COMMISSIONER' OF INCOME-TAX VS COMMISSIONER' OF INCOME-TAX
1999 P T D 3599
[230 I T R 885]
[Gujarat High Court (India)]
Before R. K. Abichandani and A.R. Dave, JJ
COMMISSIONER' OF INCOME-TAX
Versus
CADILA CHEMICALS (PVT.) LTD.
Income-tax Application No.66 of 1997, decided on 13/01/1998.
Income-tax
--Reference-- -Question of law---Deduction only on actual payment--- Tribunal rejecting Revenue's application for reference on ground that matter covered by decision in Lakhanpal National Ltd. v. ITO (1986) 162 ITR 24()---Supreme Court ruling that merely because question of law was decided earlier by High Court, similar question arising in a later case does 1'ot cease to be a referable one---Does not mean that High Court should, in case where question of law already decided, mechanically call for reference---No ground made out for reconsideration of ratio of decision in Lakhanpal's case in the context of provision of S.43-B(a)---No question of law arose for reference---Indian Income Tax Act, 1961, Ss.43-B & 256(2).
When a question of law is referred to the High Court and a decision is rendered thereon, such decision cannot be simply ignored in a subsequent matter by requiring identical questions to be referred to the High Court again for its decision. In cases where the answer to the question of law is self- evident or where the question is of an academic nature; e.g., where it is concluded by a judgment of the Supreme Court or of the very High Court to which the reference is sought, the High Court in exercise of its discretion under subsection (2) of section 256 of the Income Tax Act, 1961, would be justified in refusing to require the Tribunal to refer such a question. When a decision on a question of law is rendered by the High Court, it will-remain a binding precedent and when an identical question of law is involved in a subsequent matter, the Tribunal would be bound to follow the decision of its jurisdictional High Court and it cannot be said that a question of law arises for the opinion of the High Court from such order of the Tribunal, which has followed the High Court decision on the question which is already settled so far as it is concerned, and would be a binding precedent, until reconsidered and departed from by a larger Bench of the same Court or overruled by the Supreme Court.
The Revenue filed an application under section 256(1) of the Income Tax Act, 1961, before the Tribunal for referring the following question of law: "Whether the Tribunal was right .in deleting the addition of Rs.3,93,955 for customs duty from closing stock under section 43-B of the Act. " The Tribunal held that since the matter was squarely covered by the decision of the High Court in Lakhanpal National Ltd. v. ITO (1986) 162 ITR 240 (Guj.), no question of law arose from its order for seeking the opinion of the High Court, which had already decided the question. The Revenue contended that when there existed a question of law in the matter, the High Court, on the authority of the Supreme Court decision in D.B. Madan v. CIT (1991) 192 ITR 344., should call for the statement of case on such question of law for its consideration notwithstanding that it had already decided the same question in some previous matter.. The Revenue also contended that Lakhanpal's case (1986) 162 ITR 240 (Guj.), on which reliance was placed by the Tribunal, required reconsideration by a larger Bench.
Held, that the observations of the Supreme Court in D.B. Madan's case (1991) 192 ITR 344: "But it cannot always be said that in all cases where a similar question of law had been answered in an earlier case in a particular way an identical question of law arising in a later case would cease to be a referable one and, therefore, the course to be adopted is to reject a reference under section 256(2) of the Act", could not be construed to mean that the High Court should mechanically call for the statement of case on a question of law, which had already been decided by the High Court. These observation only enable the High Court to call for the statement of case on a question law, even if a similar question has already been decided by it. Even if the question was decided by the High Court earlier, the High Court was not precluded from calling for a statement of case on a similar question, because the question may be required to be reconsidered for various reasons or where the subsequent Bench may not subscribe to the view already taken. Therefore, the High Court could not adopt a mechanical approach by simply calling for the statement of case in respect of a question of law which was concluded by the decision of the High Court in Lakhanpal's case (1986) 162 ITR 240 (Guj.). In the context of the provisions of section 43-B(a) and the decision in Lakhanpal's case (1986) 162 ITR 240 (Guj.), no ground had been made out for reconsideration of the ratio of the decision in Lakhanpal's case (1986) 162 ITR 240 (Guj.). Therefore, no question of law arose from the decision of the Tribunal in view of the fact that Lakhanpal's case (1986) 162 ITR 240 (Guj.), had already concluded that question.
