High Court Of Punjab & Haryana
CIT vs. Motorola India Ltd.
Sections 260A, 269,
Assessment year 1996-97
M.M. Kumar & Ajay Kumar Mittal, JJ.
IT Appeal Nos. 44 & 45 of 2005
3rd October, 2007
Counsel appeared :
Yogesh Putney, for the Revenue : C.S. Aggarwal with Deepak Chopra, for the Assessee
M.M. KUMAR, J. :
This order shall dispose of IT Appeal Nos. 44 and 45 of 2005 as common questions of law and facts are involved. However, facts are being referred from IT Appeal No. 44 of 2005. The appeal has been filed under s. 260A of the IT Act, 1961 (for brevity, âthe Actâ), against order dt. 29th June, 2004, passed by the Income-tax Appellate Tribunal, Bangalore (for brevity, âthe Tribunalâ), in ITA No. 136/Bang/2000, in respect of asst. yr. 1996-97. It is claimed that the following substantial questions of law would arise for determination of this Court :
“(a) Whether the Tribunal has erred in law in holding that the order of the AO was not prejudicial and erroneous to the interest of the Revenue wherein the relief under s. 80HHC of the IT Act, 1961, was allowed on the total income without adjusting the brought forward loss and unabsorbed depreciation of the earlier years ?
(b) Whether the Tribunal has erred in law in vacating the order under s. 263 of the IT Act, 1961 ?
” Brief facts of the case are that on 29th Nov.,1996 the assessee filed its return of income before the AO-cum-Jt. CIT (Asstt.), Special Range-I, Bangalore, declaring its total income of Rs. 3,50,30,300, in respect of asst. yr. 1996-97 (A-I). Thereafter a revised return was filed on 12th Dec., 1996 in which declared income was the same. The return was processed under s. 143(1)(a) of the Act and after taking up the case for scrutiny a notice under s. 143(2) of the Act was issued. The assessee determined its income after adjusting the brought forward loss and unabsorbed depreciation of earlier years amounting to Rs. 16,76,69,984 as against the current income of Rs. 82,16,36,146. The assessee also claimed deduction under s. 80HHC of the Act out of its income of Rs. 44,52,56,153 earned from export business. On 31st March, 1999, assessment under s. 143(3) of the Act was completed and the AO disallowed exchange loss of Rs. 71,24,140 and assessed the income at Rs. 4,21,54,440. On 30th Dec., 1999, the CIT, Bangalore, passed an order under s. 263 of the Act, and held that relief under s. 80HHC of the Act can be allowed on the profits of current year as reduced by the carried forward business loss and unabsorbed depreciation.
It was further observed that the AO has calculated the deduction under s. 80HHC of the Act before setting off the unabsorbed loss and depreciation of earlier years against the business profit of current year, which resulted in excess relief to the assessee. The order of the AO was found to be erroneous and against the interest of the Revenue. Accordingly, the CIT directed the AO to modify the assessment. On 9th March, 2000, the AO passed fresh order and deduction of Rs. 36,10,68,000 as against Rs. 44,52,56,153, under s. 80HHC of the Act was allowed. The assessee filed appeals before the Tribunal at Bangalore against the order dt. 30th Dec., 1999 passed by the CIT under s. 263 of the Act as well as before the CIT(A) against the order dt. 9th March, 2000 passed by the AO. On 30th May, 2002, the CIT(A) dismissed the appeal of the assessee by observing that the AO has acted in accordance with the directions given by the CIT, Bangalore. Against the order dt. 30th May, 2002, the assessee further filed an appeal before the Tribunal and by a single order dt. 29th June, 2004, the Tribunal has allowed both the appeals of the assessee. According to the assessee it is having eligible units and also several other ineligible units. While computing profits of the eligible unit for the purpose of deductionâworking out relief under s. 80HHC of the Act, it is the eligible unit alone which has to be seen. After having computed profits of the industrial undertaking, deduction