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TMI Blog2025 (4) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting an identical question in the case of HSBC Bank Oman S.A.O.G (earlier known as Oman International Bank S.A.O.G?" The President by order dated 20.02.2025 has accordingly placed the above issue before the present Bench comprising of five Members. Brief Facts 2. Although the dispute has a chequered history, the facts necessary for the disposal of the present reference lie in a narrow compass and can be stated thus. The appellant is a foreign bank incorporated in the United States of America and having Indian operations through its Branch in Mumbai. The appellant has filed ITA No. 9189/Mum/2004 relating to assessment year 1998-99. One of the issues in the said appeal is whether the amount of interest received by the Indian Branch from its Head office can be treated as 'income not chargeable to tax' on the principle of mutuality. According to the appellant, such interest cannot be treated as 'income' on the principle of mutuality. 3. The Assessing Officer held that the same is income which is taxable as part of the business income of the appellant-assessee bank, which order has been confirmed by the learned Commissioner (Appeals) on 10.09.2004. That order is subject matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting the additional ground raised by the respondent on the applicability of the provisions of Section 14A of the Act on interest received by the Indian branches of the appellant from its Head Office ? (III) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in holding that the provisions of Section 14A of the Act are applicable in relation to the interest received by the Indian branches of the appellant from its Head Office ?" 5. The regular Division Bench hearing ITA No. 9189/Mum/2004 and CO No. 139/Mum/2013 expressed its inability to concur with the view taken by the co-ordinate Bench in Oman International Bank SAOG (supra). It was in these circumstances that the Division Bench had sought for constitution of Special Bench to resolve the issue. The President initially, vide order dated 16.01.2015, declined to constitute the Special Bench and directed the Registry to fix the appeal before the Division Bench. When the matter came up before the Division Bench again, the Division Bench vide order dated 12.07.2016 sought for a reference of the following question to the Special Bench :- "Whether an income which is not subject to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide order dated 17.04.2018 has placed the issue before the larger Bench comprising of five Members. The present Bench has been reconstituted on 20.02.2025. This is how the issue has come up before us. Submissions of the parties 9. We have heard Ms. Shilpa Goel, learned special counsel for the Revenue and Shri Percy Pardiwala, learned senior counsel for the appellant-assessee. 10. The primary contention of the leaned special counsel for the Revenue is that an identical issue as referred to the Special Bench is pending before the jurisdictional High Court in the case of HSBC Bank Oman S.A.O.G (supra) and therefore, the reference before the Special Bench of three Members be withdrawn. Reliance in this regard is placed on the order dated 22.11.2006 in the case of M/s. Star Ltd., Hongkong whereby the order constituting the Special Bench was withdrawn by the President on the ground that substantial question of law involving identical issue had already been admitted and pending before the High Court. The learned Special counsel for the Revenue also placed reliance on the order of the President in the case of Tivoli Investment and Trading Co. (P.) Ltd. (supra) where the reference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances prevailing in the case of M/s. Star Ltd., Hongkong (supra) and Tivoli Investment and Trading Co. (P.) Ltd. (supra). 13. Insofar as the reliance placed on the case of Harsha Achyut Bhogle (supra) is concerned, it is submitted that the decision is clearly distinguishable in view of the facts obtaining therein. 14. It is submitted that the Division Bench in the assessee's case has already expressed disagreement with the view taken by the co-ordinate Bench in the case of HSBC Bank Oman S.A.O.G (supra). It is submitted that in the event the reference is withdrawn and the appeal goes back to the Division Bench, this would tantamount to requiring the Division Bench to abide by the decision in the case of HSBC Bank Oman S.A.O.G (supra). It is submitted that once the Division Bench has expressed disagreement with the earlier view expressed by the co-ordinate Bench, the only option as per Section 255(3) of the Act is to refer the matter to the Larger/Special Bench. It is submitted that the pendency of the issue before the jurisdictional High Court cannot lead to the reference being kept in abeyance which would in effect have the statutory powers conferred on the President under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bench of this Tribunal in Summit Securities Ltd. (supra). It is necessary to deal with the said decision in some details in order to appreciate the controversy. In that case, the assessee had transferred its power transmission business to KEC International Ltd. for an agreed