1987 (11) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Conflict between High Court ruling and Special Bench ruling on Section 35B(1)(b)(iii) of the Income-tax Act, 1961.
2. Appropriateness of exercising writ jurisdiction under Article 226 of the Constitution of India.

Summary:

1. Conflict between High Court ruling and Special Bench ruling on Section 35B(1)(b)(iii) of the Income-tax Act, 1961:

Universal Ferro & Allied Chemicals Ltd. challenged the Special Bench ruling of the Income-tax Appellate Tribunal, which they claimed was contrary to the High Court's decision in Eldee Wire Ropes Ltd. [1978] 114 ITR 485 (Bom). The High Court had ruled that the assessee was entitled to weighted deduction under Section 35B(1)(b)(iii) for certain expenses. The Special Bench, however, concluded that the High Court did not conclusively determine the issue and held that expenditure incurred in India in connection with distribution, supply, or provision outside India does not qualify for weighted deduction. The learned single judge directed that the assessment proceedings should be completed without feeling bound by the Special Bench ruling where it conflicted with the High Court ruling, asserting that the High Court judgment would prevail.

2. Appropriateness of exercising writ jurisdiction under Article 226 of the Constitution of India:

The Department argued that the learned single judge erred in entertaining the writ petition under Article 226 and issuing directions that contradicted the Special Bench ruling. The appellate court found merit in this argument, stating that the learned single judge should have either set aside the Special Bench ruling if found erroneous or dismissed the petition. The appellate court emphasized that the Special Bench ruling, after considering the High Court judgment, is binding on subordinate authorities. The court also noted that the petition should not have been entertained when alternate remedies were available through pending assessment proceedings.

Conclusion:

The appellate court allowed the Department's appeal, set aside the judgment dated June 16, 1982, and dismissed the writ petition. The court held that the learned single judge's directions were misconceived and unnecessary, emphasizing the need for sparing exercise of writ jurisdiction when alternate remedies exist. The petitioner-company was ordered to pay the costs of the Department throughout.