under s. 80HHC of the Act has to be computed and thereafter other provisions like set off of unabsorbed depreciation and the carried forward depreciation were to arise based on the principle laid down by the Karnataka High Court in the case of CIT vs. H.M.T. Ltd. (1992) 108 CTR (Kar) 215 : (1993) 199 ITR 235 (Kar), and also the decision of the Bombay High Court in the case of CIT vs. Shirke Construction Equipments Ltd. (2000) 163 CTR (Bom) 580 : (2000) 246 ITR 429 (Bom). In the light of these decisions, the assessee has, inter alia, claimed that order of the AO cannot be considered as erroneous or prejudicial to the interest of Revenue. However, we need not go into merit of the controversy in view of a preliminary objection canvassed by the assessee. Mr. C.S. Aggarwal, learned senior counsel at the outset has raised a preliminary objection concerning maintainability of these appeals and also to territorial jurisdiction of this Court to entertain the instant appeals. Learned counsel has maintained that the assessee respondent was incorporated on 23rd June, 1989 under the Companies Act, 1956 and it was being assessed till the asst. yr. 2001-02 at Bangalore by the Jt. CIT, Special Range-I, Bangalore, who has territorial jurisdiction over the assessee respondent. On facts, he has submitted that the Jt. CIT, Special Range-I, Bangalore, vide order dt. 9th March, 2000, given effect to the order of the CIT, Bangalore, when appeal of the assessee respondent before the Bangalore Bench of the Tribunal was pending. The aforementioned order was not served on the assessee respondent till December, 2001. On receipt of the order, the assessee respondent filed an appeal on 8th Jan., 2002 before the CIT(A)-III, Bangalore, which led to the passing of order dt. 30th May, 2002. In pursuance to Notification No. F. No. 63-Ad (AT)/1997, dt. 16th Sept., 1997, as amended by Notifications bearing Nos. F. No. 63-Ad(AT)/2001, dt. 19th Oct., 2001 and F. No. 63Ad(AT)/2001, dt. 29th May, 2001, the appeals were to be filed at Bangalore, as per the standing order of the President, who has constituted the Benches to hear the appeals under s. 255(1) of the Act. He has emphasised that the crucial factor for determining the territorial jurisdiction of the Tribunal as well as that of the High Court to hear the appeals is the AO and in this case the assessment was made by the Jt. CIT, Special Range-I, Bangalore.
The appeals were disposed of by the Bangalore Bench of the Tribunal on 29th June, 2004 (A-V). He has further submitted that when the arguments were heard by the Tribunal at Bangalore then no objection was raised by the Revenue appellant that the AO of the assessee respondent is at Gurgaon and the Departmental Representative was representing the AO at Gurgaon. Therefore, the plea of the Revenue appellant that the jurisdiction of the assessee stood transferred is without any consequence. In any case, learned counsel has submitted that communication from the AO at Gurgaon vide letter dt. 9th June, 2004, if assumed to be passed under s. 127 of the Act, cannot be construed to mean that it would relate to the asst. yr. 1996-97 because the assessment in respect of that year was framed by the AO at Bangalore. In that regard Mr. Aggarwal has placed reliance on a judgment of this Court in the case of Lt. Col. Paramjit Singh vs. CIT (1996) 135 CTR (P&H) 8 : (1996) 220 ITR 446 (P&H). He has then relied upon on the standing order of the President, Tribunal, dt. 16th Sept., 1997, issued in pursuance of sub-r. (1) of r. 4 of the ITAT Rules, 1963 (for brevity, âthe Rulesâ) and supported his submission by relying upon the judgments of Delhi High Court in the cases of Seth Banarsi Dass Gupta vs. CIT 1978 CTR (Del) 183 : (1978) 113 ITR 817 (Del) and Suresh Desai & Associates vs. CIT (1998) 148 CTR (Del) 345 : (1998) 230 ITR 912 (Del); and a judgment of Patna High Court in the case of CIT vs. Justice S.B. Sinha (1999) 151 CTR (Pat) 300 : (1999) 237 ITR 268 (Pat).
