2015 (2) TMI 950 - HC - Income Tax

Deduction u/s. 36(1)(viii) - revision u/s 263 - ITAT allowing deduction following the decision in the case of Union Bank of India v/s. ACIT 2012 (6) TMI 500 - ITAT MUMBAI - whether financial corporation are separate and distinct entities different from scheduled banks which are covered by the provisions of Banking Regulation Act as held by revenue? - Held that - When Revenue challenges the order of the Tribunal which in turn relies upon another decision rendered by it on the same issue, then in cases where the Revenue has accepted the order by not preferring any Appeal against the earlier order, the Revenue should not challenge the subsequent order on the same issue. In case an appeal is preferred from the subsequent order, then the Memo of appeal must indicate the reasons as to why an appeal is being preferred in later case when no appeal was preferred from the earlier order of the Tribunal which has merely been followed in the later case. In any case, the Officer concerned must atleast file an Affidavit before the matter comes up for admission, pointing out distinguishing features in the present case from the earlier case, warranting a different view in case the appeal is being pressed. The absence of this being indicative of nonapplication of mind, does undoubtedly give an opportunity to the Revenue to arbitrarily pick and chose the orders of the Tribunal which they would challenge in the Appeal before the this Court. Uniformity in treatment at the hands of law is a basic premise of Rule of Law. In the facts of the present case, there is no occasion for the CIT to exercise his powers under Section 263 of the Act as the view taken by the Assessing Officer granting deduction under Section 36(1)(viii) to the Respondent Assesseee was a possible view. This possible view is further fortified by the decision of the Tribunal in Union Bank of India (supra) which has also been accepted by the Revenue. Even Explanation to Section 36(1)(viii) of the Act as existing at the relevant time, a Financial Corporation has been defined to include a Public Company and the Government Company.- Decided in favour of assessee.

Summary

Issues:
1. Interpretation of deduction u/s. 36(1)(viii) of the Income Tax Act, 1961.
2. Application of precedents from different High Courts.
3. Exercise of revisionary powers under Section 263 of the Act.
4. Compliance with legal procedures by the Revenue.

The High Court of Bombay heard an appeal challenging a Tribunal order regarding the deduction u/s. 36(1)(viii) of the Income Tax Act for the Assessment Year 2006-07. The Revenue raised questions regarding the correctness of allowing the deduction based on conflicting decisions from different High Courts. The Court noted that the Tribunal's decision in Union Bank of India case was accepted by the Revenue, and no appeal was filed on this specific issue. The Court emphasized the importance of consistency in Revenue's approach when challenging Tribunal orders. It directed the Revenue to serve the order to the Chief Commissioner of Income Tax for appropriate action. The Court found that the Assessing Officer's view on granting the deduction was valid, supported by the Tribunal's decision and the definition of 'Financial Corporation' under the Act. Therefore, the Court dismissed the appeal, citing no reason to entertain it.

In the judgment, the Court addressed the issue of conflicting decisions from different High Courts regarding the deduction u/s. 36(1)(viii) of the Income Tax Act. The Court relied on the Tribunal's decision in Union Bank of India case, which was accepted by the Revenue. The Court emphasized the importance of Revenue's consistent approach in challenging Tribunal orders, highlighting the need for justification if appealing a subsequent order following a similar precedent. The Court stressed the significance of uniformity in legal treatment to uphold the Rule of Law. The Court's directive to the Revenue aimed at ensuring proper adherence to legal procedures and avoiding arbitrary selection of orders to challenge before the Court.

Another issue addressed in the judgment was the exercise of revisionary powers under Section 263 of the Income Tax Act. The Court found that there was no justification for the Commissioner of Income Tax to invoke these powers in the case, as the Assessing Officer's decision on granting the deduction was a valid interpretation. The Court noted that the view taken by the Tribunal in the Union Bank of India case, accepted by the Revenue, further supported the validity of the deduction. The Court's analysis focused on the permissibility of the deduction under the relevant provisions of the Act and the supporting precedents, leading to the dismissal of the appeal.

Furthermore, the judgment highlighted the compliance aspect for the Revenue in following legal procedures. The Court emphasized the need for the Revenue to maintain consistency in challenging Tribunal orders, especially when relying on previous decisions. By directing the Revenue to serve the order to the Chief Commissioner of Income Tax for appropriate action, the Court sought to ensure that legal directives were followed diligently. The Court's emphasis on adherence to legal procedures underscored the importance of upholding the principles of justice and fairness in tax matters.