CIT v. T.S. Hajee Moosa & Co. (1985) 153 ITR 422 (Mad.); Madan (D.B.) v. CIT (1991) 192 ITR 344 (SC) and Lakhanpal National Ltd. v. ITO (1986)162 ITR 240 (Guj.) ref.
Mihir J. Thakore, Senior Advocate for Manish R. Bhatt for Petitioner.
Mukesh M. Patel for Respondent No. 1.
JUDGMENT
R.K. ABICHANDANI, J.---The Revenue has prayed for calling for a statement of case in connection with the following question suggested by it in paragraph 4 of the application.
"Whether; the Appellate Tribunal is right in law and on facts, in deleting the addition of Rs.3,93,955 for customs duty-from closing stock under section 43-B?"
Earlier, the applicant had applied under section 256(1) of the Income Tax Act, 1961, before the Income-tax Appellate Tribunal for referring the aforesaid question for the opinion of this Court. The Tribunal by its order, dated February 24, 1997, held that since the matter was squarely covered by the decision of this Court in Lakhanpal National Ltd. v. ITO (1986) 162 ITR 240, no question of law arose froth its order for seeking the opinion of the High Court, which had already decided the question.
Learned counsel appearing for the applicant Revenue contended that when there existed a question of law in the matter, the High Court, on the authority of the Supreme Court in D.B. Madan v. CIT (1991)192 ITR 344, should call for the statement of case on such question of law for its consideration notwithstanding that it had already decided the same question in some previous matter. The further contention raised by learned counsel for the Revenue is that Lakhanpal's case, (1986) 162 ITR 240 (Guj.), on which reliance was placed by the Appellate Tribunal, requires to be reconsidered by a larger Bench.
In D.B. Madam's case, (1991) 192 ITR 344 (SC), the High Court of Madras had declined to call upon the Appellate Tribunal to state a case and refer a question of, law, which was said to arise out of the order of the Tribunal for its opinion, holding that in view of its earlier decision in CIT v. T. S. Hajee Moosa & Co.,'(1985) 153 ITR 422 (Mad.), no referable question arose from the decision of the Tribunal. In that earlier case, the Madras High Court had held, in the context of the claim of the assessee-firm for deduction of expenditure incurred by it on the wife of the senior partner accompanying him on a foreign tour for the purpose of attending on him as he was a diabetic, that the expenditure in question was in the nature of personal expenses and that even assuming that the expenses related to business purposes, the expenses had a dual or twin purpose and served not only the purposes to business but also a personal or private purpose and as the expenditure did not exclusively serve the business, it did not qualify for deduction under section 37(1) of the Income Tax Act, 1961. The High Court held that the section also did not permit any allowance from the point of view of any indirect advantage that may be secured as a result of the expenditure. It was, therefore, held that the Tribunal was in error in holding that the expenditure was laid out wholly and exclusively for business purposes. Following that earlier decision, the High Court in D.B. Madam's case, refused to consider the question to -the effect as to whether the Tribunal was justified in holding that the expenditure on the air travel of the assessee's wife was not incurred wholly and exclusively for the purpose of the business of the assessee and that the benefit derived by the wife would detract from the exclusiveness of the outlay, so as to render it ineligible as a deductible expenditure. In this background, the Supreme Court held that (page 345), it was always open to the High Court to follow its earlier decision and answer the question of law one way or the other according as to whether the view taken in the earlier case commends itself to it or whether, in its opinion, that earlier view needs reconsideration. The Supreme Court then made the following observations, which are sought to be relied upon on behalf of the Revenue in support of its contention that whenever a question of law arises it must necessarily be considered notwithstanding the fact that the High Court had already decided it (page 345):
"But it cannot always be said that, in all cases where a similar question of law had been answered in an earlier case in a particular way, an identical question of law arising in a later case would cease to be a referable one and, therefore, the course to be adopted is to reject- a reference under section 256(2)."
We are of the view that these observations can never be construed so as to mean that the High Court should mechanically call for the statement of case on a question of law, which has already been decided by the High Court. These observations only enable the High Court to call for the statement of case on a question of law even if a similar question has already been decided by it. There may be several reasons for which the High Court may consider it necessary to call for a statement of case on a question of law, which it may have earlier decided. The context in which the earlier question of law was decided would also be material. The question already decided on a reference may have depended upon considerations, which may vary from year to year, or a case may have been decided mainly with reference to the question of onus of proof.
