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Simco Meters Ltd. Vs. Inspecting Assistant - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1984)8ITD922(Mad.)
AppellantSimco Meters Ltd.
Respondentinspecting Assistant
Excerpt:
.....to a question of fact. if the tribunal wants to take an opinion different from the one taken by an earlier bench, it should place the matter before the president of the tribunal so that he could have the case referred to a full bench of the tribunal consisting of three or more members for which there is provision in the income-tax act itself. (p. 453) i may also add that on an earlier occasion, the madras high court had to make the following observation in the case of cit v. s. devaraj [1969] 73 itr 1: before we leave the matter, we would like to make a further observation. we found in this case that the same tribunal, though manned by different officers on different occasions, and with reference to the same assessee and assessments relating to two different years, has come to.....
Judgment:
1. The assessee has preferred this appeal against the order dated 21-12-1982 of Shri A.B. Menon, the Commissioner (Appeals) who partly allowed the appeal of the assessee against order dated 30-3-1982 of the IAC (Assessment).

2. The only ground in this appeal is that in view of the challenge by other assessees to the amendment of Section 80J and Section 35 of the Income-tax Act, 1961 ('the Act'), vide the Finance (No. 2) Act, 1980, with retrospective effect by way of filing writs in the Supreme Court, whether the amendment is to be followed or not. This issue was there before the Hon'ble Madhya Pradesh High Court in the case of CIT v. K.N.Oil Industries [1982] 134 ITR 651 and the Hon'ble Kerala High Court in Traco Cable Co. Ltd v. CIT [1982] 138 ITR 385 and also before 'C' Bench of the Tribunal Madras in IT Appeal Nos. 1424 and 1425 (Mad.) of 1982, dated 14-9-1983. The Hon'ble High Courts and the Tribunal (where the Judicial Member and Dr. S. Narayanan, Accountant Member, were parties) decided the issue in favour of the revenue and thereby rejected the contention of the assessee that when the constitutional validity of the amendment of these Sections is challenged in the Supreme Court by way of writs and the decision regarding it is pending there, then the matters are to be sent back and to be decided by the first appellate authority in accordance with the decision of the Supreme Court. There are several decisions of Benches of the Tribunal where the Judicial Member was a party and the Benches decided the issue against the assessee and in favour of the revenue on following the aforesaid decisions of the Hon'ble High Courts. However, there is a decision of 'A' Bench of the Tribunal Madras in favour of the assessee in the case of Sundaram Fasteners Ltd. [IT Appeal Nos. 1608 and 1609 (Mad.) of 1982 dated 27-5-1983]. But the majority decision of the Tribunal and that of the High Courts are in favour of the revenue on the issue and, therefore, we follow the majority view. So we hold that there is no substance in this appeal of the assessee and the contention of the assessee stated above is not relevant at all in particular when the Tribunal is bound to follow the law on the statute and the amendment is the law on the issue of Section 80J and Section 35 reliefs as claimed and, therefore, the Tribunal cannot hold that the provisions of the amended Sections are not there till its constitutional validity is determined by the Supreme Court. If we follow this principle then wherever there is a question of law pending in the Supreme Court and not finally decided, then we have to take that the law regarding that question is nowhere there in the statute book, which will set bad precedence and non-finality of the matters and as such neither it is in the interest of justice nor in public policy. The cases can be held in abeyance if there is a stay order either by the High Court or by the Supreme Court in the matter. Otherwise not. Apart from it, if there is a decision of the Supreme Court holding therein that the amendment is constitutionally invalid, then the Act itself provides remedies to the parties by way of provisions for rectification of orders.

3. In view of our above discussion and reasons, we hold that there is no basis in this appeal on account of which we can interfere in the impugned orders. Hence, we confirm it. However, we, direct the ITO to rectify the order of assessment in accordance with the decision of the Hon'ble Supreme Court on the issue of constitutional validity of the amendment of Sections 80J and 35 and such use of power should not be withheld on the technical issue of limitation for exercising the power for rectification of the assessment order.

