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The Income- Tax Act, 1995
Plastiblends India Ltd. vs The I.T.O. on 10 February, 2004
The Mahalaxmi Mills Ltd vs The Commissioner Of ... on 8 April, 1960
Commissioner Of Income-Tax, New ... vs Anant Rao B. Kamat on 8 May, 1964
National Rayon Corporation Ltd vs The Commissioner Of Income Tax on 29 July, 1997
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Harsha Achyut Bhogle vs Income Tax Officer on 11 October, 2007

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Income Tax Appellate Tribunal - Mumbai
Mehratex India Ltd. vs Dy. Cit, Circle 6(5) on 29 April, 2005
Equivalent citations: 2005 3 SOT 539 Mum

ORDER Pramod Kumar, A.M.

1. This is an appeal filed by the assessee, and is directed against CIT(A)s order dated 19-3-2001, in the matter, of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 1998-99. The only issue involved in this appeal is whether or not the assessee has an option to claim depreciation allowance while computing deduction under section 80-IA of the Income Tax Act, 1961, in a case where the assessee has not claimed the depreciation in the books of account.

1. This is an appeal filed by the assessee, and is directed against CIT(A)s order dated 19-3-2001, in the matter, of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 1998-99. The only issue involved in this appeal is whether or not the assessee has an option to claim depreciation allowance while computing deduction under section 80-IA of the Income Tax Act, 1961, in a case where the assessee has not claimed the depreciation in the books of account.

2. This issue is squarely covered by the Tribunals decision in the case of Plastiblends India Ltd. v. ITO (ITA No. 4542/Mum/1999, dated 10-2-2004), in favour of the assessee.

2. This issue is squarely covered by the Tribunals decision in the case of Plastiblends India Ltd. v. ITO (ITA No. 4542/Mum/1999, dated 10-2-2004), in favour of the assessee.

3. Learned departmental Representative, however, contends that the Tribunal has subsequently taken a view in favour of the revenue, and urges us to follow the same. Our attention is invited to Tribunals decision in the case of Prince SWR Systems (P.) Ltd. v. Dy. CIT (IT Appeal No. 2811/Mum/2004, dated 10-9-2004), and to Tribunals decision in the case of ITO v. Venus Jewels (IT Appeal No. 3842/Mum/2001, dated 25-10-2004).

3. Learned departmental Representative, however, contends that the Tribunal has subsequently taken a view in favour of the revenue, and urges us to follow the same. Our attention is invited to Tribunals decision in the case of Prince SWR Systems (P.) Ltd. v. Dy. CIT (IT Appeal No. 2811/Mum/2004, dated 10-9-2004), and to Tribunals decision in the case of ITO v. Venus Jewels (IT Appeal No. 3842/Mum/2001, dated 25-10-2004).

4. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position.

4. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position.

5. As far as Tribunals decision in the case of Prince SWR Systems (P.) Ltd. case (supra) is concerned, we have noted that the Tribunal has not followed the co-ordinate bench decision in Plastiblend India Ltd.s case (supra) and has decided the case against the assessee by following the Bombay High Court judgment in the case of Indian Rayon Corpn. Ltd. v. CIT (2003) 261 ITR 98 (Bom). What is missed out, however, is the fact that in Plastiblend India Ltd.s case (supra) the co-ordinate bench had duly considered Indian Rayon Corpn. case (supra) and then came to the conclusion that Indian Rayon Corpn. case (supra) decision has no bearing on the question before the Tribunal. Once a co-ordinate bench comes to this conclusion, it is not open to another co-ordinate bench to come to any other conclusion on that issue. This is so held by the Honble Supreme Court in the case of Union of India v. Paras Laminates (P.) Ltd. (1990) 186 ITR 722 (SC). To that extent Tribunals decision in the case of Prince SWR Systems (P.) Ltd. (supra) appears to be, in our humble understanding, per incuriam. In the case of Paras Laminates (P.) Ltd. (supra) Honble Supreme Court has, inter alia, observed as follows :

5. As far as Tribunals decision in the case of Prince SWR Systems (P.) Ltd. case (supra) is concerned, we have noted that the Tribunal has not followed the co-ordinate bench decision in Plastiblend India Ltd.s case (supra) and has decided the case against the assessee by following the Bombay High Court judgment in the case of Indian Rayon Corpn. Ltd. v. CIT (2003) 261 ITR 98 (Bom). What is missed out, however, is the fact that in Plastiblend India Ltd.s case (supra) the co-ordinate bench had duly considered Indian Rayon Corpn. case (supra) and then came to the conclusion that Indian Rayon Corpn. case (supra) decision has no bearing on the question before the Tribunal. Once a co-ordinate bench comes to this conclusion, it is not open to another co-ordinate bench to come to any other conclusion on that issue. This is so held by the Honble Supreme Court in the case of Union of India v. Paras Laminates (P.) Ltd. (1990) 186 ITR 722 (SC). To that extent Tribunals decision in the case of Prince SWR Systems (P.) Ltd. (supra) appears to be, in our humble understanding, per incuriam. In the case of Paras Laminates (P.) Ltd. (supra) Honble Supreme Court has, inter alia, observed as follows :

