COMMISSIONER OF INCOME TAX-I CHANDIGARH vs. M/S BNAL PREFAB PVT LTD

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ITA/262/2013HC Punjab & HaryanaPHHC01105122201307 May 2015Bench: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI2 pages
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What did the High Court hold?

The High Court held that in view of its own order and judgment dated 29.04.2015 in a group of appeals, the substantial question of law is decided in favour of the revenue and against the respondent/assessee. Consequently, the Assessing Officer is directed to pass a fresh assessment order. While dealing with the issue of Section 40(a)(ia) of the Act, the AO shall do so in accordance with the High Court's aforesaid judgment and order dated 29.04.2015. The High Court also noted that all other contentions would remain open to the parties, including the respondent. The ratio decidendi is that if a High Court has taken a view contrary to a Special Bench decision of the ITAT, subsequent assessments must follow the High Court's ruling.

What were the facts?

This appeal by the Commissioner of Income Tax-I, Chandigarh (the revenue) challenges an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had remanded the matter to the Assessing Officer (AO) to pass a fresh assessment order. This remand was specifically to consider the provisions of Section 40(a)(ia) of the Income Tax Act, 1961, in light of the Special Bench decision of the ITAT in ACIT Vs Merilyn Shipping & Transports. The High Court notes that it had previously, in a separate judgment dated 29.04.2015 in ITA-716-2009, taken a view contrary to the Special Bench decision, favoring the revenue. The appeal was admitted on a substantial question of law concerning the ITAT's direction to follow the Special Bench decision.

What were the issues?

1. Whether the Hon'ble ITAT was correct in directing the AO to examine the disallowances made under Section 40(a)(ia) of the Income Tax Act, 1961, afresh, and further directing the AO to follow the decision of the Special Bench of the ITAT in ACIT Vs Merilyn Shipping & Transports, when the High Court at Hyderabad had granted an interim suspension of that Special Bench verdict, and the High Courts of Kolkata and Ahmedabad had subsequently held that the majority view in the Merilyn Shipping case did not lay down the correct law? (Question of law) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue contended that the ITAT erred in directing the AO to follow the Special Bench decision of the ITAT in Merilyn Shipping & Transports, citing contrary High Court decisions from Hyderabad (interim suspension), Kolkata, and Ahmedabad, which held that the majority view in Merilyn Shipping did not lay down the correct law. The revenue's position was supported by the High Court's own prior judgment.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA-262-2013 (O&M) Date of decision:- 07.05.2015

The Commissioner of Income Tax-I, Chandigarh ...Appellant Versus

M/s Bnal Prefab Pvt. Ltd. ...Respondent

CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE

HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Ms. Urvashi Dhugga, Advocate,

for the appellant.

Mr. Alok Mittal, Advoate,

for the respondent.

* * * * S.J. VAZIFDAR, A.C.J. (ORAL)

This is an appeal against the order of the Tribunal remanding the matter to the Assessing Officer to pass a fresh assessment order by considering the provisions of Section 40(a) (ia) of the Income Tax Act, 1961 (in short the Act) in accordance with the decision of the Special Bench of the Tribunal at Vishakhapatnam in ACIT Vs Merilyn Shipping & Transports [140 TTJ 1(SB) (Vishakhapatnam)]. 2. We have by our order and judgement dated 29.04.2015 in a group of appeals the first of which is ITA-716-2009 titled as P.M.S. Diesels, Phagwara Vs Commissioner of Income Tax-II, Jalandhar held in favour of the revenue and taken a view contrary to the one taken by the Special Bench of the Tribunal. 3. The appeal was admitted by an order dated 20.11.2013 on the following substantial question of law:- “While directing to examine the various disallowances made after invoking provisions of Section 40(a)(ia) of the Income Tax Act, 1961 afresh whether the Hon’ble ITAT was AMODH SHARMA 2015.05.08 17:58 I attest to the accuracy and authenticity of this document chandigarh

ITA-262-2013 (O&M)

2 correct in further directing to follow the decision of special Bench of Hon’ble ITAT Vishakhapatnam when the Hon’ble High Court at Hyderabad directed “interim suspension” of the Special Bench’s verdict and supported by decisions of the Hon’ble High Court Kolkata and Hon’ble High Court Ahmadabad wherein it has been held subsequently that majority view of the special Bench of the Tribunal in the case of M/s Merilyn Shipping A Transport Vs ACIT does not lay down correct law.”

4.

In view of our order and judgement dated 29.04.2015, the question of law is decided in favour of the revenue and against the respondent/assessee. In these circumstances, the Assessing Officer shall pass a fresh assessment order and while dealing with the issue of Section 40(a)(ia) of the Act shall do so in accordance with our aforesaid judgement and order dated 29.04.2015. Needless to add that all other contentions would be open to the parties including the respondent.

(S.J. VAZIFDAR) ACTING CHIEF JUSTICE

(G.S. SANDHAWALIA)

JUDGE 07.05.2015 Amodh AMODH SHARMA 2015.05.08 17:58 I attest to the accuracy and authenticity of this document chandigarh

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