TaxTMI 
TaxTMI 
2016 (5) TMI 1181
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....(Appeals) failed to appreciate that the directions contained in the Appellate Orders were not followed in proper perspective and ought to have appreciated that the precise challenge on the non implementation of such directions in the 'effect giving' order on the said issue was not considered and appreciated effectively by recording cryptic finding in para 6 of the impugned order. 4. The CIT (Appeals) went wrong in recording the findings in this regard in para 6 of the impugned order without assigning proper reasons and justification. 5. The CIT (Appeals) erred in sustaining the determination of profit assessable to tax relating to the transfer/sale of 53 wind turbine generators at Rs.7,21,99,652/- in the computation of taxable total income without assigning proper reasons and justification. 6. The CIT (Appeals) went wrong in recording the findings in this regard in para 9 of the impugned order without assigning proper reasons and justification and ought to have appreciated that directions contained in the Appellate Orders were not complied with in proper perspective. 7. The CIT (Appeals) erred in sustaining the levy of interest u/s 220(2)....
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.... remand report on 31/12/1997. After receiving the remand report, the Commissioner of Incometax (Appeals) has partly allowed the appeal by his order dated 22/4/1998. Certain issues were restored back to the Assessing Officer for fresh consideration. This order was given effect to by the Assessing Officer on 22/6/1998 and the same was revised on 7/8/1998 as per which the income was determined at Rs. 10,45,24,360/- and a demand of Rs. 5,27,12,347/- was determined. By order dated 31/8/1998 this was revised to give effect to the payment of Rs. 25 lakhs made on 4/4/1994. Against giving effect to order dated 24/8/1998 an appeal was filed before CIT(A) which was dismissed on 29/1/1999, as the mistake was already rectified by the Assessing Officer. By an order dated 23/4/1999, to give effect to the order of the CIT(A) dated 19/3/1999 based on the miscellaneous petition filed by the Assessing Officer that the interest under section 234B was wrongly calculated. The Assessing Officer has taken the income at Rs. 10,45,24,360/- as per order u/s 154 referred above but calculated the tax payable at Rs. 8,43,46,139/-. The order dated 22/6/1998 was further revised by order da....
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....icer on 30/9/2011 determining the total income at Rs. 24,62,67,120/- demanding a tax of Rs. 65,44,47,917/-(addl. Demand raised was Rs. 30,20,15,655/-). Appeal was filed against the order dated 30/9/2011 before the Commissioner of Income-tax (Appeals). The CIT(A) decided the matter by his order in ITA No.100/11-12 dated 8/8/2012 by which the appeal was allowed. The order of the CIT(A) dated 8/8/2012 was given effect to by the Assessing Officer on 18/3/2013 determining the total income at Rs. 19,47,53,363/-. The tax payable was determined as Rs. 18,12,26,267/- and interest of Rs. 34,56,08,7901- was charged as interest under section 220(2). The appeal filed against the assessment order dated 18/3/2013 before the CIT(Appeals) and the CIT(Appeals) was dismissed the appeal on 18/11/2013 in ITA No. 73/13- 14. Against this, the assessee is in appeal before us. 4. The ld. AR submitted that the assessee originally claimed that it has manufactured 209 WTGs out of which 159 WTGs were sold to outsiders and 50 WTGs were transferred to assessee's own division. However, the AO found that assessee had produced only 156 WTGs, out of this, 150 WTGs were sold to outsiders and 6 WT....
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....ansferred as against 59 WTGs claimed by the assessee. When the matter came to this Tribunal, this Tribunal has directed the Assessing Officer to verify the number of Wind Turbine Generators that were actually installed in the assessee's won division and then allow the depreciation passed on the facts that they were commissioned and so certified by the State Electricity Board. In the given effect order, the Assessing Officer has reduced the sale price of 59 WTGs at Rs. 3,893.86 lakhs but corresponding cost has been reduced only in respect of 6 WTGs which is apparent from the order of the giving effect in which the Assessing Officer has referred the original assessment order dated 27.03.1997 at page 9. On our directions, the assessee filed the original assessment order before us during the hearing on 12.05.2009. After going through the original assessment order, we found that the sale value of Rs. 3,893.86 lakhs pertains to 59 Wind Turbine Generators, whereas while giving effect order, the Assessing Officer has taken into account only the cost of 6 WTGs but reduced the sale value of 59 WTGs from the sale proceeds which has resulted the net income as loss. Though, we are n....