"It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration ofjustice. Persons affected by decisions of Tribunals or courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters. Classification of particular goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions, lest such judicial inconsistency should shake public confidence in the administration of justice. It is, however, equally true that it is vital to the administration of justice that those exercising judicial power must have the necessary freedom to doubt the correctness of an earlier decision if and when subsequent proceedings bring to light what is perceived by them as an erroneous decision in the earlier case. In such circumstances, it is but natural and reasonable and indeed efficacious that the case is referred to a larger Bench."

6. In the case of Venus Jewels (supra), the co-ordinate bench held the issue in favour of the revenue on the basis of Honble Bombay High Courts judgment in the case of Indian Rayon Corpn. Ltd. (supra) and on the basis of Honble Rajasthan High Courts judgment in the case of Vijay Industries v. CIT (2004) 139 Taxman 353 (Raj). What is held in Vijay Industries case (supra) is the same thing as held in Indian Rayon Corpn. Ltd. case (supra) but then Plastibends India Ltd.s case (supra) decision, having considered the school of thought emerging from these materially similar decisions, has come to the conclusion that where the assessee has not claimed the depreciation in its books of account, the same cannot be thrust upon the assessee for the purpose of computing the deduction under section 80-IA. Following the Honble Supreme Courts judgment in Paras Laminates (P.) Ltd. case (supra), it was not open to the bench to take any other view of the matter than the view taken by the co-ordinate bench. The decision in Venus Jewels case (supra) also appears to be per incuriam.

6. In the case of Venus Jewels (supra), the co-ordinate bench held the issue in favour of the revenue on the basis of Honble Bombay High Courts judgment in the case of Indian Rayon Corpn. Ltd. (supra) and on the basis of Honble Rajasthan High Courts judgment in the case of Vijay Industries v. CIT (2004) 139 Taxman 353 (Raj). What is held in Vijay Industries case (supra) is the same thing as held in Indian Rayon Corpn. Ltd. case (supra) but then Plastibends India Ltd.s case (supra) decision, having considered the school of thought emerging from these materially similar decisions, has come to the conclusion that where the assessee has not claimed the depreciation in its books of account, the same cannot be thrust upon the assessee for the purpose of computing the deduction under section 80-IA. Following the Honble Supreme Courts judgment in Paras Laminates (P.) Ltd. case (supra), it was not open to the bench to take any other view of the matter than the view taken by the co-ordinate bench. The decision in Venus Jewels case (supra) also appears to be per incuriam.

7. No doubt that when a co-ordinate bench doubts the correctness of decision of another co-ordinate bench, a reference can be made to the Honble President for constitution of a larger bench. However, as far as the issue before us is concerned, a request for constitution of larger bench was already been turned down. We see no necessity to make yet another request considering that Honble President has, in a considered decision, turned down earlier request to that effect. In our opinion, the issue does not call for a re-consideration at this stage.

7. No doubt that when a co-ordinate bench doubts the correctness of decision of another co-ordinate bench, a reference can be made to the Honble President for constitution of a larger bench. However, as far as the issue before us is concerned, a request for constitution of larger bench was already been turned down. We see no necessity to make yet another request considering that Honble President has, in a considered decision, turned down earlier request to that effect. In our opinion, the issue does not call for a re-consideration at this stage.

8. As to what should be the binding effect of a per incuriam decision, we an do no better than to quote the Honble Andhra Pradesh High Court in the case of CIT v. B.R. Constructions (2003) 202 ITR 222 (FB). In his inimitable style, Justice S.S.M. Quadri (as he then was) has articulated the views of the Full Bench of Honble Andhra Pradesh High Court as follows :

8. As to what should be the binding effect of a per incuriam decision, we an do no better than to quote the Honble Andhra Pradesh High Court in the case of CIT v. B.R. Constructions (2003) 202 ITR 222 (FB). In his inimitable style, Justice S.S.M. Quadri (as he then was) has articulated the views of the Full Bench of Honble Andhra Pradesh High Court as follows :

"In a country like ours which is governed by rule of law, law has to be certain and uniform which is fundamental to the rule of law. In Mamleshwar v. Kanahaiya Lal AIR 175 SC 907, Krishna Iyer, J., speaking for the Supreme Court, observed (at page 909).

Certainty of the law, consistency of rulings and comity of courts all flowering from the same principle-converge to the conclusion that a decision once rendered must later bind like cases.

