1993 (4) TMI 37 - HC - Income Tax

Electric meters not 'plant and machinery' in residential premises, s.33(6) inapplicable, development rebate allowed on costs

HC held that electric meters installed by the assessee, an electric supply undertaking, at consumers' residential or office premises do not constitute ... Development Rebate - electric supply undertaking - Machinery Installed In Office Premises - precedent value or their binding effect​​​​​​​ - doctrine of stare decisis​​​​​​​ - Whether, the Tribunal was right in law in holding that the claim of development rebate on the cost of meters installed by the assessee-company at the residential or office premises of its consumers, was not at variance with the provisions of section 33(6) of the Act ? - HELD THAT:- At the outset, it may be appropriate to point out the well-settled legal position that what is binding on the courts is the ratio of a decision. There is a clear distinction between the ratio of a decision, obiter dicta and observations from the point of view of precedent value or their binding effect. It will be necessary in this case to explain this distinction. But before we do so, we may discuss the principle of binding precedent. This will take us to the question whose decision binds whom. For deciding whose decision is binding on whom, it is necessary to know the hierarchy of the courts. In India, the Supreme Court is the highest court of the country. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution. We are, therefore, of the clear opinion that decision of one High Court is not binding on another High Court. It is clear that it is the satisfaction of the court interpreting the law that the language of the taxing provision is ambiguous or reasonably capable of more meanings than one, which is material. If the court does riot think so, the fact that two different views have been advanced by parties and argued forcefully, or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation. In the instant case, as we are not satisfied with the interpretation given by the Tribunal or the Calcutta High Court to section 33(6) of the Act, in our opinion, accepting those decisions by applying the test of beneficial interpretation does not arise. Whether the electric meters put up by the assessee, which is an electric supply undertaking, for the purpose of measuring the electricity consumed by the consumers fall within the expression plant and machinery installed in residential or office accommodation as contemplated by section 33(6) of the Act - The meter is in fact necessary only for the purpose of measuring the consumption of electricity. It has no independent use of its own. In fact, it is not for the use in the office, residence, etc. It is a necessary adjunct to the supply line of electricity and the last point wherefrom starts the private line of the consumer. Though the meter is 'plant and machinery' in the technical sense, in the context of section 33(6) of the Act, it cannot be said to be a plant or machinery installed in the office premises or residential accommodation, etc. Plant and machinery referred to in section 33(6) of the Act will only mean those plant or machinery which are intended for use in the office or the residence. The meter does not meet this description. It will, therefore, not fall within the section 33(6) of the Act. That being so, we are of the clear opinion, though on different grounds, that the Tribunal was right in holding that section 33(6) of the Act was not attracted and the assessee was entitled to development rebate in respect of electric meters, no matter where they are installed whether in the office premises, residential accommodation, etc., or elsewhere. In view of our above conclusion, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the Revenue. Issues Involved:1. Interpretation of section 33(6) of the Income-tax Act, 1961.2. Binding nature of High Court decisions on other High Courts.3. Application of beneficial interpretation in tax law.Summary:1. Interpretation of Section 33(6) of the Income-tax Act, 1961:The primary issue was whether the development rebate on the cost of meters installed by the assessee-company at the residential or office premises of its consumers was at variance with the provisions of section 33(6) of the Act. The Tribunal held that the restriction in section 33(6) applied only to machinery and plant installed in the office premises or residential accommodation belonging to or occupied by the assessee. The High Court found no ambiguity in the language of section 33(6) and stated that the restriction applies to any machinery or plant installed in any office premises or residential accommodation, regardless of ownership or occupation by the assessee. However, the High Court agreed with the Tribunal that electric meters do not fall within the category of plant and machinery intended for use in the office or residence as contemplated by section 33(6).2. Binding Nature of High Court Decisions on Other High Courts:The court addressed whether it was bound to follow the decision of another High Court on an all-India statute like the Income-tax Act. It concluded that the decision of one High Court is not binding on another High Court. The doctrine of stare decisis applies within the same High Court, but decisions of one High Court only have persuasive value for other High Courts. The court emphasized that each High Court must give its own decision on questions of law referred to it, as required by section 260 of the Act.3. Application of Beneficial Interpretation in Tax Law:The assessee argued that even if the High Court disagreed with the Tribunal's interpretation of section 33(6), it should adopt the interpretation favorable to the assessee, citing Supreme Court decisions that favor the taxpayer in cases of ambiguity. The High Court rejected this argument, stating that beneficial interpretation applies only when the language of the statute is ambiguous or reasonably capable of more than one interpretation. Since the court did not find any ambiguity in section 33(6), it did not apply the principle of beneficial interpretation.Conclusion:The High Court concluded that the Tribunal was correct in holding that section 33(6) was not applicable to the electric meters installed by the assessee at the residential or office premises of its consumers. Therefore, the assessee was entitled to the development rebate on the cost of these meters. The question referred to the court was answered in the affirmative, in favor of the assessee and against the Revenue.