In the case which was before the Supreme Court, it will be noted that the earlier decision of the Madras High Court in Hajee Moosa's case, (1985) 153 ITR 422, was rendered in the context of the expenditure incurred by a partner over taking his spouse on a foreign tour and it was observed that even assuming that the expenditure related to business purposes; it had a dual or twin purpose and it did not only serve purposes of business. The Supreme Court, in view of the fact that the High Court in D.B. Madam's case, had simply relied upon the decision in Hajee Moosa's case, (1985) 153 ITR 422 (Mad.), without going into the relevant aspects and considering whether there was a valid ground for calling for a question of law for its opinion, made it clear by the aforesaid observations that 'merely because a question of law was decided earlier by the High Court, it cannot be said that a similar question arising in a later ease could cease to be a referable one. This can never be construed so as to mean that the High Court should, in all cases where a question of law has already been decided, as a matter of course call for statement of case for deciding it again whenever moved under section 256(2).
Under section 256(1) of the Act, an application is required to be made by the assessee before the Appellate Tribunal to refer to the High Court any question of law arising out of the order of the Tribunal. Under section 260, the High Court decides such question of law referred to it and delivers judgment thereon containing grounds on which such decision is founded, and a copy of the judgment is to be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. Therefore, when a question of law was referred to the High Court and a decision is rendered thereon, such decision cannot be simply ignored in a subsequent matter by requiring identical questions to be referred to the High Court again for its decision. In cases where the answer to the question of law is self-evident or where the question is of an academic nature, e.g., where it is concluded by a judgment of the Supreme Court or of the very High Court to which the reference is sought, the High Court in exercise of its discretion under subsection (2) of section 256 would be justified in refusing to require the Tribunal to refer such a question. When a decision on k question of law is rendered by the High Court, it will remain a binding precedent, on the doctrine of "stare decisis" and when an identical question of law is involved in a subsequent matter the Tribunal would be bound to follow the decision of its jurisdictional High Court and it cannot be said that a question of law arises for the opinion of the High Court from such order of the Tribunal, which has followed the High Court decision on the question which is already settled so far as it is concerned, and would be a binding precedent until reconsidered and departed from by a larger Bench of the same Court or overruled by the Supreme Court.
In this view of the matter, it can never be said that the Supreme Court by its aforesaid- observations in D.B. Madan's case, (1991) 192 ITR 344, required the High Courts to mechanically call for the statement of case in all matters where a question of law, which was already considered and decided upon by the High Court earlier, was involved. The fact, however, remains that even if the question was decided by the High Court earlier, the High Court was not precluded from calling for a statement of case on a similar question, because the question may be required to be reconsidered for various reasons or where the subsequent Bench may not subscribe to the view already taken. We, therefore, are not inclined to adopt a mechanical approach by simple calling for the statement of question in respect of a question of law, which is admittedly concluded by a decision of this Court in Lakhanpal's case, (1986) 162 ITR 240. We may note here that the decision in Lakhanpal's case (1986) 162 ITR 240 (Guj.), has not been challenged by the Revenue-as stated by learned counsel.
We have heard learned counsel for the Revenue at length on the question whether the ratio of Lakhanpal's case (1986) 162 ITR 240 (Guj.), required, to be reconsidered. In Lakhanpal's case (1986) 162 ITR 240, in the context of the provisions of section 43-B of the Act, it was held that the import duty and excise duty which were paid by the assessee were deductible and that the sum payable under clause (a) of section 43-B had not been claimed by way of deduction in any previous year prior to 1983. It was held that the liability to pay the duties accrued in 1983 and the duties were actually paid in that year and, therefore, the amounts paid were deductible under section 43B of the Act. Section 43B(a), inter alia, provides that notwithstanding anything contained in any other provision of the Act, a deduction otherwise allowable under the Act in respect of any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall be allowed (irrespective of the previous year in which the liability to pay such income was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him.
There is no dispute about the fact that the deduction is claimed only in respect of the duties actually paid by the assessee. In the context of the provision of section 43-B(a) and on carefully going through the decision in Lakhanpal's case, (1986) 162 ITR 240 (Guj.), we are of the view that no ground is made out for reconsideration of the ratio of the decision in Lakhanpal's case, (1986) 162 ITR 240 (Guj). We, therefore, are of the view that no question of law arises from the decision of the Tribunal for our opinion, in view of the fact that Lakhanpal's case, (1986) 162 ITR 240 (Guj.), has already concluded that question. In this view of the matter, the application is rejected. Rule is discharged with no order as to costs.
M.B.A./3144/FC Application rejected.