HIMACHAL PRADESH FINANCIAL CORPORATION VS COMMISSIONER OF INCOME-TAX, 2000 PTD-HIMACHAL-PRADESH-HIGH-COURT-INDIA 1072 (1997)

(a) Income-tax---

----Appeal to Appellate Tribunal---Rectification of mistakes---Powers of Tribunal---Power of Tribunal to rectify mistakes in its order---Tribunal passing order without considering decision of Supreme Court---Is mistake which can be rectified---Indian Income Tax Act, 1961, S. 254.

(b) Income-tax---

----Appeal to Appellate Tribunal---Reference---Rectification of mistakes-- Application for reference pending before Tribunal---Tribunal can rectify mistake in its order---Indian Income Tax Act, 1961, Ss.254 & 256.

(c) Income-tax--

----Income---Accrual of income---Interest---Interest on sticky loans assessable on basis of accrual---Indian Income Tax Act, 1961.

When the Supreme Court has decided a matter on a question of law, it is the law of the land and it has to be followed by all the Tribunals and the Courts in this country, vide Article 141 of the Constitution of India. Hence, if the Tribunal had decided a matter overlooking the judgment of the Supreme Court on a question of law, it is certainly a mistake apparent from the record. Such a mistake can be rectified under section 254(2) of the Income Tax Act, 1961. The Tribunal can exercise such a power when the matter was sought to be referred to the High Court in the reference

Held, that interest charged on sticky loans an credited to interest suspense account was taxable under the Income-tax Act and the same should be included in the income of the assessee.

State Bank of Travanore v. CIT (1986) 158 ITR 102 (SC) and Kerala Financial Corporation v. CIT (1994) 210 ITR 129 (SC) fol.

CIT v. Dhadi Sahu (1976) 105 ITR 56 (Orissa) and CIT v. Jagabandhu Roul (1984) 145 ITR 153 (Orissa) ref.

Kuldip Singh for the Assessee.

Indar Singh for the Commissioner.

JUDGMENT

M. SRINIVASAN, C. J.----The Tribunal passed an order in the appeal preferred by the assessee in I. T. A. No. 606 of 1984. The Revenue was aggrieved thereby and filed an application for reference to the High Court with regard to two questions which are as follows:

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the assessee's claim regarding interest due on sticky loans?

(2) Whether, on the facts and in the circumstances of the case, theAppellate Tribunal was right in law in holding that the deduction under section 36(1)(vii) of the Income Tax Act, 1961, be allowed at the prescribed percentage of the total income computed before allowing deduction under Chapter VI-A and also before taking into account the deduction allowable under section 36(1)(viii) itself?"

When that application for reference was pending, the Revenue filed an application M. P. No. 19 of 1988 for rectifying the order of the Tribunal under section 254(2) relying upon a judgment of the Supreme Court in State Bank of Travancore v. CIT (1986) 158 ITR 102. In that judgment the Supreme Court has held that interest charged on sticky loans and credited to interest suspense account was taxable under the Income-tax Act and the same should be included in the income of the assessee. As the Tribunal has taken a different view in its appellate order it rectified the mistake by referring to the judgment of the Supreme Court which was brought to its notice in M. P. No.19 of 1988 by the Revenue, consequently, the Tribunal ordered that the amount of interest of Rs.27,57,363 on sticky loans would be included in the income of assessee on accrual basis as held by the Supreme Court. That order was passed on March 21, 1988.

When the reference application came before the Tribunal thereafter an order was passed on March 30, 1988. In that order, the Tribunal pointed out that only one of the questions will have to be referred to the High Court as the first question had become infructuous in view of the rectification of the order passed in M. P. No. 19 of 1988 on March 21, 1988. Consequently the Tribunal referred only the second question by order, dated March 30, 1988.

