not. The Special Bench decision clearly mentioned at page 118 of the report that damages under section 14B of the Provident-Fund Act are an allowable deduction and it was only by mistake in the order passed by the Tribunal the ground was adjudicated against the assessee. The decision of the Special Bench being in conformity with the decision of the Hon'ble Supreme Court referred to supra, the Misc. petition of the assessee is required to be allowed. The reliance by the ld. D.R. on the Allahabad High Court judgments in Saraya Sugar Mills (P.) Ltd.'s case, L.H. Sugar Factories Oil Mills (P.) Ltd.'s case and Swadeshi Cotton Mills Co. Ltd.'s case is mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rruled and still holds the field and in none of these cases point of allowability under section 37(1) of damages paid/recovered under section 14B of Provident Fund Act was there and when none of these cases were cited by either side? THIRD MEMBER ORDER This is a case where unfortunately the difference did not end at the stage of deciding the miscellaneous petition but continued even upto the stage of framing the point of difference as the following would show:- Per A.M. "Whether, on the facts and in the circumstances of the case, the Misc. petition of the assessee seeking rectification of Tribunal's order dated 26-2-1997 should be dismissed as held by the Judicial Member or it should be allowed in view of the reasoning given by the Accountant Member?" Per J.M. "Whether, on the facts and in the circumstances of the case, the misc. petition of the assessee seeking rectification of the Tribunal's order dated 26-2-1997 should be dismissed as held by the Judicial Member relying on 116 ITR 387 (All.) (FB) and 180 ITR 651 (All.) cited by DR, or it should be allowed as held by the Accountant Member relying on 144 ITR 732 (All.) (FB) where 116 ITR 387 was overruled on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the Special Bench decision of the Tribunal in the case of Bisleri (I)(P.) Ltd. cited at the hearing of the appeal had been erroneously applied against the assessee whereas it had been quoted as favouring the assessee. To this extent a mistake apparent from the record was canvassed but in the ex parte hearing the Tribunal proceeded to decide the matter as if in an "appeal hearing" rather than to restrict itself to the limited issue raised. In other words, the limit where rectification proceedings ended and assumed the character of an appeal hearing were lost sight of and the department was allowed to cite decisions not done by it at the time of hearing of the appeal as the initial order of the Tribunal shows that the parties restricted themselves to the Special Bench decision, supra. 4. In view of the peculiar background of this case, I now proceed to decide whether the decisions relied upon by the ld. Accountant Member were applicable or those referred to by the ld. Judicial Member held the field. 5. Taking up first the Special Bench decision of the Tribunal in the case of Bisleri (I)(P.) Ltd., the question was of the claim for deduction in respect of penalty imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty/damage has been suffered by the assessee in spite of its acting in good faith and in its capacity as a trader." 6. The Special Bench in the aforesaid decision considered the judgments of the Hon'ble Allahabad High Court in the cases of Saraya Sugar Mills (P.) Ltd. and L.H. Sugar Factories Oil Mills (P.) Ltd., the latter judgment following the former along with a catena of decisions of various other High Courts. Another decision considered was the one of the Hon'ble Allahabad High Court reported in the case of Triveni Engg. Works Ltd., which followed the Hon'ble Supreme Court judgment in the case of Mahalakshmi Sugar Mills Co., which was followed by the ld. Accountant Member in his dissenting order and the earlier two decisions relied upon by the revenue at the hearing of the Misc. Petition finding favour with the ld. Judicial Member along with the decision of the same Hon'ble High Court in the case of Swadeshi Cotton Mills Co. Ltd. which in turn followed the decision in Saraya Sugar Mills (P.) Ltd.'s case. 7. Coming back to the aforesaid decision once again i.e. Saraya Sugar Mills (P.) Ltd.'s case, their Lordships initially dealt with the question of interest under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in Saraya Sugar Mills (P.) Ltd's case was cited and observations of the Court were as follows:- "... Our attention has also been invited to Saraya Sugar Mills (P.) Ltd. v. CIT [1979] 116 ITR 387, where a Full Bench of the Allahabad High Court has held that the payment of interest under section 3(3) of the U.P. Sugarcane Purchase Tax Act, 1961, is a penal liability which accrues on an infraction of the law. Section 3(3) of the U.P. Sugarcane Purchase Act, 1961, does seem to be in pari materia with section 3(3) of the Cess Act." Their Lordships, however, declined to deal further with this issue on the ground that it was not before them. 9. Even before the Special Bench of the Tribunal, supra, the revenue referred to the Full Bench decision in Saraya Sugar Mills (P.) Ltd.'s case and at page 121 of the report there is an observation that this decision has been overruled in Triveni Engg. Works Ltd.'s case on the question