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....o be reduced in addition to boost up sales of WTG correspondingly the expenses of the manufacturing division would also have to be reduced to the cost of the number of WTGs capitalised in the year. However, the lower authorities only reduced from profit element of 53 WTGs and not the sales value from the sales which itself is wrong and contrary to the directions of the Tribunal. According to the ld. AR, the AO has to reduce the sales value of 59 WTGs from the total sales, then he has to grant depreciation on 6 inter-division transferred WTGs on cost price. Further, the ld. AR submitted that the AO has to determine cost of 156 WTGs by apportioning the total cost of manufacture and consider the cost of each WTG and, therefore, he has to determine the profit of the assessee and exclude inter-divisional sales from out of the net profit, which has not done in this case. Therefore, he prayed to rectify the mistake. 5. On the other hand, the ld. DR submitted that the impugned order of AO is the order dated 18.3.2013 giving effect to the order of CIT(A) dated 8.8.2012 in which it is specifically held that excess depreciation allowed on account of 6 WTGs internally transferred amounting ....
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....to be excluded from taxable income Sch.II to the impugned assessment order shows that AO has strictly followed the directions of the appellate authority and adopted the figure of profit as given in the appellate order. This order of the CIT(A) was accepted by both the assessee and department and thus it has reached finality. Accordingly, the ld. DR submitted that since the AO has followed the binding direction of the CIT(A) which was accepted by both the parties, appeal of the assessee needs to be dismissed on the issue as it has no grievance. 6. We have heard both the parties and perused the material on record. The issue in this appeal is whether to exclude the sale value or element of profit from 53 WTGs which was not manufactured by the assessee to be reduced from the profit shown by the assessee and said to be inflated so as to give a rosy picture of the profit of the assessee. The other issue is with regard to determination of cost of 6 WTGs which represents inter-divisional transfer and allowability of depreciation on it. 6.1 The chronological events of the case are follows : 1. The assessee filed return of income 30.11.1994 2. The return was scrutiniz....
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....n." While deciding this issue, the Tribunal has taken note of earlier order of the Tribunal dated 30.6.2003 in ITA Nos.1666/Mds/2000, 1017/Mds/2002, 1018/Mds/2002, 1667/Mds/2000, 1238/Mds/2002, 1239/Mds/2002 & 1021/Mds/2002 for the asst. years 1993-94, 1995-96, 1996- 97, 1997-98, 1997-98, 1997-98 & 1997-98 respectively, wherein it was observed in paras 23 & 24 as follows: "23. The next issue is with regard to the amount relating to wind turbine generators (WTG for short) of 68 numbers, which the assessee had shown as sales but required to be reduced from the expenditure because it related to capitalisation of WTG. The WTGs were transferred to the Power Division and accordingly the assessee claimed depreciation on the said WTGs. 24. The assessee apparently purchased 371 WTGs of which 34 numbers were capitalised by it for its own purpose in the Power Unit or Power Division. The assessee showed the transfer of 34 numbers of WTGs from the manufacturing unit to the Power Division Unit as sales in the manufacturing unit. This was an issue that came up for consideration before the Tribunal in the case of the assessee for the assessment year 1997-98. In that year at th....
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....der clearly proved that the assessee could not have produced 209 WTGs and held that only 156 WTGs were actually manufactured by the assessee, out of which only 6 WTGs were internally transferred as against 59 claimed by assessee. The A.O. conducted enquiries with TNEB, Gujarat Energy Development Authority and correlated the details with details of consumption of Iron & Steel, critical parts used for manufacture of WTGs. Based on the enquiries and analysis of details furnished by the assessee, the AO held that the assessee could have manufactured only 156 WTGs during the year. The A.O. also restricted the depreciation on WTG's to 6 WTGs. The view of the Assessing Officer was upheld by CIT(A). The Hon'ble ITAT held that the issue was considered in the earlier years and directed the Assessing Officer to consider allowing depreciation based on the fact that they were commissioned and so certified by the State EBs. The Hon'ble ITAT considered the same issue for A.Y. 95-96 and in its order dated 30.6.003, held that inter-divisional transfers cannot be treated as sales and to that extent the sales figures would have to be reduced correspondingly the expenses of manufacturing divi....