On merit also learned counsel for the assessee respondent has made submissions but in view of the preliminary objection raised, we are not opining on merit and would prefer to first decide the preliminary objection. Mr. Yogesh Putney, learned counsel for the Revenue appellant has submitted that the preliminary objection is devoid of any merit and is liable to be rejected. According to the learned counsel, the assessee respondent had requested for transfer of its area from Bangalore to Gurgaon on 2nd Jan., 2002 on the ground that the registered office of the company has shifted to Gurgaon. According to the learned counsel, applications were again filed on 5th Feb., 2002 and 25th Nov., 2002 and records were accordingly transferred from Bangalore to Gurgaon, vide order dt. 20th May, 2005, under s. 127 of the Act, which specifically stipulate the transfer of jurisdiction of the assessee respondent from Bangalore to the Dy. CIT, Gurgaon Circle, Gurgaon. A copy of the order has been placed on record as mark âAâ. Mr. Putney has placed reliance on the Explanation to s. 127 of the Act to argue that all proceedings under the Act in respect of any order, which may be pending on the date of such order or direction or which may have been completed on or before such date would be covered by the expression âcaseâ as used in s. 120 of the Act. Therefore, the expression âcaseâ in s. 127 of the Act should also be construed in the same manner. Learned counsel has also placed reliance on the definition of expression âHigh Courtâ used in s. 269 of the Act. He has further invited our attention to Note 4 of r. 4 of the standing order under the Rules to argue that jurisdiction of the Bench is required to be determined not by the place of business or residence of the assessee but by the location of the office of the AO, which in the present case would be at Gurgaon after the transfer of the case under s. 127 of the Act. He has emphasised that this Court has jurisdiction over the assessee respondent because its head office is within territorial area of this Court. The argument is that jurisdiction of this Court is not to be determined on the basis of the place of passing of assessment order by the AO but the AO who exercises jurisdiction over the assessee after the transfer of the case.
We have thoughtfully considered the submissions made by the learned counsel for the parties and have also gone through the judgments and notifications on which reliance has been placed. It is undisputed that the returns dt. 29th Nov., 1996 and 12th Dec., 1996 were filed by the assessee respondent at Bangalore and the assessment order dt. 31st March, 1999 was passed by the AO at Bangalore (A-I). Even the revisional order in exercise of jurisdiction under s. 263 of the Act was passed by the CIT at Bangalore. All other orders have been passed by the Revenue officers at Bangalore. Even the appeals before the Tribunal were decided on 29th June, 2004 at Bangalore. According to Note 4 under sub-r. (1) of r. 4 of the Rules, it has been stipulated that ordinary jurisdiction of the Bench is to be determined not by the business or residence of the assessee but by the location of the office of the AO. This statutory guidance is available from the standing order dt. 16th Sept., 1997, passed under sub-r. (1) of r. 4 of the Rules. Moreover, the aforementioned legal position has been laid down by the Delhi High Court in the cases of Seth Banarsi Dass Gupta (supra) and Suresh Desai & Associates (supra). In the case of Suresh Desai & Associates (supra), assessment in respect of asst. yr. 1980-81 was framed by the AO at Bombay, which was in pursuance to a search and seizure action conducted by the Directorate of Enforcement under s. 132 of the Act. The assessee had also filed an appeal before the CIT(A) at Bombay, who had directed the AO to afford the assessee an opportunity of hearing and then again complete the assessment in accordance with law. The Dy. CIT Asst. Bombay then passed an order of assessment. Again an appeal was preferred which was decided by the CIT(A) at Bombay. However, the assessee and the Revenue preferred further appeals before the Delhi Bench of the Tribunal. The assessee filed an application under s. 256(1) of the Act citing few questions and sought reference to the High Court.
The application was dismissed by the Tribunal at Bombay with the observation that no referable question arose out of the order of the Tribunal. Thereafter an application was filed before the High Court of Delhi, under s. 256(2) of the Act and a preliminary objection was raised by the Revenue that the High Court at Delhi did not have jurisdiction and the application could lie only before the High Court at Bombay. Placing reliance on the judgment in the case of Seth Banarsi Dass Gupta (supra), the Division Bench culled out the following reasonings to sustain the preliminary objection : “(i) Sec. 64 which has relevance for determining the jurisdiction of the AO by reference to the place where the assessee carries on business, profession or vacation, has no relevance for determining the jurisdiction of the appellate authority/Tribunal; (ii) In considering the question as to the High Court to which a Bench having jurisdiction over more than one State has to make a reference, the basis adopted for determining the jurisdiction of the Bench of the Tribunal would be more appropriate than the basis adopted for determining the jurisdiction of the ITO; (iii) It would be quite appropriate for the Bench to refer the question of law arising out of its own order in appeal to the High Court of the State from which the appeal had come; (iv) The suggestion that the place of the location of the Bench which heard and determined an appeal may be adopted as the basis for the determination of the jurisdiction of the High Court to which the question of law arising out of the order should be referred cannot be accepted. Reference cannot be made to the High Court of Delhi merely because the Delhi Bench of the Tribunal situated within the territorial jurisdiction of the High Court heard the appeal.”
