DCIT CEN CIR 42, v. UNIVERSAL CAPSUEL P. LTD,

MA 657/MUM/2009 | 2001-2002
Pronouncement Date: 28-01-2010 | Result: Allowed

Appeal Details

RSA Number 65719924 RSA 2009
Assessee PAN AAACU0615L
Bench Mumbai
Appeal Number MA 657/MUM/2009
Duration Of Justice 4 month(s) 5 day(s)
Appellant DCIT CEN CIR 42,
Respondent UNIVERSAL CAPSUEL P. LTD,
Appeal Type Miscellaneous Application
Pronouncement Date 28-01-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted F
Tribunal Order Date 28-01-2010
Assessment Year 2001-2002
Appeal Filed On 22-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI. BEFORE SHRI D. K. AGARWAL JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER. M.A. NO. 657/MUM/2009 (IN ITA NO. 3793/MUM/2005) ASSESSMENT YEAR : 2001-02. DY. COMMISSIONER OF INCOME TAX M/S UNI VERSAL CAPSULE P. LTD. CENTRAL CIRCLE-42 MUMBAI. VS. 100 1 DALAMAL HOUSE NARIMAN POINT MUMBAI 400 021. PAN :AAACU0615L APPLICANT RESPONDENT APPLICANT BY : SHRI S.M. KESHKAMATH. RESPONDENT BY : SHRI M.D. INAMDAR. O R D E R PER J. SUDHAKAR REDDY A.M. BY THIS MISCELLANEOUS PETITION THE REVENUE SEEKS RECTIFICATION OF THE ORDER OF THIS BENCH OF THE TRI BUNAL IN ITA NO. 3793/MUM/2005 DATED 14-11-2006 ON THE ISSUE WHETHER DUTY DRAW BACK CAN BE CONSIDERED AS INCOME DERIVED FROM THE INDUST RIAL UNDERTAKING ITSELF FOR THE PURPOSE OF COMPUTING RELIEF U/S 80I. 2. THE LEARNED DR MR. S.M. KESHKAMATH SUBMITTED TH AT THE TRIBUNAL IN PARA 23 AND 24 OF ITS ORDER HELD THAT D UTY DRAW BACK IS INEXTRICABLY LINKED WITH PRODUCTION COST OF GOODS MANUFACTURED AND THEREFORE IT IS A TRADING RECEIPT OF THE INDUSTRIA L UNDERTAKING AND HENCE 2 ELIGIBLE FOR DEDUCTION U/S 80I. HE RELIED ON THE RE CENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT 317 ITR 218 AND SUBMITTED THAT THE HONBLE SUPREME COURT HAS HE LD THAT DUTY DRAW BACK AND DEPB BENEFITS ARE NOT DERIVED FROM INDUSTR IAL UNDERTAKING. HE SUBMITTED THAT THE ORDER SHOULD BE RECTIFIED BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE MR. M.D. I NAMDAR SUBMITTED THAT THE DECISION OF THE SUPREME COURT WA S RENDERED SUBSEQUENTLY AND THIS CANNOT BE TAKEN AS A GROUND F OR RECTIFYING THE ORDER OF THE TRIBUNAL U/S 254(2). HE SUBMITS THAT THE ISS UE IS VERY MUCH DEBATABLE AND OUT OF JURISDICTION OF SECTION 254(2) . HE RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F SHREE PILLANIAPPA TRANSPORTS VS. CIT 238 ITR 492. 4. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LA W CITED WE FIND THAT THE TRIBUNAL AT PAR 23 HELD THAT DUTY DRAW BACK IS INEXTRICABLY LINKED WITH PRODUCTION COST AND HENCE IS A TRADING RECEIPT HAVI NG DIRECT NEXUS WITH THE ACTIVITY OF THE UNDERTAKING AND HENCE ELIGIBLE FOR DEDUCTION U/S 80I. THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA (SUPRA) HELD THAT DUTY DRAW BACK AND DEPB CANNOT BE CONSIDERED AS INC OME DERIVED FROM INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING RELIEF U/S 80I. 5. NOW THE SHORT POINT THAT ARISES FOR OUR CONSIDE RATION IS WHETHER A SUBSEQUENT DECISION OF THE HONBLE SUPREM E COURT CAN BE THE BASIS OF RECTIFICATION AS CONTEMPLATED U/S 254(2). WE FIRST TAKE UP THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASS ESSEE. 