ACIT CIRCLE 1, TUTICORIN vs. DIAMOND SHIPPING AGENCIES (P) LIMITED, TUTICORIN

This appeal filed by the Revenue is directed against the order passed by the learned Commissioner of Income Tax

The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in deleting the disallowance of deduction U/s.80IA(4) of the Act with respect to the business activity of the assessee being developer and operator of Container Freight Station by relying on the decision of the Hon’ble High Court.

The brief facts of the case are that the assessee is a company, engaged in the business of shipping & transport, filed its return of income for the assessment year 2014-15 electronically on 27.09.2014 admitting ‘Nil’ income. The case was selected for scrutiny under CASS and notice U/s.143(2) was issued on 28.08.2015. Thereafter the assessment was completed U/s.143(3) of the Act, wherein the Ld.AO disallowed the claim of deduction U/s.80IA of the Act, in respect of the business of developing and operating container freight station. While doing so, the Ld.AO opined that the decision of the Hon’ble High Court in the case of A.L. Logistics was not acceptable to the Income Tax Department since the department has filed appeal before the Hon’ble Apex court.

However on appeal, the Ld.CIT(A) allowed the claim of the assessee by observing as under:- “I have considered the submissions of the representative. As far as the deduction u/s.80IA is concerned, I accept the plea of the representative that this issue is covered by my appellate orders for assessment years 2012-13 and 2013-14 which have been confirmed by the Hon'ble ITAT. Regarding the binding decision of the jurisdiction High Court, I find that there is merit in the claim of the appellant that the Assessing Officer is bound to follow the jurisdictional High Court decision even if the same is not accepted by the department and further appeal is pending. The Board has issued instructions that the Assessing Officers have to follow the decision of the jurisdictional High Court and note down such cases separately so that whenever the jurisdictional High court's decision is reversed by the Hon'ble Apex court, remedial action is to be taken. The Assessing Officer is not justified in refusing to follow the decision of the jurisdictional High court merely because the appeal is pending before the Apex Court. The action of the Assessing Officer is against the instructions issued by the Board. In view of the above, I direct the Assessing Officer to allow deduction u/s.801A. The Assessing Officer shall take into account the disallowances/additions if any, which shall have the effect of enhancement of deduction u/s.801A.”

At the outset, we find merit in the order of the Ld.CIT(A). The issue has been held in favour of the assessee by the Hon’ble Jurisdiction Madras High Court. It is pertinent to mention that all the lower judiciary has to necessarily follow the decision of the order of the Hon’ble Jurisdictional High Court, which the Ld.CIT(A) has adhered to. Therefore we do not find any infirmity in the decision of the Ld.CIT(A). Hence we hereby uphold the same.

In the result, appeal of the Revenue is dismissed.