consideration of Rs. 143 crores and offered an equal amount as Capital Gains arising out of slump sale. The Auditors had determined a negative net worth of the business transferred at Rs. 157.19 crores. The Assessing Officer observed that the sale consideration should be taken as Rs. 300 crores (the sale consideration of Rs. 143 crores + additional liabilities taken over amounting to Rs. 157 crores) and as such, the entire amount was considered for computing Long Term Capital Gains. Before the First Appellate Authority, reliance was placed on behalf of the assessee on two decisions of the Tribunal in Zuari Industries Ltd. vs ACIT [2007] 105 ITD 569 and Paperbase Co. Ltd. vs CIT [2008] 19 SOT 163 (Delhi) in which it has been held that negative net worth has to be treated as zero in view of the provisions of Section 50B of the Act. The First Appellate Authority, therefore, deleted the addition made on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Paras Laminates (P) Ltd. (supra) 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 issue/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. 21. We find that apart from the statutory provisions, which have a bearing on the question, the Special Bench 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution of Special Bench mainly on the ground that the view taken by the Tribunal in assessee's own case for preceding assessment year 2000-01 was contrary to several other decisions of the co-ordinate Benches. Reference was thus sought to resolve the conflicting views. The President, by a communication dated 17.08.2006, had sought comments of the Vice President, who by his communication dated 14.09.2006 recommended for constitution of Special Bench. It was in these circumstances that the issue was referred to Special Bench in ITA No. 4348/Mum/2005 by order dated 15.09.2006. When the fact about constitution of Special Bench came to the notice of the Revenue, a detailed objection was filed claiming that the assessee had made an incorrect statement that the decision of Division Bench was in variance with several other decisions of co-ordinate Benches. It was pointed out that after obtaining the order of reference, a submission was made before the High Court in an appeal relating to assessment year 2000-01 for remand of the said appeal also to the Special Bench. 25. In the facts of the case, the learned President found that the assessee was not justified in asking for reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns had refused to make the recommendation. It is necessary to note that the Tribunal in para 8 of the order found that the rule of consistency and judicial discipline require the Bench to follow the earlier order for assessment year 1997-98 in order to maintain uniformity and consistency in the decision making. The Division Bench has categorically found that there was no valid reason to take a contrary view to the one already taken by the Tribunal in assessee's own case for assessment year 1997-98. It can thus be seen that in the absence of the Division Bench taking any contrary view to the earlier decision, there was no occasion for the Division Bench to have made a recommendation for constitution of Special Bench. The facts are clearly distinguishable. 28. We now propose to briefly deal with the other decisions on which reliance was placed on behalf of the Revenue. 29. In Harihar Collections & Raj Grow Impex LLP vs UOI & others (supra), the Petitioner, being a proprietorship firm, was engaged in the business of import and export of agricultural commodities. The Petitioner had imported Yellow Peas, which was found by the concerned authorities under Foreign Trade (Development an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad directed the appellant not to carry out any further construction which was in the teeth of the order passed by the High Court, permitting construction on certain conditions. It was in these circumstances that the Supreme Court found that the NGT could not have passed the order, particularly in the wake of the order passed by the High Court of Andhra Pradesh as referred above. 32. In Yogendra Mohan Sengupta (supra), the Supreme Court found that despite pendency of the proceedings before the High Court, the NGT had passed an interim order. It was found that although the NGT was informed about the High Court being in seisin of the proceedings, it went on to hold that the judgment given by it was binding and, therefore, the draft development plan, which in its view was not in conformity with its judgment, was liable to be set aside. 33. We find that all these decisions turned on their own facts and are clearly distinguishable. 34. In Pranay Sethi and others (supra), which was a case arising out of a claim for compensation under the Motor Vehicles Act, 1988, there was a reference made to the Constitution Bench of the Supreme Court on account of cleavage of opinion between two thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Special Bench in the case of Summit Securities Ltd. (supra) and we are in respectful agreement with the views expressed therein. 38. In the result, 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 appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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