1. I have perused the order of my brother, the learned Judicial Member.

With great respect, I am unable to agree. The first part of para 2 of my brother's order states that the ground in this appeal, i.e., whether, in view of the challenge by other assessees to the amendment of Section 80J and Section 35 by the Finance (No. 2) Act, 1980, with retrospective effect by way of filing writs in the Supreme Court the amendment is to be followed or not, was there before the Madhya Pradesh High Court in the case of K.N. Oil Industries case (supra) and the Kerala High Court in Traco Cable Co. Ltd.'s case (supra) and that they decided the issue in favour of the revenue. With great respect, I may mention that the issue considered in the two cited High Court decisions was not the same. In both the cases, the ITO had computed the deduction under Section 80J, read with rule 19A of the Income-tax Rules, 1962 ('the Rules'). The question in the case of K.N. Oil Industries (supra) (judgment dated 8-9-1981) was merely whether the assessee was entitled to relief under Section 80J on the basis of the gross capital without deducting the value of the borrowed capital employed in the undertaking which the High Court answered in favour of the revenue, on the ground, inter alia, that Section 80J has been amended with effect from 1-4-1972 by the Finance (No. 2) Act, 1980. In Traco Cable Co. Ltd.'s case (supra) also (dated 24-9-1981), the same question was considered and was answered in favour of the revenue for the same reason. Thus, these High Court decisions only considered the fact that Section 80J has been amended by the Finance (No. 2) Act, 1980, retrospectively. The High Courts had, therefore, no occasion to consider the point which arises in the present appeal, viz., whether in view of the pending writ petitions in the Supreme Court challenging the retrospectivity of the amendment of Section 80J, the Tribunal could follow the procedure of remitting the respective matter, after setting aside the orders of the lower authorities for recomputation of the profit for the purpose of the claim under Section 80J in the light of the decision of the Supreme Court to be rendered regarding the retrospectivity of the amendment. It is precisely this specific aspect of the matter which was considered in the decision of the Tribunal in the case of Sundaram Fasteners Ltd. (supra) and the Tribunal deemed it fit to remit the matter back to the ITO for recomputation of the profit under Section 80J after the decision of the Supreme Court or the Madras High Court is available, whichever is earlier. In coming to the above conclusion, the Tribunal relied on the order of the Gujarat High Court in the case of CIT v.Swat District Co-operative Milk Producers Union Ltd. [Income-tax Application No. 81 of 1982] in which the same procedure adopted by the concerned Bench of the Tribunal to remit the matter back to the Commissioner (Appeals) with a direction to recompute the profit after the pronouncement of the decision of the Supreme Court on the vires of the retrospective amendment, was approved by the Gujarat High Court, as being only with a view to save public time and cost. The Tribunal in its order also referred to K.N. Oil Industries' case (supra) and Traco Cable Co. Ltd.'s case (supra) and stressed that in these cases the specific question, as posed before the Gujarat High Court, was not raised.

2. It may also be stressed here that the issue before us relates only to a question of procedure and not of law. The Madras Benches of the Tribunal have generally been following the practice of restoring the matter regarding Section 80J to the ITG to await the decision of the Supreme Court. This procedure is in full accordance with the order of the Gujarat High Court to the effect that it is in the interest of the public and the revenue, being only with a view to save public time and cost. I am of the view that the Gujarat High Court decision being the only one covering this aspect of the matter, it would be proper to follow it, also bearing in mind the Bombay High Court decision in CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589. Having regard to the above position and on balance of convenience, I would set aside: (i) the ITO's computation of the deduction under Section 80J, and (ii) the ITO's disallowance of depreciation on the assets used for scientific research in respect of which deduction under Section 35(2)(ia) had been allowed for the earlier year, as also the Commissioner (Appeals) direction thereon and restore the matter to the ITO for fresh decision on both the points after the decision of the Supreme Court or the Madras High Court is available.

Order under Section 255(4) of the income-tax act, 1961 - Whereas we are unable to agree on the point set out below for the assessment year 1979-80, we refer the following point of difference of opinion to the President for reference to Third Member, under Section 255(4) of the Act: Whether, on the facts and in the circumstances of the case, the Tribunal would be justified in vacating the findings of the Commissioner (Appeals) and the Income-tax Officer regarding: (i) the computation of deduction under Section 80J of the Income-tax Act, 1961, and (ii) the disallowance of depreciation on assets used for scientific research in respect whereof deduction under Section 35(2)(ia) had been allowed for the earlier year and restoring the matter to the Income-tax Officer for fresh decision on both the points after the decision of the Supreme Court or the Madras High Court becomes available regarding the retrospectivity of the amended Section 80J and Section 35 (as amended by the Finance (No. 2) Act, 1980)? 1. Owing to difference of opinion between my learned brothers on the point set out below, the President has nominated me as Third Member under Section 255(4): Whether, on the facts and in the circumstances of the case, the Tribunal would be justified in vacating the findings of the Commissioner (Appeals) and the Income-tax Officer regarding: (i) the computation of deduction under Section 80J of the Income-tax Act, 1961, and (ii) the disallowance of depreciation on assets used for scientific research in respect whereof deduction under Section 35(2)(ia) had been allowed for the earlier year, and restoring the matter to the Income-tax Officer for fresh decision on both the points after the decision of the Supreme Court or the Madras High Court becomes available regarding the retrospectivity of the amended Section 80J and Section 35 (as amended by the Finance (No. 2) Act, 1980) ?" 2. The point of difference was very clearly worded and the difference of opinion between my learned brothers is whether the decision of the Tribunal in the case of Sundaram Fasteners Ltd. (supra) should be followed and that the order passed by the Commissioner (Appeals) should be vacated and that the ITO should be directed to recompute the capital base after the decision of the Supreme Court or the Madras High Court regarding the validity of the retrospective amendment to Section 80J and Section 35, as amended by Section 17 of the Finance (No 2) Act, 1980.

