2018 (12) TMI 647 - HC - Income Tax

Rectification of mistake u/s 154 - TDS u/s 194A - interest income of NOIDA to be eligible to exemption under Section 194A(3)(iii)(f) - whether NOIDA is a corporation formed by a State enactment (which is a precondition for claiming exemption under section 194A(3)(iii)(f) - Held that - Tribunal having dealt with the issue of interest income of NOIDA being eligible to exemption under section 194A(3)(iii)(f) of the Act, the provision of section 154(1-A) of the Act also did not come into play, to any extent. Even on merits, as on date, the matter had been carried to the Supreme Court, by the revenue, and the Supreme Court had also held the interest income of NOIDA to be eligible to exemption under Section 194A(3)(iii)(f). No contrary decision is permissible to be reached by any revenue authority, on any reasoning. The revenue authorities are solemnly obliged to efficiently and promptly apply that law without offering the least resistance to the decision reached by the Supreme Court. That being the necessary and unavoidable obligation. As to the second aspect, whether even otherwise such an issue may have been permitted to be raised by way of rectification, it is seen even if the submissions advanced by Shri Goyal could be examined to any extent so as to draw a point of distinction in the decision of the Supreme Court, even then, certainly a wholly new and debatable issue would be involved in such a scenario. One opinion having been formed by the CIT(Appeals) in his order dated 02.12.2013, it no longer remained open to him to engage in a fresh exercise to determine whether another opinion could be formed on the same issue. The position in law is fairly settled in view of the decision of the Supreme Court in the case of T.S. Balram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay (1971 (8) TMI 3 - SUPREME COURT). Even if any point of debate may ever arise, then in absence of any legislative action preceding, the forum for that debate, would remain only before the highest Court of the land and before no other authority, Tribunal or Court.

Summary

Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax (Appeals) to pass orders under Section 154/250 of the Income Tax Act, 1961.
2. Applicability of Section 194A(3)(iii)(f) concerning tax deduction at source (TDS) on interest payments made to NOIDA.
3. Doctrine of merger and its implications on the rectification order.
4. Whether the issue was debatable and thus outside the scope of rectification under Section 154.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax (Appeals) to pass orders under Section 154/250 of the Income Tax Act, 1961:
The petitioner challenged the jurisdiction of the Commissioner of Income Tax (Appeals)-1, NOIDA to pass an order under Section 154/250 of the Income Tax Act, 1961, after the original order dated 02.12.2013 had merged with the order of the Income Tax Appellate Tribunal (ITAT) dated 07.08.2015. The court noted that once the order of the CIT(A) merged with the ITAT's order, the CIT(A) lost jurisdiction to pass any rectification order on the same matter. The rectification order dated 30.11.2015 was thus held to be without jurisdiction.

2. Applicability of Section 194A(3)(iii)(f) concerning tax deduction at source (TDS) on interest payments made to NOIDA:
The petitioner bank argued that NOIDA was a corporation established under a state enactment and thus exempt from TDS under Section 194A(3)(iii)(f). The CIT(A) initially agreed with this view in the order dated 02.12.2013, which was upheld by the ITAT. The revenue's further appeals to the High Court and the Supreme Court were dismissed, affirming that NOIDA was entitled to the exemption under Section 194A(3)(iii)(f).

3. Doctrine of merger and its implications on the rectification order:
The court emphasized the doctrine of merger, stating that once the CIT(A)'s order merged with the ITAT's order, any rectification application should have been directed against the ITAT's order. The Supreme Court's ruling in Kunhayammed v. State of Kerala was cited, explaining that the doctrine of merger implies that the order of the superior forum subsumes the order of the inferior forum. Thus, the CIT(A)'s order dated 02.12.2013 was no longer open to rectification after it merged with the ITAT's order dated 07.08.2015.

4. Whether the issue was debatable and thus outside the scope of rectification under Section 154:
The court held that the issue of whether NOIDA was entitled to exemption under Section 194A(3)(iii)(f) was a debatable issue. As per the Supreme Court's decision in T.S. Balram, Income Tax Officer, Company Circle IV, Bombay v. Volkart Brothers, Bombay, a debatable issue cannot be rectified under Section 154. The court found that the CIT(A)'s attempt to revisit and alter the original order on a debatable issue was beyond the scope of Section 154.

Conclusion:
The court quashed the order dated 30.11.2015 passed by the CIT(A) under Section 154/250, holding it to be without jurisdiction. The writ petition was allowed, and no costs were imposed. The judgment reinforced the principles of judicial discipline and the doctrine of merger, emphasizing that once an order merges with a higher authority's order, the lower authority loses jurisdiction to alter or rectify it.