3 6. IN THE CASE OF SREE PALANIAPPA TRANSPORTS (SUPR A) THE HONBLE MADRAS HIGH COURT HAS HELD AS FOLLOWS : HELD THAT A TRIBUNAL DECIDING A CASE ON CERTAIN DEBATABLE ISSUES WHEREIN THERE IS NO DECISION OF THE JURISDI CTIONAL HIGH COURT COULD NOT BE DEEMED TO HAVE MADE A MISTAKE BECAUSE SUBSEQUENT TO THE DECISION OF THE TRIBUNAL A JUDGMENT HAS BEEN R ENDERED BY THE JURISDICTIONAL HIGH COURT. IN RESPECT OF THE ORDERS PASSED BY THE TRIBUNAL SUBSEQUENT TO THE DECISION OF THE JURISDIC TIONAL HIGH COURT IF IT DOES NOT FOLLOW THE RATIO OF THE JUDGM ENT OF THE JURISDICTIONAL HIGH COURT THEN IT CAN BE SAID THAT IT HAS COMMITTED AN ERROR APPARENT ON THE FACE OF THE RECORD. THEREF ORE THERE WAS NO MISTAKE APPARENT FROM THE RECORD IN THE ORDER OF TH E TRIBUNAL WITHIN THE MEANING OF SECTION 254(2) OF THE ACT RE QUIRING RECTIFICATION IN VIEW OF THE SUBSEQUENT DECISION OF THE MADRAS HIGH COURT IN CIT V. NAGAPATINAM IMPORT AND EXPORT CORPO RATION [1979] 119 ITR 444. KUPPURAJ (M.K.) V. ITO [1995] 211 ITR 853 (MAD) OVERRULED. THIS CASE LAW IS ON THE DECISION OF JURISDICTIONAL HIGH COURT AND NOT THE DECISION OF THE HONBLE SUPREME COURT AS IN THE CA SE ON HAND. 7. IN THE CASE OF CIT VS. VARDHMAN SPINNING 226 IT R 296 THE HONBLE PUNJAB & HARYANA HIGH COURT HELD AS FOLLOWS : HELD THAT ON THE INTERPRETATION OF SECTION 84 OF THE ACT READ WITH RULE 19A OF THE RULES THERE COULD REASONABLY BE TWO VIEWS OUT OF WHICH THE TRIBUNAL TOOK ONE VIEW. NO DOUBT AT THE RELEVANT TIME ONLY THE CALCUTTA HIGH COURT HAD EXPRESSED IT S VIEWS IN CENTUARY ENKA LTD.S CASE [1977] 107 ITR 909 (WHICH WAS LATER ON OVERRULES BY THE SUPREME COURT IN LOHIA MACHINES LT D. V. UNION OF INDIA [1985] 152 ITR 208) WHICH RAN COUNTER TO T HE VIEW TAKEN BY THE TRIBUNAL BUT THIS DID NOT MEAN THAT TWO VIE WS WERE NOT POSSIBLE. THE JUDGMENT OF THE CALCUTTA HIGH COURT I N CENTURY ENKA LTD.S CASE [1977] 107 ITR 909 WAS NOT EITHER BY TH E APEX COURT OR BY THE JURISDICTIONAL HIGH COURT AND THEREFORE WA S NOT BINDING ON THE TRIBUNAL. THE TRIBUNAL COULD TAKE A DIFFERENT V IEW AND ARRIVE AT A DIFFERENT CONFUSION. HENCE THE TRIBUNAL WAS NOT RIGHT IN LAW IN RECTIFYING ITS APPELLATE ORDER UNDER SECTION 254(2) OF THE ACT. 4 8. THIS DECISION RELIED UPON BY THE ASSESSEE IS O F NO HELP BECAUSE THE HONBLE COURT WAS CONSIDERING THE DECIS ION OF A NON JURISDICTIONAL HIGH COURT. 9. WE NOW EXAMINE THE CASE LAWS IN FAVOUR OF THE R EVENUE. 