In this concurring judgment in State of UP. v. Synthetics and Chemicals Ltd. (1991) 4 SCC 139, 163, the observation of Sahai, J. on this aspect is :

Uniformity and consistency are the core of judicial discipline.

That is why the doctrine of stare decisis is part of our judicial system. This doctrine means to abide by former precedents. Blackstone elucidated the doctrine thus :

For it is an established rule to abide by former precedents, where the same points come again in litigation: as well as to keep the scale of justice even and steady and not liable to waver with every new judges opinion, as also because the law in that case being solemnly declared and determined, what before was uncertain, and perhaps indifferent, is now become a permanent rule, which it is not in the breast of any subsequent judge to alter or vary from, according to his private sentiment...."

The ratio decidendi of a judgment is a binding precedent. The hierarchy of authority with regard to binding precedent is summed up in paragraph 28 at page 158 of "Salmond on Jurisprudence, Twelfth Edition, as follows :

The general rule is that a court is bound by the decision of all courts higher than itself. A High Court Judge cannot question a decision of the court of Appeal, nor can the court of Appeal refuse to follow judgments of the House of Lords. A corollary of the rule is that the courts are bound only by decisions of higher courts and not by those of lower or equal rank. A High Court judge is not bound by a previous High Court decision, though he will normally follow it on the principle of judicial comity, in order to avoid conflict of authority and to secure certainty and uniformity in the administration of justice. If he refuses to follow it, he cannot overrule it; both decision stand and the resulting antimony must wait for a higher court to settle.

The principles applicable to courts in India were laid down by Subba Rao, J. (as he then was) in Dr. K.C. Nambiar v. State of Madras AIR 1953 Mad 351, which were approved by a Full Bench of our High Court in Subbarayudu v. The State AIR 1955 AP 87 (FB) : (1955) II ALT (Cri) 53. They are as follows (at page 94 of AIR 1955 AP) :

A single judge is bound by a decision of a Division Bench exercising appellate jurisdiction. If there is a conflict of Bench decisions, he should refer the case to a Bench of two judges who may refer it to a Full Bench. A single judge cannot differ from a Division Bench unless a Full Bench or the Supreme Court overruled that decision specifically or laid down a different law on the same point. But he cannot ignore a Bench decision, as I am asked to do on the ground that some observations of the Supreme Court made in different context might indicate a different line of reasoning. A Division Bench must ordinarily respect another Divisional Bench of coordinate jurisdiction but if it differs, the case should be referred to a Full Bench. This procedure would avoid unnecessary conflict and confusion that otherwise would prevail.

The effect of binding precedents in India is that the decisions of the Supreme Court are binding on all the courts. Indeed, article 141 of the Constitution embodies the rule of precedent. All the subordinate courts are bound by the judgments of the High Court. A single judge of a High Court is bound by the judgment of another single judge and a fortiori judgments of Benches consisting of more judges than one. So also, a Division Bench of a Hiah Court is bound by judgments of another Division Bench and Full. A single judge or Benches of High Courts cannot differ from the earlier judgments of co-ordinate Jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice are of paramount importance. But, if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from the earlier judgment will be permissible. When a Division Bench differs from the judgment of another Division Bench, it has to refer the case to a Full Bench. A single judge cannot differ from a decision of a Division Bench except when that decision or a judgment relied upon in that decision is over ruled by a Full Bench or the Supreme Court, or when the law laid down by a Full Bench or the Supreme Court is inconsistent with the decision.

It may be noticed that precedent ceases to be a binding precedent

(i) if it is reversed or overruled by a higher court,

(ii) when it is affirmed or reversed on a different ground,

(iii) when it is inconsistent with the earlier decisions of the same rank,

(iv) when it is sub silentio, and

(v) when it is rendered per incuriam.

In paragraph 578 at page 297 of Halsburys Laws of England, Fourth Edition, the rule of per incuriam is stated as follows :

A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covered the case before it, in which case it must decided which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force.

In Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour court (1990) 3 SCC 682 (SC) : (1990) 77 FJR 17 (SC), the Supreme Court explained the expression per incuriam thus (at page 36 of 77 FJR) :

The Latin expression per incuriam means through inadvertence. A decision can be said generally to be given per incuriam when the Supreme Court has acted in ignorance of a previous decision of its own or when a High Court has acted in ignorance of a decision of the Supreme Court.

As has been noticed above, a judgment can be said to be per incuriarn if it is rendered in ignorance or forgetfulness of the provisions of a statute or a rule having statutory force or a binding authority. But, if the provision of, the Act was noticed and considered before the conclusion arrived at, on the ground that it has erroneously reached the conclusion the judgment cannot be ignored as being per incuriam. In Salmond on Jurisprudence, Twelfth Edition, at page 151, the rule is stated as follows :

The mere fact that (as is contended), the earlier court misconstrued a statute, or ignored a rule of construction, is no ground for impugning the authority of the precedent. A precedent on the construction of a statute is as much binding as any other, and the fact that it was mistaken in its reasoning does not destroy its binding force.

