M/S Janapriya Engineers Syndicate, ... vs Department Of Income Tax

ITA No.1614/Hyd/2012 : Assessment year 2005-06 ITA No.1622/Hyd/2012 : Assessment year 2006-07 ITA No.1623/Hyd/2012 : Assessment year 2007-08 ITA No.1624/Hyd/2012 : Assessment year 2008-09

Asstt. Commissioner of Income- V/s. M/s. Janapriya Properties Pvt. Ltd. tax Central Circle 2, Hyderabad (Previously known as M/s. Janapriya Engineers Syndicate) Hyderabad

( PAN - AABFJ 7649 B)

(Appellant) (Respondent)

Appellant by : Shri Rajat Mitra

Respondent by : Shri A.Srinivas

Date of Hearing 19.01.2015 Date of Pronouncement 19.01.2015

ORDER

Per Bench :

Vide common order dated 29.11.2013, the Income Tax Appellate Tribunal 'B' Bench, Hyderabad, considered the issue of additions made by the Assessing Officer on account of disallowance under S.40(a)(ia) of the Income Tax Act,1961 and observed as under-

"57. We heard both sides and perused the impugned orders of the lower authorities. We find that the decision of the CIT(A) while deleting the disallowance made by the Assessing Officer under S.40(a)(ia) of the Act, is based on the Special bench decision of the Visakhapatnam Tribunal in the case of Merilyn Shipping & Transport in ITA No.477/Viz/2008 dated 29.3.2012. We find that the said decision of the Special Bench has been stayed by the Hon'ble High Court of Andhra Pradesh vide its interim order dated 8th October, 2012. That being so, in the interests of justice, we set aside the impugned order of the CIT(A) on this issue and restored this aspect of the matter to the file of the Assessing Officer, with a direction to redecide the disallowance if any that maybe warranted in terms of S.40a(ia) of the Act, in consonance with the view that the 2 ITA No.1614/Hyd/2012 & 3 ors M/s. Janapriya Properties Pvt. Ltd.

Hyderabad.

Hon'ble High Court may take on the above decision of the Special Bench of the Tribunal. The Assessing Officer is directed to redecide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee

2. Aggrieved by the order of the Tribunal, the Revenue preferred appeals before the Hon'ble High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, wherein it was contended that the order of the Tribunal cannot be given effect technically, since a consequential order has to be passed by the Assessing Officer within one year from the financial year in which the order of the Hon'ble Income Tax Appellate Tribunal is received, whereas in the instant case, the direction was to pass orders in consonance with the view, that is yet to be taken, by the Hon'ble High Court in the case of Merilyn Shipping and Transports (supra).

3. It is well known that Special Bench was constituted so as to have uniformity of opinion across the country on a particular legal issue and therefore, the order of the Special Bench would be binding on the other benches until and unless a jurisdictional High Court decision or a Supreme Court decision is rendered contrary to the view taken by the Special Bench. In the instant case, the Hon'ble High Court, in the case of Merylin Shipping and Transport, stayed the operation of the order passed by the Special Bench, and keeping in view this peculiar circumstance, the Tribunal had to pass an order by merely setting aside the issue to the file of the Assessing Officer to consider the issue afresh in line with the probable view that may be taken by the Hon'ble High Court in the case of Merylin Shipping and Transport.

4. Having regard to the peculiar circumstances of the case, the High Court having noticed the 'cachce-22' situation in which it was placed in, clarified the concept of 'precedent' and in this regard observed as udner-

3 ITA No.1614/Hyd/2012 & 3 ors M/s. Janapriya Properties Pvt. Ltd.

Hyderabad.

"We are of the view that until and unless the decision of the Special Bench is upset by this Court, it binds smaller bench and coordinate Bench of the Tribunal. Under the circumstances, it is not open to the Tribunal, as rightly contended by Mr. Narasimha Sarma, learned counsel, to remand on the ground of pendency on the same issue before this Court, overlooking and overruling, by necessary implication, the decision of the special Bench. We simply say that it is not permissible under quasi judicial discipline. Under the circumstances, we set aside the impugned judgment and order, and restore the matter to the file of the Tribunal, which will decide the issue in accordance with law and it would be open to the Tribunal either to follow the Special Bench decision or not to follow. If the Special Bench decision is not followed, obviously remedy lies elsewhere.

The appeal is thus allowed only on the point of remand. We direct the Tribunal to decide the matter on remand afresh within a period of two months from the date of communication of this order."

Thus, the matter was remanded to the Tribunal for fresh adjudication on the issue.

5. Having regard to the direction given by the Hon'ble High Court, the matter was posted for hearing. The learned counsel appearing on behalf of the assessee placed before us the following orders of the ITAT to submit that the Hon'ble Allahabad High Court in its decision in the case of CIT V/s. Vector Shipping Services Pvt. Ltd. (357 ITR 647) has taken a view on the issue in favour of the assessee in consonance with the view taken by the ITAT Visakhapatnam Special Bench in the case of Merylin Shipping and Transport (supra), and the view taken by the Hon'ble Allahabad High Court was impliedly affirmed by the Hon'ble Supreme Court by dismissing an SLP sought by the Revenue, and thus the view taken by the ITAT Special Bench Visakhapatnam deserves to be followed.

(a) Decision of Hyderabad Bench 'A' of the Tribunal in Ushodaya Enterprises Ltd. Hyderabad V/s. Dy. Commissioner of Income-tax Circle 4 ITA No.1614/Hyd/2012 & 3 ors M/s. Janapriya Properties Pvt. Ltd.

Hyderabad.

16(2), Hyderabad (ITA Nos.676/Hyd/2009 & 411/Hyd/2010 dated 7.1.2015)

(b) Decision of Mumbai Bench 'A' of the Tribunal in M/s. Arcadia Share & Stock Brokers Pvt. Ltd., Mumbai V/s. Dy. Commissioner of Income-tax, Range 4(1), Mumbai (ITA No.1871/Mum/2013 dated 22.12.2014)

6. The Learned Departmental Representative fairly agreed that the ITAT Hyderabad Bench considered an identical issue and followed the decision of the Special Bench in the case of Merylin Shipping and Transport (supra).

7. Upon hearing the rival submissions, we are of the view that the decision of the ITAT Special Bench is binding on the Tribunal, particularly in view of the clarificatory order passed by the Hon'ble High Court of judicature at Hyderabad in the instant case, and thus, we respectfully follow the decision of Special Bench in the case of Merylin Shipping and Transports (supra), and hold that the provisions of S.40(a)(ia) cannot be invoked where the payments were already made by the assessee. We direct the Assessing Officer accordingly. In the result, appeals of the revenue insofar as the above issue is concerned, are hereby dismissed.

Order pronounced in the Court on 19th January, 2015

Sd/- Sd/-

(D.Manmohan) (B.Ramakotaiah) Vice President Accountant Member

Dt/- 19th January, 2015 5 ITA No.1614/Hyd/2012 & 3 ors M/s. Janapriya Properties Pvt. Ltd. Hyderabad.

Copy forwarded to:

1. M/s. Janapriya Properties Pvt. Ltd. (Previously known as M/s. Janapriya Engineers Syndicate) 8-2-120/86, Plot No.11 & 12, Keerthi and Pride Towers, Road No.2, Banjara Hills, Hyderabad 34.

2. Asst. Commissioner of Income-tax, Central Circle 2, Hyderabad

3. Commissioner of Income-tax(Appeals) I, Hyderabad 4 Commissioner of Income-tax Central Circle Hyderabad

5. Departmental Representative, ITAT, Hyderabad.

B.V.S