of interest paid under section 3(3) of the U.P Sugarcane Cess Act, 1956. Now their Lordships of the Hon'ble Supreme Court in Mahalakshmi Sugar Mills Co.'s case have observed that section 3(3) of both the enactments i.e., U.P. Sugarcane Purchase Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. ITAT [1980] 122 ITR 519. The ld. Counsel also placed reliance on the decision of the Hon'ble Supreme Court in the case of Mahalakshmi Sugar Mills Co., further stating that the issue of "damages" under section 14B of the Employees' Provident Fund Act was no longer res integra in view of the decision of the Hon'ble Supreme Court in the case of Prakash Cotton Mills (P.) Ltd. v. CIT [1993] 201 ITR 684/67 Taxman 546. The ld. counsel also relied on the judgment of Hon'ble Apex Court in the case of Organo Chemical Industries v. Union of India AIR 1979 SC 1803. He also referred to two other decisions, the first being of the Hon'ble Allahabad High Court in the case of Standard Chemical Co. (P.) Ltd. v. CIT [1997] 143 CTR (All.) 398, and the second being that of the Hon'ble Bombay High Court in the case of New Mahalaxmi Silk Mills (P.) Ltd. v. CIT [1994] 77 Taxman 205, which had followed the judgment of Hon'ble Supreme Court in the case of Prakash Cotton Mills (P.) Ltd. According to the ld. counsel, if the payment was compensatory in nature, the same was to be allowed as a deduction and in case it was penal in nature, then the claim was not tenable. As regard calculation of the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court which was the law of the land although the same was not cited before it by the parties. Even in the present case, the Id. Accountant Member has relied on the judgment of the Hon'ble Supreme Court in Mahalakshmi Sugar Mills Co.'s case, which in turn has been "followed" by the Hon'ble Supreme Court in the decision of Prakash Cotton Mills (P.) Ltd.'s case. 15. At this stage I would like to refer to the role of a Third Member while deciding a point of difference referred to him under section 255(4) of the Income-tax Act. The Third Member has to restrict himself to the point of difference and he has to agree with the view of one or the other Hon'ble Members who have passed the dissenting orders and the Third Member cannot express a different opinion even if he is convinced that another view in the matter could have been possible. In case a Third Member were to express a different opinion altogether, then according to me, there would be no majority opinion of the Tribunal and all the three orders would become null and void. The Third Member, in my opinion, does not sit over the dissenting orders passed by the two Members constituting the Division Bench and all that he is require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's case on the basis of the law laid down, it is required to be determined as to what is the nature of the payment made by the assessee and for which purpose one would have to read minutely the order passed by the Regional Provident Fund Commissioner. It is noticed from the order that the "default" committed was the delay in making the payment of dues on account of provident fund contributions as also the delay on account of payment of administrative charges. In reply to the show-cause notice it was submitted that the management of the company which was a State Government undertaking of the Himachal Pradesh Government had in operation a private provident fund scheme whose benefits were at par with the benefits provided under the Employees' Provident Fund and Miscellaneous Provident Fund Act, 1952 and consequent upon the application of the latter on the undertaking with retrospective effect from 1-1-1975 by a letter dated 4-10-1975 they had applied for exemption on 29-5-1975 under the impression that since they were having a private provident scheme even prior to the introduction of the 1952 scheme, they may be allowed exemption. On the aforesaid grounds it was pleaded that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident Fund Commissioner. 19. In the final analysis, I hold that the entire amount paid by the assessee, i.e., in a sum of Rs. 10,090, was deductible as expenditure under section 37(1) of the Income-tax Act, 1961 in the light of the decisions of the Hon'ble Supreme Court in the cases of Mahalakshmi Sugar Mills Co., Organo Chemical Industries and Prakash Cotton Mills (P.) Ltd. 20. A question may be raised at this stage as to how the Third Member has expressed an opinion different from the one given by the two Hon'ble Members constituting the Division Bench. In my opinion, the Third Member is fully empowered in law to arrive at the same end result as done by any of the Members constituting the Division Bench although he may do it by a different route and all that is necessary is that he must agree with one of the Members constituting the Division Bench and who have disagreed on the point at issue. By means of the present order I have held that the deduction of Rs. 10,090 is allowable and the ld. Accountant Member has also expressed a similar opinion by allowing the Miscellaneous Petition filed by the assessee. In other words, majority opinion of the Tribunal is available as a res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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