3. Normally, there should not have been a difference of opinion in such a case, because it is the convention of the Tribunal that whenever there is a decision of the Tribunal on identical points, that decision should be followed unless some points not covered by that decision arise or the law, in the meantime, has been amended or a decision of the Supreme Court is available taking a contrary view. Even when such thing happens, the convention that we have built up is that the Bench should refer the case to a larger Bench for decision instead of itself differing from the view expressed by another Bench. This is to develop a healthy convention that one co-ordinate Bench should not criticise or refuse to follow the view expressed by another co-ordinate Bench. The matter, if referred to a larger Bench, the decision of the larger Bench would then be available to all the Members in the country. This is the convention that we have been following all along. That apart, the Madras High Court has not only approved of this practice, but even judicially laid it down as a guideline for the Tribunal in the case of CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad.). It may be necessary and apposite to quote from the headnote of that case: No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals presiding over the Courts or the Tribunals and not reached objectively on the basis of the facts placed before the authorities.

If a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiorari with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the Income-tax Act itself. (p. 453) I may also add that on an earlier occasion, the Madras High Court had to make the following observation in the case of CIT v. S. Devaraj [1969] 73 ITR 1: Before we leave the matter, we would like to make a further observation. We found in this case that the same Tribunal, though manned by different officers on different occasions, and with reference to the same assessee and assessments relating to two different years, has come to conflicting decisions on the scope and effect of Section 12(2), which, on the face of it, should be embarrassing to the revenue and assessee in general. There is of course no provision in the Income-tax Act relating to the matter and the doctrine of res judicata also may not be applicable to orders of the Tribunal. Even so, in our opinion, it is proper and desirable that when the Tribunal takes a particular view on the scope and effect of a statutory provision, it does not contradict itself and come to a diametrically opposite view later; but in such a case, it follows the earlier view and, if and when the aggrieved party applies, should make a reference to this Court of the question. (p.

11) Following this healthy convention and the rule laid down by the Madras High Court quoted above, I must say that whatever may be the view of the learned Judicial Member on the correctness of the view expressed by the earlier Bench in the case of Sundaram Fasteners Ltd. (supra), it is expected that the earlier Bench's view be followed, and disagreement and more particularly criticisms are avoided.

4. The substance of the matter is whether the procedure of remitting the matter to the ITO to await the decision of the Supreme Court will be in the interest of justice and balance of convenience. The Gujarat High Court has held that the procedure followed by the Tribunal was quite correct when it merely remitted the matters after setting aside the orders of the Commissioner (Appeals) for recomputation of the profit for the purpose of the claim under Section 80J in the light of the decision of the Supreme Court. That was with a view to save public time and cost. It further held that there were no justifying reasons even to call for a statement of the case from the Tribunal and decide the matter. In following this procedure, it is to be remembered that no final order has been passed by the Tribunal against any party and the matters are left open.

5. The same would apply to the allowance or otherwise of depreciation on assets used for scientific research in respect whereof deduction under Section 35(2)(ia) had been allowed for the earlier year. The ITO will do likewise in this matter also. In para 3 of the order of the learned Judicial Member, I find a direction given to the ITO to rectify the order of assessment in accordance with the decision of the Hon'ble Supreme Court on the issue of constitutional validity of the amendment to Sections 80J and 35 and such use of power should not be withheld on the technical issue of limitation for exercising the power for rectification of the assessment order. This direction shows to my mind a realisation on the part of the learned Judicial Member that a direction to the ITO similar to the procedure followed by the Tribunal in the case of Sundaram Fasteners Ltd. (supra) is necessary or has become necessary to prevent miscarriage of justice. I am referring to it not by way of adopting as a ground to justify my view but to show how justice and balance of convenience demand that the procedure adopted by the Tribunal in remitting the matter back to the ITO and keeping the matters alive, is very necessary and called for which procedure received the commendation of the Gujarat High Court. By adopting this procedure, to repeat, the rights of the parties are not at all affected except that a reassessment has to be made by the department, which it has to do in any case.

6. Since that is the only point of difference before me and since the merits are not in issue before me, I would accordingly agree with the view expressed by the learned Accountant Member that the view expressed by the earlier Bench in the case of Sundaram Fasteners Ltd. (supra), should be followed for vacating the findings of the Commissioner (Appeals) and restroring the matter to the ITO regarding the computation of the deduction under Section 80J and disallowance of depreciation on assets used for scientific research in respect whereof deduction under Section 35(2)(ia) has been allowed for the earlier year, awaiting the final outcome of the decision of the Supreme Court or the Madras High Court, as the case may be, regarding the retrospectivity of the amended Section 80J.7. The learned departmental representative argued before me that he has nothing to urge other than referring me to the decisions of the High Courts in the cases of Traco Cable Co. Ltd. (supra), K.N. Oil Industries (supra) and CIT v. Toshiba A nand Lamps Ltd. [1984] 145 ITR 563 (Ker.). In view of the fact that the point of difference referred to me is confined to whether the order of the Tribunal in the case of Sundaram Fasteners Ltd. (supra), should be relied upon or not, I am afraid, I will not be able to go into the decisions cited by the learned departmental representative before me, as that would mean going into merits, which is not the point of difference, referred to me.

8. The matter will now go before the regular Bench for disposal of the appeal in accordance with the opinion of the majority.


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