Thereafter, the assessee filed M. P. No. 70 of 1988 challenging the order passed by the Tribunal in the rectification proceedings. The assessee contended that there were several mistakes in the said order and required to be rectified. The Tribunal rejected its contention and dismissed M. P. No.70 of 1988 by order, dated August 22, 1988.

Then the assessee filed R. A. No. 168 of 1988 for referring two questions to this Court for consideration under section 256. The Tribunal passed an order on November 16, 1989, referring to this Court three questions which read as follows:

"(1) Whether the Tribunal was justified in law in acquiring jurisdiction under section 254(2) of the Act on a point sought to be referred to the High Court in a reference application?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal had the jurisdiction to rectify an admitted contentions (sic) and debatable matter under the provisions of section 254(2) of the Act?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest on sticky loans is liable to be taxed on accrual basis?"

The contention of the assessee, in short, is that the Tribunal having passed an order in the appeal in I. T. A. No. 606 of 1984 taking a particular view on the question of law which arose before it with regard to interest on sticky loan should not have modified that order on the pretext of rectification under section 254(2) on the basis of a judgment of the Supreme Court. According to learned counsel, if the Tribunal had omitted to consider a binding judgment of the High Court or the Supreme Court it .could not be rectified under section 254(2) but it should be only by a proceeding for review. It is argued that the Tribunal has no power of review as it has not been conferred by the statute on the said Tribunal. In this connection reliance is placed by learned counsel on the judgment of Orissa High Court in CIT v. Jagabanadhu Roul (1984) 145 ITR 153. In that case, the Tribunal dismissed the assessee's appeal but on application made under section 254(2) for rectification the Tribunal accepted the said application on the ground that the judgment of the Orissa High Court in CIT v. Dhadi Sahu (1976) 105 ITR 56 was not referred to by it in the appellate order. The Division Bench held that the Tribunal could have rectified the order only on an application for review and there was no power of review vested in it and consequently the exercise of power under section 254(2) was not valid. According to the Division Bench of the Orissa High Court, the matter cannot be brought for rectification under section 254(2) on the ground that some binding judgment of the High Court or the Supreme Court was not placed before it earlier when the appeal was disposed of by it.

The ruling of the Division Bench will not apply to the present case. When the Supreme Court has decided a matter on a question of law, it is the law of the land and it has to be followed by all the Tribunals and the Courts in this country, vide Article 141 of the Constitution of India. Hence, if the Tribunal had decided a matter overlooking the judgment of the Supreme Court on the question of law, it is certainly a mistake apparent from the record. Such a mistake can certainly be rectified under section 254(2) of the Income-tax Act. That is what has been done by the Tribunal in the present case. Hence, the Tribunal was well within its jurisdiction in rectifying the mistake committed by it while disposing of the Appeal No. 606 of 1984.

Incidentally, we may also place on record the fact that the Supreme Court has reiterated the position in law in its judgment in Kerala Financial Corporation v. CIT (1994) 210 ITR 129. Thus, there can by no doubt whatever of the position in law.

Consequently, as regards the first question we have no doubt in holding that when the matter was only pending for reference, the Tribunal had jurisdiction under section 254(2) to rectify a mistake committed by it in the appellate order. It is not as if the matter had already been referred to the High Court by the Tribunal. Hence, the first question is answered in the affirmative by holding that the Tribunal was justified in law in exercising its powers under section 254(2) of the Act when the matter was sought to be referred to the High Court in the reference.

As regards the second question it follows that the Tribunal had jurisdiction to rectify the mistake committed in the order passed to I. T. A. No.606 of 1984 on May 10, 1985, by allowing the application M. P. No. 19 of 1988 on March 21, 1988.

The third question is covered by the judgments of the Supreme Court referred to above, namely, State Bank of Travancore v. CIT (1986) 158 ITR 102 and Kerala Financial Corporation v. CIT (1994) 210 ITR 129 and the question is answered in the affirmative by holding that the; Tribunal was right in law.

Reference is answered accordingly.

M.B.A./3356/FCReference answered.