2024 (5) TMI 224 - HC - Income Tax

Rectification application u/s 254 - Tribunal not followed the decision on the identical facts by the Coordinate Bench which is confirmed by this Court - as per the view of the Tribunal the interest earned on the staff loan and advances incidental to the assessee s business is factually incorrect as the loan advances given to the employees are not mandatory incentive given to the staff and cannot be termed as incidental to the business but Tribunal could not have taken different view than what was already taken by the Coordinate Bench which is confirmed by this Court in 2020 (3) TMI 1468 - GUJARAT HIGH COURT . Thus there is a mistake apparent on the face of the record HELD THAT - When the Tribunal has not followed the decision on the identical facts by the Coordinate Bench which is confirmed by this Court there is mistake apparent on the record which ought to have been considered by the Tribunal when it is pointed out being a mistake apparent on record. As decided in Air Conditioning Specialities (P.) Ltd 1995 (3) TMI 14 - GUJARAT HIGH COURT as held no doubt in our minds that when a point is concluded by a decision of this court all subordinate courts and inferior Tribunal within the territory of this State and subject to the supervisory jurisdiction of this court are bound by it and must scrupulously follow the said decision in letter and spirit. Since the second respondent has not decided the matter in accordance with law laid down by this court in the case of Bharat Textile Works 1978 (2) TMI 72 - GUJARAT HIGH COURT the order passed by him requires to be quashed and set aside. In such circumstances not following the binding decision is mistake apparent on record. The impugned orders are accordingly quashed and set aside. The matter is remanded back to the Tribunal to pass fresh orders in Misc. Application preferred by the petitioner.

Summary

Issues Involved:
1. Whether the interest income from staff loans and advances should be classified as "business income" or "income from other sources."
2. Whether the Tribunal erred in dismissing the Misc. Application u/s 254(2) of the Income Tax Act, 1961.

Summary:
Issue 1: Classification of Interest Income
The petitioner challenged the classification of interest income from staff loans and advances as "income from other sources" instead of "business income." The Tribunal initially treated this income as "income from other sources," distinguishing it from the business income based on the facts that the loans were not mandatory incentives. The petitioner cited the Gujarat High Court decision in Gujarat Urja Vikas Nigam Ltd vs. DCIT, which classified similar interest income as business income. The Tribunal's decision to classify the income differently was deemed incorrect by the High Court, which held that the Tribunal should have followed the jurisdictional High Court's binding decision.

Issue 2: Tribunal's Error in Dismissing Misc. Application u/s 254(2)
The petitioner argued that the Tribunal made a mistake apparent on record by not considering the binding decisions of the jurisdictional High Court and the Coordinate Bench. The Tribunal dismissed the Misc. Application, stating it had limited power to rectify mistakes apparent from the record u/s 254(2) and that the petitioner was seeking a review, not a rectification. The High Court found that the Tribunal's failure to follow the binding decisions constituted a mistake apparent on record. The Tribunal should have rectified this mistake instead of dismissing the Misc. Application.

Conclusion:
The High Court quashed the Tribunal's impugned orders and remanded the matter back to the Tribunal to pass fresh orders in the Misc. Application, adhering to the binding decisions of the jurisdictional High Court. The rule was made absolute to the extent of these observations, with no order as to costs.