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....ot deviate from them. Hence, the order dated 27.3.06 passed by the AO is erroneous in so far as it is prejudicial to the interests of revenue. I therefore deem it fit to set aside the above order with a direction to the AO to proceed afresh to give effect to the Tribunal's directions contained in its order dated 9.3.05 correctly and strictly in accordance with the directions." 6.5 The assessee went in appeal before the Tribunal in ITA No.1041/Mds/2008 dated 19.6.2009 and the observation of the Tribunal is reproduced in para 4.1 of this order. 6.6 The AO once again passed consequential order dated 29.12.2010, wherein the AO observed as under: " Based on the above evidences and findings the undersigned to reduce the profit element of 6 internally transferred WTGs only from the total income. Further, during this set aside assessment proceedings, in reply to the hearing notice dated 06/08/2009 from Assistant Commissioner of Income Tax, Company Circle IV(4), Chennai the assessee had filed a written submission dated NIL (Copy enclosed as Annexure-IV to this assessment order). Vide this submission the assessee's authorized representative had already submitted....
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....TAT has given the finding is on account of addition made for inflation of purchases. The Hon'ble ITAT commented that the addition for inflation on purchases was made on a very crude way of working for the assessment year 1997- 98. Hence, the Hon'ble ITAT opined that the cost of manufacture comprise of raw material cost, direct or indirect manufacturing expenses, operating expenses both direct and indirect l.e., allocated and other expenses that are allocable to the cost of manufacture. 5.4 "The Assessing Officer instead of going by this proposition, has estimated the operating expenses on on estimate and giving no basis for such derivation. Based on an assumed expenses share, the inflation on purchases has been arrived at which, in our opinion, could not be aI/owed to stand and hence it is deleted". The observations of the Hon'ble ITAT in my opinion, has no bearing on the determination of the cost of WTGs for the assessment year 1994-95. In the original assessment order for the assessment year 1994-95, the Assessing Officer arrived at cost of each WTG basing on the enquiries made with other manufacturers of the same product. Regarding the selling price of each ....
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....4.28) 81.73 The depreciation on account of 6 WTGs internally transferred has to be worked out by the Assessing Officer on the cost which should be capitalized as per Hon'ble ITAT direction. There would be reduction in the depreciation on this account. The Assessing Officer to verify all the facts and work out the cost of the WTGs as per the specific directions given by the Hon'ble ITAT in its order dated 19.6.2009 referring to the order dated 13.12.2003 in the case of the assessee for the assessment year 1997-98. These grounds of appeal are partly allowed." 6.8. The AO passed consequential order to the order of the CIT(Appeals) and he observed vide order dated 20.9.2011 as follows : "The cost of WTG's are being worked out by taking the raw materials as per the Schedule of Profit and loss account, adding the manufacturing expenses and restricting the work in progress. Directions given by Hon'ble ITAT in its order dated 19.6.2009 is also followed. Assessee actually manufactured only 156 WTG's out of which 6 were internally transferred, when the Hon'ble tribunal directed the assessing officer to verify number of WTG's that were actually installed in t....
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....nufactured and then not manufacture and those internally transferred have been elaborated. The selling price per WTG out of 53 internally transferred has been discussed by the Assessing Officer in his order dated 27.3.1997. The Assessing Officer is directed to follow the directions as given in Para 5.5 and 5.6 of the appellate order. These grounds of appeal are allowed." 6.9. The AO vide order dated 18.3.2013, while giving effect to the order of the CIT(Appeals) dated 8.8.2012 apportioned the total cost of manufacturing of Rs. 1,09,46,41,000/- by 209 WTGs. Thus, worked out cost of each WTG at Rs. 52,37,516/-, thereby worked out the cost of 6 WTG at Rs. 3,14,25,096/- and restricted the depreciation at 50% of it (since used for less than 180 days at 1,57,12, 548/-). Against this, the assessee went tin appeal before the CIT(Appeals). The CIT(Appeals) considered the order of the A.O. dated 18.3.2013. 7. From the above facts, there is a clear cut finding by the Tribunal in the order dated 9.3.2005 in ITA No.1403/Mds/98 for the assessment year 94-95 directed the AO, to follow the order of the Tribunal in earlier years i.e. ITA Nos.1666/Mds/2000 & others dated 30.6.2003 ....
