INDIAN MERCHANTS CHAMBER vs. ASSISTANT COMMISSIONER OF INCOME TAX (E)-I(1), MUMBAI AND 2 ORS.

ORAL JUDGMENT (PER K.R. SHRIRAM, J.) : 1 Petitioner is impugning an order dated 23rd September 2015 passed by respondent no.2 denying petitioner’s claim for grant of approval for claim of exemption under Section 10(23C) (iv) of the Income Tax Act, 1961 (the Act). Gauri Gaekwad 2024:BHC-OS:4058-DB CNR No : HCBM020079132016 Uploaded on - 12/03/2024 Downloaded on - 31/10/2026 00:51:20

2/7 909.WP-887-2016.doc 2 Petitioner is an institution formed and established with the primary object of promoting, advancing and protecting trade, commerce and industry in India. It has been regularly filing return of income since its inception. According to petitioner, it qualifies for claiming exemption under Section 10(23C) (iv) of the Act. 3 Petitioner states that the Central Government had notified petitioner as an institution qualifying for this exemption for Assessment Year 1977-1978 to 2000-2001. Thereafter, upto Assessment Year 2008- 2009, Revenue has granted it exemption under Section 11 of the Act as a charitable institution. 4 Respondent no.2 rejected petitioner’s application for grant of approval under Section 10(23C) (iv) of the Act for Assessment Year 2014- 2015 primarily by invoking the provisions of proviso to Section 2(15) of the Act. According to respondent no.2, petitioner is not a charitable institution because it carries on the activities mentioned in the impugned order. 5 Mr. Mistri submitted that the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2016-2017 and Assessment Year 2017-2018, by an order pronounced on 27th September 2022, has set aside the order of rejection passed by Commissioner of Income Tax (Exemptions) [CIT (Exemptions)] and has held that petitioner was entitled to exemptions under Section 10(23C) (iv) of the Act. Mr. Mistri, on instructions states that Gauri Gaekwad Uploaded on - 12/03/2024 Downloaded on - 31/10/2026 00:51:20

3/7 909.WP-887-2016.doc petitioner’s application for Assessment Year 2015-2016 is yet to be disposed by the CIT (Exemptions). 6 Since the order of the ITAT for Assessment Year 2016-2017 and 2017-2018 has been passed after the impugned order was passed, in our view, respondent no.2 should be given an opportunity to apply the law as laid down by the ITAT. It will be useful to reproduce paragraph 14 of the judgment of this Court in Indusind Bank Ltd. V/s. Income Tax Settlement Commission & Ors.1, where the Court has held that a judicial decision acts retrospectively :

4/7 909.WP-887-2016.doc and the High Court - were right in holding that such a mistake can be said to be a "mistake apparent from the record"which could be rectified under Section 254(2). A similar question came up for consideration before the High Court of Gujarat in Suhrid Geigy Ltd.’s case (supra). It was held by the Division Bench of the High Court that if the point is covered by a decision of the Jurisdictional Court rendered prior or even subsequent to the order of rectification, it could be said to be"mistake apparent from the record" under Section 254(2) of the Act and could be corrected by the Tribunal. In our judgment, it is also well-settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a ‘new rule’ but to maintain and expound the ‘old one’. In other words, Judges do not make law, they only discover or 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. Salmond in his well-known work states; “… the theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law.

Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicataor accounts that have been settled in the meantime”. It is no doubt true that after a historic decision in Golak Nath v. State of Punjab AIR 1967 SC 1643, this Court has accepted the doctrine of ‘prospective overruling’. It is based on the philosophy : “The past cannot always be erased by a new judicial declaration”. It may, however, be stated that this is an exception to the general rule of the doctrine of precedent. Gauri Gaekwad Uploaded on - 12/03/2024 Downloaded on - 31/10/2026 00:51:20

5/7 909.WP-887-2016.doc 7 Mr. Gulabani submitted that the order of the ITAT for Assessment Year 2016-2017 and 2017-2018 has been challenged in this Court by way of an appeal which is still pending. Mr. Gulabani submitted that, therefore, the Revenue has not accepted the findings of the ITAT. The Apex Court in Union of India and Ors. V/s. Kamlakshi Finance Corporation Ltd.2 held that the mere fact that the order of the appellate authority is not “acceptable” to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. The Court further observed that if this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws Paragraph 6 of Kamlakshi Finance Corporation Ltd. (Supra) reads as under :

6/7 909.WP-887-2016.doc is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. 8 Mr. Gulabani states that a similar order, as impugned in this petition, was passed for Assessment Year 2013-2014 which has not been challenged by petitioner. In our view, that would make no difference and it is for every assessee to decide whether to accept the order or not to accept. Mr. Mistri submitted that petitioner is an institution that has been formed and established for promoting, advancing and protecting trade, commerce and industry in India and has been in existence for over 100 years and was established in the year 1907 and petitioner might have chosen not to contest the order for Assessment Year 2013-2014. But that cannot alter the fact that the law, as laid down by the ITAT, is the law on the subject. 9 In the circumstances, we hereby quash and set aside the impugned order dated 23rd September 2015 and remand the matter to respondent no.2 for denovo consideration. 10 Respondent no.2 shall consider and apply the law as laid down by the ITAT unless respondent no.2 is able to distinguish on the basis of Gauri Gaekwad Uploaded on - 12/03/2024 Downloaded on - 31/10/2026 00:51:20

7/7 909.WP-887-2016.doc facts. All rights and contentions are kept open. 11 Petition disposed accordingly. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gauri Gaekwad Uploaded on - 12/03/2024 Downloaded on - 31/10/2026 00:51:20 Powered by TCPDF (www.tcpdf.org)