10. THE HONBLE SUPREME COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. VS. CIT 295 ITR 466 (SC) WERE CONSI DERING A CASE WHERE THE TRIBUNAL FAILED TO CONSIDER A DECISION OF THE C OORDINATE BENCH CITED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES THE HONBLE SU PREME COURT HELD THAT BY OVERSIGHT THE TRIBUNAL MISSED THE JUDGMENT WHI LE DISMISSING THE APPEAL FILED BY THE ASSESSEE AND THAT THE RULE OF P RECEDENT AS AN IMPORTANT ASPECT OF CERTAINTY IN THE RULE OF LAW AND PREJUDIC E HAS RESULTED TO THE ASSESSEE SINCE THE PRECEDENT HAD NOT BEEN CONSIDERE D BY THE TRIBUNAL. THE TRIBUNAL WAS JUSTIFIED IN RECTIFYING THE MISTAKE. T HE HONBLE COURT ANALYSED THE SCOPE OF POWER OF RECTIFICATION U/S 2 54(2) AND HELD THAT ONE OF THE IMPORTANT REASONS FOR GIVING THE POWER OF RE CTIFICATION TO THE TRIBUNAL IS TO SEE THAT NO PREJUDICE SHOULD CAUSE TO EITHER OF THE PARTIES APPEARING BEFORE IT BY ITS DECISION BASED ON MISTAK E APPARENT ON RECORD. IN THE CASE OF ACIT VS. SAURASHTRA KUTCH STOCK EXCH ANGE LTD. 305 ITR 227 THE HONBLE SUPREME COURT HELD THAT RECTIFICATI ON OF AN ORDER STEAMS FROM THE FUNDAMENTAL PRINCIPLE THAT JUSTICE IS ABOV E ALL. THE COURT FURTHER HELD THAT THERE WAS A MISTAKE APPARENT ON RECORD I F A DECISION OF THE JURISDICTIONAL HIGH COURT WAS NOT BROUGHT TO THE NO TICE OF THE TRIBUNAL AND IN SUCH CIRCUMSTANCES THE TRIBUNAL HAD TAKEN A VIEW CONTRARY TO THE VIEW EXPRESSED BY THE JURISDICTIONAL HIGH COURT. AT PAGINATION 41 42 AND 43 AT PAGE 240 OF THE REPORTED DECISION IT WAS HELD AS FOLLOWS : 41 A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE THE HIGH COURT OF GUJARAT IN SUHRID GEIGY LTD. V. COMMI SSIONER OF SURTAX [1999] 237 ITR 834. IT WAS HELD BY THE DI VISION 5 BENCH OF THE HIGH COURT THAT IF THE POINT IS COVERE D BY A DECISION OF THE JURISDICTIONAL COURT RENDERED PRIOR OR EVEN SUBSEQUENT TO THE ORDER OF RECTIFICATION IT COULD BE SAID TO BE A MISTAKE APPARENT FROM RECORD UNDER SECTION 254( 2) OF THE ACT AND COULD BE CORRECTED BY THE TRIBUNAL. (EMPHAS IS OURS). 42 IN OUR JUDGMENT IT IS ALSO WELL-SETTLED THA T A JUDICIAL DECISION ACTS RETROSPECTIVELY. ACCORDING TO BLACKST ONIAN THEORY IT IS NOT THE FUNCTION OF THE COURT TO PRON OUNCE A NEW RULE BUT TO MAINTAIN AND EXPOUND THE OLD ONE. IN OTHER WORDS JUDGES DO NOT MAKE LAW THEY ONLY DISCOVER O R FIND THE CORRECT LAW. THE LAW HAS ALWAYS BEEN THE SAME. IF A SUBSEQUENT DECISION ALTERS THE EARLIER ONE IT (THE LATER DECISION) DOES NOT MAKE NEW LAW. IT ONLY DISCOVERS THE CORRECT PRINCIPLE OF LAW WHICH HAS TO BE APPLIED RETROSPECTIVELY. TO PUT IT DIFFERENTLY EVEN WHERE AN EARLIER DECISION OF THE COURT OPERATED FOR QUITE SOME TIME THE DECISION RENDERED LATER ON WOULD HAVE RETROSPECTIVE EFFECT CLARIFYING THE LEGAL POSITION WHICH WAS EARLIER NOT CORRECTLY UNDERSTOOD. 43 SALMOND IN HIS WELL-KNOWN WORK STATES; . THE THEORY OF CASE LAW IS THAT A JUDGE DOE S NOT MAKE LAW; HE MERELY DECLARES IT; AND THE OVERRULING OF A PREVIOUS DECISION IS A DECLARATION THAT THE SUPPOSED RULE NE VER WAS LAW. HENCE ANY INTERMEDIATE TRANSACTIONS MADE ON TH E STRENGTH OF THE SUPPOSED RULE ARE GOVERNED BY THE L AW ESTABLISHED IN THE OVERRULING DECISION. THE OVERRUL ING IS RETROSPECTIVE EXCEPT AS REGARDS MATTERS THAT ARE R ES JUDICATAE OR ACCOUNTS THAT HAVE BEEN SETTLED IN THE MEANTIME 11. IN ANY EVENT THE COURT OBSERVED THAT THE JURI SDICTIONAL HIGH COURT DECISION IN THIS CASE WAS RENDERED PRIOR TO T HE ORDER OF THE TRIBUNAL. 