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2025 (4) TMI 1556 - AT - Income TaxReference made to the Special Bench in the present case be withdrawn or not in the wake of the Hon ble Jurisdictional High Court of Mumbai admitting an identical question - Disallowance u/s 14A - Whether Special Bench can proceed with the hearing of the issue in view of the fact that the Division Bench had expressed its inability to concur with the view taken by the co-ordinate Bench in the case of Oman International Bank SAOG 2014 (1) TMI 537 - ITAT MUMBAI ? - HELD THAT - The issue before this Bench has already been considered by the Special Bench of this Tribunal in Summit Securities Ltd. 2011 (8) TMI 657 - ITAT MUMBAI has also considered certain practical aspects which would eventually lead to incongruity if it is held that the Special Bench has to stay its hands and/or is liable to be disbanded in the event of a similar/substantial question of law being pending before the High Court. The Special Bench has noticed that such a course of action would lead to pendency of the issue before the Special Bench and eventually before the Division Bench also requiring the Division Bench to await decision of the Special Bench. The Special Bench has clarified that this has no bearing on the powers of the President to constitute or de-constitute any Special Bench and/or withdrawing reference in the facts of each case. It is not shown that the decision in the case of Summit Securities Ltd. (supra) was challenged any further. For all practical purposes the said decision can be said to have attained finality. Revenue has placed reliance on the order passed in the case of Tivoli Investment and Trading Co. (P.) Ltd. 2011 (4) TMI 876 - ITAT MUMBAI on the administrative side and the decision of Harsha Achyut Bhogle 2007 (10) TMI 640 - ITAT MUMBAI in support of her submissions. We find that all these three orders have already been considered by the Special Bench. We find that the Special Bench has rightly found that these decisions have no bearing on the question involved. We find that Section 253 of the Act confers statutory powers on the Tribunal to decide appeals challenging the orders of CIT(A) and other orders as are permissible under the said Section. Section 255(3) of the Act also confers statutory powers on the President to constitute Benches including a Bench comprising of three or more Members to decide any particular issue. From the submissions advanced at the Bar it appears that Revenue has no objection for the Division Bench continuing the hearing and considering the issue. It is difficult to see as to how only the Special Bench would be precluded from hearing the matter if according to the Revenue the Division Bench can hear the same. There is one more aspect of the matter as pointed out by the learned Senior counsel for the assessee. It is pointed out that if the reference is withdrawn and the matter goes back to the Division Bench it will be compelled to take a view and agree with the co-ordinate Bench in the case of HSBC Bank Oman S.A.O.G (supra) which would be contrary to the opinion earlier expressed by the learned Members of the Division Bench expressing their inability to concur with the view as expressed in the case of HSBC Bank Oman S.A.O.G (supra). We find that the contention is justified. We also find that in the case of intervenor (appeals before the Delhi Benches which appeals have since been disposed of on 03.09.2021) and in the case of Summit Securities Ltd. (supra) the Revenue had taken a contrary stand. We cannot appreciate the Revenue taking such contrary stand on the issue involved in this matter. We find that there is no prohibition either in law or in practice which has been pointed to us which would require the Special Bench as a rule to stay its hands when a similar/identical issue is pending before the High Court. This is albeit subject to the considerations on the basis of propriety which the Special Bench itself may consider depending on the facts and circumstances of each case. In the present case except that the appeal by another assessee namely HSBC Bank Oman S.A.O.G (supra) has been admitted by the High Court nothing has been brought on record to require the Special Bench to stay its hands. There is one more reason why we are inclined to hold that the Special Bench need not be deconstituted and the reference withdrawn. It is necessary to note that the dispute relates to assessment year 1998-99. The appeal itself is of the year 2004. Therefore in our considered opinion hearing before the Special Bench brooks no further delay. In our humble opinion the Special Bench can proceed to hear and decide the appeal in accordance with law. Subject to this we hold that it is not necessary to withdraw the reference and/or to deconstitute the Special Bench.
