2012 (2) TMI 614 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of interest income as business income eligible for exemption u/s 10A.
2. Applicability of the Supreme Court decision in Liberty India Vs CIT.
3. Binding nature of coordinate bench decisions and the concept of per incuriam.

Summary:

1. Treatment of Interest Income as Business Income Eligible for Exemption u/s 10A:
The appellant Assessing Officer challenged the CIT(A)'s decision to treat interest income as business income eligible for exemption u/s 10A. The CIT(A) had followed the Tribunal's orders in the assessee's own cases for the assessment years 2006-07 and 2007-08, which allowed such treatment. The Tribunal upheld the CIT(A)'s order, emphasizing that the specific definition in Section 10A(4) focuses on "profits of the business of the undertaking," which has a broader scope than "profits derived by the undertaking."

2. Applicability of the Supreme Court Decision in Liberty India Vs CIT:
The Assessing Officer argued that the CIT(A)'s decision contradicted the Supreme Court's ruling in Liberty India Vs CIT, which held that the term "derived" covers sources not beyond the first degree. However, the Tribunal noted that Section 10A(4) provides a specific definition that should be followed, which includes the profits of the business of the undertaking rather than limiting it to the first degree of derivation.

3. Binding Nature of Coordinate Bench Decisions and the Concept of Per Incuriam:
The Departmental Representative contended that the coordinate bench decision in Livingstone Jewellery Pvt Ltd Vs DCIT was per incuriam as it did not consider the Liberty India ruling. The Tribunal rejected this argument, stating that a later decision that does not consider an earlier binding precedent is itself per incuriam and lacks precedence value. The Tribunal emphasized the importance of judicial consistency and the binding nature of coordinate bench decisions unless overruled by a larger bench or higher court. The Tribunal declined to refer the matter to a Special Bench, as the binding precedents favored the assessee.

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(A)'s order to treat the interest income as business income eligible for exemption u/s 10A, and emphasized the binding nature of coordinate bench decisions and the specific definition provided in Section 10A(4).