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....oving it from the sales account and the transfer has been accounted for cost which is in accordance with the accounting standards. Accordingly, the directors do not make a wrong statement to the shareholders that inter divisional transfer was shown on sale price. The Tribunal required the AO to re-examine the matter. In other words, it was held by the Tribunal that inter-divisional transfer does not result in a sale and the assessee cannot be said to have earned any profit and therefore, directed to reduce the profit and corresponding cost thereon. 7.1 Now, coming to the recomputation of the AO by apportioning total cost of manufacture between 209 WTG, since there is a finding of the Tribunal in earlier orders that the assessee manufactured only 156 WTGs and to arrive at the cost of one WTGs, the total cost of manufacture to be apportioned between 156 WTGs only. Thereafter the Assessing Officer has to arrive at cost of one WTG so as to determine depreciation on inter-divisional transfer. In other words, the AO has to follow the earlier order of the Tribunal dated 13.12.2002 in ITA No.1019/Mds/2002 for the asst. year 1997-98, 1018/Mds/2002 dated 30.6.2003 and 1043/Mds/2008 dated ....
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.... the said Act or any other law which exalts the ratio of those decisions to the status of a binding law nor could the ratio decidendi of those decisions be perpetuated by invoking the doctrine of stare decisis. The doctrine of stare decisis cannot be stretched that far as to make the decision of one High Court a binding precedent for the other. This doctrine is applicable only to different Benches of the same High Court. 12. It is also well-settled that though there is no specific provision making the law declared by the High Court binding on subordinate courts, it is implicit in the power of supervision conferred on a superior Tribunal that the Tribunals subject to its supervision would confirm to the law laid down by it. It is in that view of the matter that the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs (AIR 1962(SC) 1893 (at p. 1905) : "We, therefore, hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and they cannot ignore it........" 13. This position has been very aptly summed up by the Supreme Court in Mahadeolal Kanodia v. Administrator General of West Be....
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....o follow logically from it. Judgments of courts are not to be construed as statutes (see Amar Nath Om Parkash v. State of Punjab (1985) 1 SCC 345). While following precedents, the court should keep in mind the following observations in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai (AIR 1976 SC 1455 ) (at p.1467-68) : "It is trite, going by Anglophonic principles, that a ruling of a superior court is binding law. It is not of scriptural sanctity butis of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decision, exalting the doctrine of precedents into a prison- house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration and not affecting those matters which may lurk in the record. Whatever be the position of a subordinate court's casual observations, generalisations and subsilentio determinations must be judiciously read by courts of coordinate jurisdiction." 16. Decision on a point not necessary for the purpo....
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....ing - not obiter dictum. Obiter, at best, may have some persuasive efficacy. 18. From the foregoing discussion, the following propositions emerge: (a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extend beyond its territorial jurisdiction. (c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court may be summed up as follows : (i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which h....
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....ntence from the order of the Tribunal de hors the context of the question under consideration and construe it to be complete law declared by the Tribunal. A judgment must be read as a whole. Being so, the Assessing Officer cannot sit in judgment over the order of the Tribunal, and he is required to give just effect to the order of the Tribunal. If he has any grievance, he is at liberty to appeal against that order of the Tribunal before higher forum. 20. It is needless to say that the income-tax authorities are required to exercise their powers in accordance with law, as per the power given to them in specific sections. If the powers conferred on a particular authority are exercised by another authority without mandate of law, it would create chaos in the administration of law and hierarchy of administration would mean nothing. Judgment of a higher forum cannot be substituted by the decisions of the lower authorities. Judicial discipline requires that there cannot be any amount of disregard to the superior authority in the hierarchy by the Assessing Officer. When once the Tribunal decides an issue in one way, the only course available to the Assessing Officer is to follow the or....
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....s. Thus, it is the duty of the Assessing Officer to consider the same. 23. It is needless to say that the Tribunal has not rejected the claim of the assessee. Regarding the depreciation, again and again, it was held by the Tribunal that the depreciation has to be recomputed considering that the assessee has manufactured 156 WTGs and remitted back to the file of the AO again and again for reconsideration. If the AO has not properly understood the directions of the Tribunal, he can approach the Tribunal by filing a Misc. Application or if he did not agree with the finding of the Tribunal, he can explore and pursue the remedy available under the law, otherwise, he is duty bound to pass consequential orders in conformity with the finding of the Tribunal cited supra and he has no apprehension or choice to overlook the finding of the Tribunal, which is a higher forum. 24. For this purpose, we place reliance on the judgment of the Andhra Pradesh High Court in the case of State of Andhra Pradesh v. Commercial Tax Officer & Another (169 ITR 564), wherein it was held that : "The Tribunal's functioning within the jurisdiction of a particular High Court in respect of whom th....
