2004 (8) TMI 709 - AT - Income Tax

Deduction u/s 80-IA - data processing activity - Manufacture Or Production - Rectification of Tribunal's order due to non-consideration of a binding precedent - main contention of the assessee was that the Tribunal did not consider the existing jurisdictional High Court's decision - HELD THAT - After careful consideration of entirety of facts and circumstances and case laws, we are of the opinion that there is a mistake in the aforesaid order passed by the Tribunal which is apparent from the record. There is no dispute with regard to the findings of the Tribunal that assessee is engaged in the business of data processing activity and their Lordships of Bombay High Court in the later decision in the case of Emirates Commercial Bank Ltd. 2003 (4) TMI 2 - BOMBAY HIGH COURT following the decision of Madras and Kerala High Courts in the cases of Comp-Help Services (P.) Ltd. 1998 (10) TMI 15 - MADRAS HIGH COURT and Computerised Accounting and Management Service (P.) Ltd. 1998 (2) TMI 86 - KERALA HIGH COURT respectively have held that data processing activity fulfils all the three conditions of section 32A(2)(b)( iii) which includes a condition of manufacture and production of an article or thing, not being an article or thing specified in the list in the Eleventh Schedule. The claim of the assessee has been disallowed only on the ground that data processing activity is not an activity of manufacture or production of an article or thing. This view is contrary to the view of jurisdictional High Court as expressed in the case of Emirates Commercial Bank Ltd. (supra) (the case relied upon by the Learned A.R.). Thus, non-consideration of a judgment of jurisdictional High Court constitutes a mistake apparent from record, regardless of judgment being rendered prior to or subsequent to the order proposed to be rectified and after the mistake is corrected, consequential order must follow and the Tribunal has power to pass all necessary consequential orders. Therefore, we hold that non-consideration of existing and binding decision of jurisdictional High Court constitutes a mistake apparent from the record in the order of the Tribunal dated 27th January, 2004 and we rectify the said order to the extent that assessee is entitled to get benefit of deduction u/s 80-IA and we hold that CIT(A) has rightly held so. Thus, revenue s ground relating to deduction u/s 80-IA for both the years is dismissed. As the only other ground taken in the appeal for assessment year 1996-97 by the revenue was in respect of disallowance of water charges paid to BMC was dismissed by the order of this Tribunal dated 27th January, 2004, the appeals filed by the revenue are considered to be dismissed. In the result, the Miscellaneous Application filed by the assessee is allowed in the abovementioned terms.

Summary

Issues Involved:
1. Consideration of jurisdictional High Court's decision in the context of deduction u/s 80-IA.
2. Rectification of Tribunal's order due to non-consideration of a binding precedent.

Summary:

Issue 1: Consideration of Jurisdictional High Court's Decision in the Context of Deduction u/s 80-IA

The main contention of the assessee was that the Tribunal did not consider the existing jurisdictional High Court's decision in CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55 (Bom.) while deciding the claim for deduction u/s 80-IA. The assessee argued that its data processing activity qualifies as an industrial activity, equating to the manufacture and production of an article or thing, thus making it eligible for the deduction. The Tribunal, however, decided against the assessee by following two earlier decisions of the Bombay High Court: CIT v. R. Shroff Consultants (P.) Ltd. [1999] 238 ITR 10184 and CIT v. Prudential Management and Services (P.) Ltd. [2001] 250 ITR 1365.

Issue 2: Rectification of Tribunal's Order Due to Non-Consideration of a Binding Precedent

The assessee argued that the Tribunal's order contained a mistake apparent from the record as it did not consider the later decision of the jurisdictional High Court in Emirates Commercial Bank Ltd. The assessee emphasized that when there are conflicting decisions by benches of equal strength, the later decision has binding force. The Tribunal acknowledged that the decision in Emirates Commercial Bank Ltd. was binding and should have been followed. The Tribunal's failure to consider this decision constituted a mistake apparent from the record, necessitating rectification.

Conclusion:

The Tribunal concluded that non-consideration of the existing and binding decision of the jurisdictional High Court in Emirates Commercial Bank Ltd. constituted a mistake apparent from the record. Consequently, the Tribunal rectified its order, allowing the assessee the benefit of deduction u/s 80-IA. The appeals filed by the revenue were dismissed, and the Miscellaneous Application filed by the assessee was allowed.