In Choudhry Brothers case (1986) 158 ITR 224 (AP), as noticed above, the Division Bench treated the judgment in Ch. Atchaiahs case (1979) 116 ITR 675 (AP), as per incuriam on the ground that the earlier Division Bench did not notice the significant changes the charging section 3 has undergone by the omission of the words "or the partners of the firm or the members of the association individually". In our view, this cannot be a ground to treat an earlier judgment as per incuriam. The change in the provisions of the Act was present in the mind of the court which decided Ch. Atchaiahs case (1979) 116 ITR 675 (AP). Merely because the conclusion arrived at on construing the provisions of the charging section under the old Act as well as under the new Act did not have the concurrence of the latter Bench, the earlier judgment cannot be called per incuriam.

Though a judgment rendered per incuriam can be ignored even by a lower court, yet it appears that such a course of action was not approved by the House of Lords in Cassell and Co. Ltd. v. Broome (1972) 1 All ER 801, wherein the House of Lords disapproved the judgment of the court of Appeal treating an earlier judgment of the House of Lords as per incuriam. Lord Hailsham observed (at page 809) :

It is not open to the court of Appeal to give gratuitous advice to judges of first instance to ignore decisions of the House of Lords in this way.

It is recognised that the rule of per incuriam is of limited application and will be applicable only in the rarest of rare cases. Therefore, when a learned single judge or a Division Bench doubts the correctness of an otherwise binding precedent, the appropriate course would be to refer the case to a Division Bench or Full Bench, as the case may be, for an authoritative pronouncement on the question involved as indicated above. The above said two questions are answered as indicated above."

9. It is thus beyond dispute that a decision which is per incuriam is not a binding judicial precedent. It is also well-settled that when it is not open to a High Court Bench to differ from the decision of a bench of equal strength, it cannot also be open to a bench of this Tribunal to differ from the view taken by a co-ordinate bench of equal strength. The only option in case one doubts the correctness of such a decision is to refer the matter for constitution of a larger Bench. A decision ignoring this rule of precedent, which is duly approved by the Honble Courts from time-to-time, cannot but be viewed as per incuriam. Therefore, following the Honble AP High Court Full Bench decision in the case of B.R. Constructions (supra), such a decision of the co-ordinate bench was of no precedence value.

9. It is thus beyond dispute that a decision which is per incuriam is not a binding judicial precedent. It is also well-settled that when it is not open to a High Court Bench to differ from the decision of a bench of equal strength, it cannot also be open to a bench of this Tribunal to differ from the view taken by a co-ordinate bench of equal strength. The only option in case one doubts the correctness of such a decision is to refer the matter for constitution of a larger Bench. A decision ignoring this rule of precedent, which is duly approved by the Honble Courts from time-to-time, cannot but be viewed as per incuriam. Therefore, following the Honble AP High Court Full Bench decision in the case of B.R. Constructions (supra), such a decision of the co-ordinate bench was of no precedence value.

10. For the reasons aforesaid, we are of the considered view that, what appear to be per incuriam decisions, orders passed by the co-ordinate benches in the case of Prince SWR Systems (P.) Ltd. (supra) and to Tribunals decision in the case of Venus Jewels (supra) do not constitute binding judicial precedents. Accordingly, following Honble AP Full Bench judgment in the case of B.R. Constructions (supra), we decline to be guided by the same. In any case, larger Bench request has already been turned down, and, accordingly, the only option open to us is to follow the co-ordinate bench decision in the case of Plastiblends India Ltd. (supra), we do so. Accordingly, we hold that it is not open to the assessing officer to thrust depreciation allowance while computing deduction under section 80-IA of the Income Tax Act, 1961, in a case where the assessee has not claimed the depreciation in the books of account. The assessee gets relief accordingly.

10. For the reasons aforesaid, we are of the considered view that, what appear to be per incuriam decisions, orders passed by the co-ordinate benches in the case of Prince SWR Systems (P.) Ltd. (supra) and to Tribunals decision in the case of Venus Jewels (supra) do not constitute binding judicial precedents. Accordingly, following Honble AP Full Bench judgment in the case of B.R. Constructions (supra), we decline to be guided by the same. In any case, larger Bench request has already been turned down, and, accordingly, the only option open to us is to follow the co-ordinate bench decision in the case of Plastiblends India Ltd. (supra), we do so. Accordingly, we hold that it is not open to the assessing officer to thrust depreciation allowance while computing deduction under section 80-IA of the Income Tax Act, 1961, in a case where the assessee has not claimed the depreciation in the books of account. The assessee gets relief accordingly.

11. In the result, the appeal is allowed.

11. In the result, the appeal is allowed.