2004 (5) TMI 11 - HC - Income Tax

Powers of tribunal under section 254 for rectification - By impugned order, the Tribunal allowed the application made by the assessee u/s 254(2) seeking rectification in the main appellate order - Mere perusal of the impugned order of the Tribunal quoted supra would indicate that the rectification was done or was required to be done on the strength of the law laid down by the Supreme Court in the case of Kerala State Industrial Development Corporation Ltd. v. CIT. It is in this case, their Lordships have explained the manner in which the tax is to be calculated on the interest earned by the assessee. So the rectification had to be done to make the direction of the Tribunal to the taxing authorities to follow the law laid down by the apex court. Indeed, the law laid down by the Supreme Court being binding on all courts/Tribunals in our country by virtue of article 141 of the Constitution of India, the rectification had become necessary so as to make the judicial orders in accord with the law explained by the Supreme Court. - We, therefore, do not find any error of law committed by the Tribunal in invoking their powers of rectification u/s 254

Summary

Issues:
Appeal by Revenue under section 260A of the Income-tax Act against Tribunal's order. Rectification of main order by Tribunal. Chargeability of tax on interest received basis. Tribunal's substitution of para. 7 of appellate order. Tribunal's invocation of powers under section 254 of the Act for rectification. Admissibility of appeal based on question of law. Binding nature of Supreme Court's decision on taxing authorities.

Analysis:
The High Court addressed an appeal filed by the Revenue under section 260A of the Income-tax Act against an order passed by the Income-tax Appellate Tribunal. The Tribunal had allowed an application by the assessee for rectification of the main order, specifically substituting para. 7 of the appellate order regarding the chargeability of tax on interest received basis. The Tribunal referred to a decision of the Supreme Court in the case of Kerala State Industrial Development Corporation Ltd. v. CIT [2003] 259 ITR 51 to justify the rectification. The High Court noted that the rectification was necessary to align the judicial orders with the law as explained by the Supreme Court, which is binding on all courts and Tribunals in India under article 141 of the Constitution. Therefore, the High Court found no error of law in the Tribunal's invocation of powers under section 254 of the Act for rectification.

The High Court further emphasized that the rectification was based on the binding nature of the Supreme Court's decision, and there was no question of law arising for the court to admit the appeal. The court dismissed the appeal, stating that the rectification made by the Tribunal was in accordance with the law laid down by the Supreme Court. The judgment highlighted the importance of ensuring that judicial orders are in conformity with the legal principles established by higher courts, such as the Supreme Court, to maintain consistency and adherence to the law. The High Court's decision ultimately upheld the Tribunal's rectification and dismissed the appeal by the Revenue, affirming the Tribunal's authority to rectify the order based on the Supreme Court's decision.