12. THE HONBLE SUPREME COURT IN THE CASE OF MEPCO INDUSTRIES LTD. VS. CIT CIVIL APPEAL NOS. 7622-7633 OF 2009 ORDER DATED 19 TH NOV. 2009 WAS CONSIDERING THE SCOPE OF SECTION 154 WHICH IS IDENTICAL TO THE SCOPE U/S 254. THE HONBLE SUPREME COURT AFTER ANALYSING THE VARIOUS CASE LAWS HELD THAT IN INCOME-TAX MATTERS ONE HAS TO EXAMINE THE NATURE 6 OF THE ITEMS IN QUESTION WHICH WOULD DEPEND ON THE FACTS OF EACH CASE. IN THAT CASE THEY ARE CONCERNED WITH POWER SUBSIDY. THEY FOUND THAT IN THE CASE OF CIT VS. PONNI SUGARS AND CHEMICALS LTD. REP ORTED IN (2008) 306 ITR 392 THE SUBSIDY GIVEN BY THE GOVERNMENT WAS FO R REPAYING LOANS. THEREFORE IT WAS HELD THAT IN EACH CASE ONE HAS TO EXAMINE THE NATURE OF SUBSIDY AND THAT THIS EXERCISE CANNOT BE UNDERTAKEN U/S 154 OF THE ACT. WHILE SAYING SO THE HONBLE SUPREME COURT ALSO CON SIDERED THE DECISION IN THE CASE KIL KATOGIRI TEA AND COFFEE ESTATES CO MPANY LIMITED VS. INCOME TAX APPELLATE TRIBUNAL & ORS. REPORTED IN 17 4 ITR 579 AND ALSO CONSIDERED THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF JIYAJEERAO COTTON MILLS LTD. VS. ITO 130 ITR 710 AN D CONCLUDED THAT THE HIGH COURT LAID DOWN A PRINCIPLE OF LAW WHICH WAS APPLICABLE ACROSS THE BOARD NAMELY PAYMENT OF ADVANCE TAX MA DE WITHIN THE FINANCIAL YEAR THOUGH NOT WITHIN THE SPECIFIED DAT ES SHOULD BE TREATED AS ADVANCE TAX AND THEREFORE THE ASSESSEE WAS ENTITL ED TO INTEREST ON EXCESS TAX PAID AND HELD THAT SUCH A GENERAL INTERPRETAT ION OF LAW EMPOWER THE ASSESSING OFFICER TO RECTIFY HIS ORDER U/S 154. 13. IN OTHER WORDS THE RATIO LAID DOWN IS THAT WH EN THE HIGH COURT LAYS DOWN A PRINCIPLE OF LAW WHICH CAN BE AP PLIED WITHOUT THE NECESSITY OF UNDERTAKING THE EXERCISE OF VERIFYING WHETHER THE PRINCIPLES OF LAW LAID DOWN ARE APPLICABLE TO THE FACTS OF THE CASE OR NOT THEN THE RECTIFICATION U/S 154 IS POSSIBLE. IN CASE WHEN THE FACTS HAVE TO BE EXAMINED TO COME TO A CONCLUSION AS TO WHETHER THE PRINCIPLE OF LAW LAID DOWN BY THE HIGH COURT IS APPLICABLE OR NOT THEN R ECTIFICATION U/S 154 IS NOT POSSIBLE. 14. IN THIS CASE ON HAND THE HONBLE SUPREME COUR T HAS LAID DOWN THE PRINCIPLE OF LAW WHICH IS APPLICABLE ACROS S THE BOARD. 7 APPLICATION OF THESE PRINCIPLES OF LAW NEEDS NO FAC TUAL VERIFICATION AS THERE IS NO DISPUTE ON FACTS. THUS EVEN GOING BY T HE DECISION OF THE APEX COURT IN THE CASE OF MEPCO INDUSTRIES LTD. THE MIS CELLANEOUS APPLICATION OF THE REVENUE HAS TO BE ALLOWED. 15. IN THE RESULT WE RECTIFY OUR ORDER BY MODIFYI NG PARA 24 AND ALLOWING THE GROUND OF THE REVENUE BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. (SUPRA). 16. IN THE RESULT THE MISCELLANEOUS APPLICATION I S ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF JANUARY 2010. SD/- SD/- (D. K. AGARWAL) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI DATED : 28 TH JANUARY 2010. WAKODE COPY FORWARDED TO : 1. APPLICANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR F-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES