APOLLO INTERNATIONAL LTD.,NEW DELHI vs. DCIT, NEW DELHI

O R D E R PER AMIT SHUKLA, JM

The aforesaid appeal has been filed by the assessee against the impugned order dated 19.09.2016 passed by Commissioner of Income Tax (Appeals)-I, New Delhi for the quantum of assessment passed u/s. 143(3) for the Assessment Year 2012-13. In the grounds of appeal, the assessee has raised the following grounds:

“1. The learned assessing officer has erred in disallowing an amount of Rs.26,16,000/- under section 14A of the Act read with rule 8D of the Income tax rules and in doing so has grossly erred in:- a) Holding that the appellant is under an obligation to compute disallowance as per provisions of rule 8D. b) Making addition u/s 14A of the Act without rewarding his disqualification having regard to the tax audit report and accounts of the appellant that expenditure of Rs.8,17,000 has been incurred for earning exempt income.”

“4.3 Before us, the learned counsel has prayed for following the decision of the Special Bench of the Tribunal in the case of Vireet Investment Pvt. Ltd. (supra), wherein the Tribunal held as under: "11.14 Now the position of law as stands is that the decision of Hon'ble Jurisdiction High Court is directly on the point in dispute whereas the decision of Hon'ble Supreme court in the case of Rajendra Prasad Moody (supra) has been rendered in the context of section 57(iii), the applicability of which has been ruled out by Hon'ble Delhi High Court in the case of Cheminvest (supra). 11.15 Under Article 227 of the Constitution of India, the courts function under the supervisory jurisdiction of Hon'ble High Court. The decisions rendered by Hon'ble High Court are binding on all subordinate courts working within its jurisdiction. In this regard we may refer to the following decisions: (i) CIT v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom.), wherein on the issue of "whose decision-is binding on whom", the. Hon'ble Bombay Court considered in detail the hierarchy of the courts and has observed as under: "It is also well-settled that though there is no specific provision making the law declared by the High Court binding on subordinate courts, it is implicit in the power of supervision conferred on a superior Tribunal that the Tribunals subject to its supervision would conform to the law laid down by it. It is in that view of the matter that the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893 (at page1905) declared: "We, therefore', hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and they cannot ignore it. ...." This position has been summed up by the Supreme Court in Mahadeolal Kanodia v. Administrator General of West Bengal, AIR 1960 SC 936 (at page 941) as follows: "Judicial decorum no less than legal propriety forms the basis of judicial procedure. If one thing is more necessary in law than any other thing, it is the quality of certainty. That quality would totally disappear if judges of co- ordinate jurisdiction in a High Court start overruling one another's decisions. If one Division Bench of a High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view, the result would be utter confusion. The position would be equally bad where a judge sitting singly in the High Court is of opinion that the previous decision of another single judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench." The above decision was followed by the Supreme Court in Baradakanta Mishra v. Bhimsen Dixit, AIR 1972 SC 2466, wherein the legal position was reiterated in the following words (at page 2469) : "It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise there would be confusion in the administration of law and respect for law would irretrievably suffer," (ii) CIT v. Svnil Kumar (1995) 212 ITR 238 (Raj.), it was observed as under: "The point which has been raised could have been considered to be debatable because other High Courts have taken a different view. But since the view taken by this court is binding on the Tribunal and other authorities under the Act in this State, it could not be considered to be a debatable point in view of the decision of this court in the case of CIT v. M.I, Sanghi [1988] 170 ITR 670." (iii) Indian Tube Company Ltd. v. CIT & others (1993) 203 ITR 54 (Col.) , it was observed as under: "In the impugned order, respondent No.1 has rejected the petitioner's contention by stating that, although the Calcutta High Court had held that an assessee was entitled to interest on such refund calculated up to the date of the order passed consequent upon an appeal or revision of the original assessment, this view had not been accepted by the Bombay High Court, the Allahabad High Court and the Kerala High Court. Respondent No.1, accordingly, chose to accept the view of the Bombay, Allahabad and Kerala High Courts in preference to the view of the Calcutta High Court. In my view, the order of respondent No. 1 cannot be sustained on the simple ground that respondent No. 1 is an authority operating within the State of West Bengal and is bound by the decisions of the Nigh Court of this State ( see CIT v. Indian Press Exchange Ltd. [1989] 176 ITR 331 (Col) ; East India Commercial Co. Ltd. v. Collector of Customs AIR 1962 SC 1993, paragraph 29). In that view of the matter, the impugned order must be set aside and the Commissioner is directed to consider the matter afresh in keeping with the decisions of this court after giving the petitioners an opportunity of being heard. At least 48 hours clear notice must be given to the petitioners. The Commissioner will communicate the final order to the petitioner within eight weeks from the date of hearing. (iv) CIT v. J.K. Jain [1998] 230 ITR 839 (P&H), observing as under: "We have carefully examined the records and have heard Ld. counsel representing the parties. We are in respectful agreement with the view expressed by the Allahabad High Court in Omega Sports and Radio Works' case [1982] 134 ITR 28, as also the decision of this court in Mohan Lal Kansal's case [1978] 114 ITR 583. Following the decision in the two cases referred to above, we hold that it was not a case of divergence of opinion inasmuch as the opinion expressed by this court was binding upon the Tribunal." 11.16 Therefore, in our considered opinion, no contrary view can be taken under these circumstances. We, accordingly, hold that only those investments are to be considered for computing average value of investment which yielded exempt income during the year." 4.3 Respectfully, following the above decision, we direct the Assessing Officer to accordingly restrict the disallowance under Section 14A read with Rule 8D(2)(iii) of the Rules to average value of investment which yield exempt income during the year. The ground no. 4 of the appeal is partly allowed.”

Order pronounced in the open Court on 14th August, 2019.