1. ISSUES PRESENTED and CONSIDERED
The primary legal question considered by the Tribunal was whether a reference made to a Special Bench should be withdrawn or continued in view of an identical question of law being admitted and pending before the jurisdictional High Court. Specifically, the issue was: "Whether in the facts and circumstances of the case the reference made to the Special Bench in the present case be withdrawn or not in the wake of the Hon'ble Jurisdictional High Court of Mumbai admitting an identical question in the case of HSBC Bank Oman S.A.O.G?" This question arose in the context of a dispute concerning the taxability of interest received by an Indian branch of a foreign bank from its head office, and the applicability of Section 14A of the Income Tax Act, 1961, regarding disallowance of expenditure in relation to such interest. 2. ISSUE-WISE DETAILED ANALYSIS Issue: Whether the Special Bench reference should be withdrawn due to pendency of an identical question before the High Court Relevant Legal Framework and Precedents: The Tribunal's powers to constitute Benches and refer matters to Special Benches are derived from Sections 253 and 255(3) of the Income Tax Act, 1961. Section 255(3) empowers the President of the Tribunal to constitute a Special Bench comprising three or more members to decide any particular issue, especially when there is a difference of opinion between two coordinate Benches. The question of whether a Special Bench should stay proceedings or be disbanded due to pendency of a similar question before a High Court is not expressly addressed in the Act. Precedents considered included the Special Bench decision in Summit Securities Ltd. which held that the pendency of a similar issue before the High Court does not prohibit the Special Bench from proceeding. The Supreme Court decision in UOI vs Paras Laminates was relied upon to affirm the wide powers of the President to constitute Special Benches in cases of conflicting views among coordinate Benches. Administrative orders by the President withdrawing references in cases like Tivoli Investment and Trading Co. (P.) Ltd. and M/s. Star Ltd., Hongkong were examined. These were found to be administrative in nature, often based on peculiar facts such as withholding of material information or pendency of appeals in the assessee's own case for earlier assessment years, and not binding judicial precedents. Decisions such as Harsha Achyut Bhogle vs ITO were distinguished on facts, as were various Supreme Court and High Court decisions cited by the Revenue regarding subordinate courts or tribunals staying proceedings when a higher forum is seized of the matter. Court's Interpretation and Reasoning: The Tribunal noted that the Special Bench in Summit Securities Ltd. had comprehensively dealt with the issue and concluded that the pendency of a similar or identical question before the High Court does not, as a matter of law or practice, require the Special Bench to stay its hands or disband. The Special Bench emphasized that the powers conferred under Sections 253 and 255(3) are not fettered by the pendency of a similar question in a higher forum, unless the High Court has already decided the substantial question of law. The Tribunal further observed that withdrawing the reference and sending the matter back to the Division Bench would compel the Division Bench to follow the view of the coordinate Bench in the case pending before the High Court, which the Division Bench had already expressed inability to concur with. This would undermine the statutory scheme and the purpose of constitution of a Special Bench to resolve conflicting views. The administrative orders relied upon by the Revenue were found inapplicable because they were passed under different circumstances and did not constitute binding judicial precedent. The Tribunal also noted the inconsistency in the Revenue's stance, as it had taken an opposite position in other cases. Key Evidence and Findings: The Tribunal examined the history of the dispute, including the earlier decisions of coordinate Benches and Special Benches, the pendency of the appeal before the High Court in the case of HSBC Bank Oman S.A.O.G, and the nature of the administrative orders withdrawing references in other cases. The Tribunal found no material on record justifying the withdrawal of the reference or disbanding of the Special Bench. It also noted the considerable delay already suffered in the matter, with the appeal relating to assessment year 1998-99 and filed in 2004. Application of Law to Facts: Applying the principles established in Summit Securities Ltd. and the statutory provisions, the Tribunal held that the Special Bench should not be precluded from proceeding merely due to pendency of an identical question before the High Court. The Tribunal emphasized the need to avoid further delay and to exercise the statutory powers conferred on it effectively. Treatment of Competing Arguments: The Revenue argued for withdrawal of the reference based on administrative orders and the principle that subordinate forums should not proceed when a higher forum is seized of the matter. The Tribunal distinguished these precedents on facts and nature of orders and reaffirmed the binding judicial precedent of Summit Securities Ltd. The Revenue's inconsistent positions in other cases were noted and weighed against the statutory scheme and judicial discipline. Conclusions: The Tribunal concluded that there is no legal or practical bar to the Special Bench proceeding with the hearing and decision of the issue despite the pendency of a similar question before the High Court. It held that the reference should not be withdrawn and the Special Bench should not be disbanded. 3. SIGNIFICANT HOLDINGS The Tribunal preserved the following crucial legal reasoning verbatim from the Summit Securities Ltd. Special Bench decision, which it respectfully agreed with: "i) That where a subsequent Bench of the Tribunal is disinclined to follow the view taken by the earlier Bench on a particular issue, the only course open is to make a reference to the President for constitution of a Special Bench so that the issue can be finally decided by the Special Bench. ii) The President in view of the decision of Supreme Court in the case of Paras Laminates (P) Ltd. has wide powers to make such a reference and place the issue before a Special Bench in the context of difference of opinion between two co-ordinate Benches. iii) There are no fetters placed on the powers of the Special Bench of the Tribunal in hearing the case and rendering its decision, notwithstanding the fact of pendency of a similar/substantial question of law before the High Court. iv) The situation may be different when a substantial question of law has been decided by the High Court one way or the other wherein hearing by the Special Bench would become futile and in such a case, the President can consider withdrawing reference and disband the Special Bench." The Tribunal also held: "There is no prohibition either in law or in practice which has been pointed to us which would require the Special Bench as a rule to stay its hands when a similar/identical issue is pending before the High Court. This is albeit subject to the considerations on the basis of propriety, which the Special Bench itself may consider depending on the facts and circumstances of each case." On the final determination, the Tribunal ordered that the Special Bench reference should not be withdrawn or deconstituted and that the Special Bench should proceed to hear and decide the appeal in accordance with law without further delay.
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