12. The Division Bench also placed reliance on another Division Bench judgment of Delhi High Court in the case of Birla Cotton, Spinning & Weaving Mills Ltd. vs. CIT (1980) 17 CTR (Del) 177 : (1980) 123 ITR 354 (Del). The Division Bench also held that territorial jurisdiction of the Tribunal extends over several States though each of such State has its own High Court. The decisions of the High Courts are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territory in relation to which it exercises jurisdiction but it does not extend beyond its territorial jurisdiction. In other words, the decision of one High Court is not a binding precedent for another High Court or for Courts or Tribunals outside its territorial jurisdiction. The doctrine of precedents and rule of binding efficacy of law laid down by the High Court within its territorial jurisdiction, the questions of law arising out of decision in a reference, have to be determined by the High Court which exercises territorial jurisdiction over the situs of the AO and if it was otherwise then it would result in serious anomalies as an assessee affected by an assessment order at Bombay may invoke the jurisdiction of Delhi High Court to take advantage of a suitable decision taken by it. Thus, such an assessee may avoid application of inconvenient law laid down by the jurisdictional High Court of Bombay. On the basis of the aforementioned reasoning, the Division Bench sustained the objection that the jurisdiction to entertain the application under subss. (1) and (2) of s. 256 of the Act vested in the High Court of Bombay and not of Delhi. We are in respectful agreement with the aforementioned reasoning of the Delhi High Court. Accordingly, we hold that the preliminary objection raised by learned counsel for the assessee respondent is sustainable.
13. It is true that transfer order under s. 127 of the Act has been passed on 20th May, 2005 but it would not affect the assessment framed by the AO in respect of the asst. yr. 1996-97. The reliance of the Revenue on Explanation to s. 127 of the Act with regard to the meaning of expression âcaseâ is wholly misplaced and is liable to be rejected because s. 120 of the Act does not deal with jurisdiction of the Tribunal or the High Court. It is appropriate to make a reference to ss. 120 and 127 along with Explanation, which thus read : “120. (1) IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. Explanation.âFor the removal of doubts, it is hereby declared that any IT authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the IT authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-s. (1). (2) The directions of the Board under sub-s. (1) may authorise any other IT authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other IT authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-ss. (1) and (2), the Board or other IT authority authorised by it may have regard to any one or more of the following criteria, namely : (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (4) Without prejudice to the provisions of sub-ss. (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,â (a) authorise any Director General or Director to perform such functions of any other IT authority as may be assigned to him by the Board; (b) empower the Director General or Chief CIT or CIT to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the AO by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Addl. CIT or an Addl. Director or a Jt. CIT or a Jt. Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the AO shall be deemed to be references to such Addl. CIT or Addl. Director or Jt. CIT or Jt. Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Dy. CIT shall not apply.
The directions and orders referred to in sub-ss. (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more AOs (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the AOs of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the AO shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in s. 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the IT authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.” “127. (1) The Director General or Chief CIT or CIT may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more AOs subordinate to him (whether with or without concurrent jurisdiction) to any other AO or AOs (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the AO or AOs from whom the case is to be transferred and the AO or AOs to whom the case is to be transferred are not subordinate to the same Director General or Chief CIT or CIT,â (a) where the Directors General or Chief CITs or CITs to whom such AOs are subordinate are in agreement, then the Director General or Chief CIT or CIT from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief CITs or CITs aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-s. (1) or sub-s. (2) shall be deemed to require any such opportunity to be given where the transfer is from any AO or AOs (whether with or without concurrent jurisdiction) to any other AO or AOs (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-s. (1) or sub-s. (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the AO or AOs from whom the case is transferred. Explanation.âIn s. 120 and this section, the word âcaseâ, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.”
A conjoint reading of the aforementioned provisions makes it evident that the Director General or Chief CIT or CIT is empowered to transfer any case from one or more AOs subordinate to him to any other AO. It also deals with the procedure when the case is transferred from one AO subordinate to a Director General or Chief CIT or CIT to an AO who is not subordinate to the same Director General, Chief CIT or CIT. The aforementioned situation and the definition of expression âcaseâ in relation to jurisdiction of an AO is quite understandable but it has got nothing to do with the territorial jurisdiction of the Tribunal or High Courts merely because s. 127 of the Act dealing with transfer has been incorporated in the same chapter. Therefore, the argument raised is completely devoid of substance and we have no hesitation to reject the same. In view of the above, the appeal is dismissed by sustaining the preliminary objection that this Court has no territorial jurisdiction over an order passed by the AO at Bangalore. Accordingly, these appeals are returned to the Revenue appellant for their filing before the competent Court of jurisdiction in accordance with law.
[Citation : 326 ITR 156]