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....reated in the original assessment order stands partly upheld by appellate authorities which culminated in the impugned order of the A.O. Further, he relied on the judgment of the Delhi High Court in the case of Girnar Investment Ltd. v. CIT (340 ITR 529), wherein it was considered in detail the decision of the Apex Court in the case of Vikrant Tyres(247 ITR 821)(SC) and held that the same decision is applicable only in a case where assessee fully paid taxes at any point of time and no demand was outstanding against the assessee at any point of time. Further, he submitted that in Super Spinning Mills Ltd. vs. CIT & Anr. (224 ITR 814)[Mad], it was held: "Though addition made by Assessing Officer was deleted by CIT(A), it was restored by the order of ITAT - The effect of the order of Tribunal is that the earlier notice of demand stood revived and became legal, valid and enforceable - in view of sec.3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, the original notice of demand continued to be valid and operative - In the absence of payment of entire demand, interest u/s.220(2) to be levied from the date of original order." In view of t....
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....is mutandis to the proceedings under other direct taxes also. These instructions may be brought to the notice of all the officers working in your charge." 28. After going through the above Circular, clause 2.(ii) becomes applicable only in the event when the original assessment order is varied or set aside by one appellate authority and on further appeal, the original order of the AO is restored either wholly or in part. In the present case, it is shown that the original assessment order was not all restored by the Tribunal in ITA No.1041/Mds/2008 dated 19.6.2009 and the consequential order was passed by the A.O. on 28.12.10 and this is the assessment order passed consequent to the order of the Tribunal. Being so, clause 2 (ii) of the aforesaid Circular is squarely applicable, wherein assessment is cancelled or set aside by an appellate authority becomes final, no interest u/s.220(2) can be charged pursuant to the issue of demand notice. In other words, when the assessment is reframed, interest u/s.220(2) can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to the assessment order. This view is supported by the judgment of the Rajast....
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....dt. 24th Dec.,2006 nor the demand notice dt. 24th Dec.,2006 required the assessee to pay interest after thirty days from the date of service of the original demand notice dt. 28thy Feb.,1997. Since the demand itself was crystallized under the assessment order dt. 24th Dec., 2006 and the assessee under s.220(1) had time to pay that demand upto thirty days of the service of the demand notice dt. 24th Dec., 2006, the argument of the Revenue that the assessee was liable to pay interest under s.220(2), for the period prior to the crystallisation of the demand on 24th Dec.,2006 cannot be sustained. Therefore, in the facts of the present case, the decision of the Tribunal in holding that the assessee is liable to pay interest under s.220(2) from the end of the period mentioned in s.220(1) i.e. thirty days after the service of notice of demand dt. 24th Dec.,2006 till the date on which the amount demanded was paid cannot be faulted." 28.3 The judgment of the jurisdictional High Court relied on by the ld. DR in the case of Super Spinning Mills v. CIT (244 ITR 814) cannot be applied, wherein it was held that though the CIT(Appeals) allowed the appeal, the Tribunal reversed it, as such, the....
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....he condition precedent which could attract s.220(2) was absent. The adjustment made by the Revenue of the amount determined by it as interest by invoking s.220 from the refund that was due to the assessee at that time cannot be regarded as lawful. There was no question of any revival of a demand as the order made by the AO on 16th April, 1980, giving effect to the order in appeal was not required to be altered by reason of any further challenge to the appellate order. That appellate order itself has become final. Sec.3 of the Validation Act, therefore would not help to revive the notice. - Vikrant Tyres Ltd. vs. ITO (2001) 166 CTR (SC) 1(2001) 247 ITR 821 (SC) relied on." 28.6 Further, co-ordinate Bench of the Tribunal in the case of M/s. Precot Meridian Ltd. v. DCIT in ITA Nos.1562 & 1565/Mds/2012 dated 8.5.2013 decided the issue of levy of interest u/s.220(2) of the Act by following the decision of that assessee in ITA No.1870/Mds/2012 dated 20.2.2013, wherein it was held as under : "5. The second ground raised by the assessee in the appeals relates to levy of interest under section 220(2) of the Act. We find that the issue is also adjudicated in assessee's own ca....