Wtax/394/2016 Of Canara Bank v. Commissioner Of Income Tax Appeals And 2 Ors

Court No. - 7 Case :- WRIT TAX No. - 394 of 2016 Petitioner :- Canara Bank Respondent :- Commissioner Of Income Tax (Appeals) And 2 Ors.Counsel for Petitioner :- Abhinav MehrotraCounsel for Respondent :- S.C.,Manish Goyal (I.T.) Hon'ble Saumitra Dayal Singh,J. 1. Heard Sri Abhinav Mehrotra, learned counsel for the petitioner-Bank; Sri Manish Goyal, Sri Gaurav Mahajan, Sri Praveen Kumar, SriKrishna Agarwal & Sri Shubham Agarwal, learned counsel for therespondent-revenue. 2. The present and the connected matters have been filed by thedifferent Banks against similar orders passed by the Commissioner ofIncome Tax (Appeals)-1, NOIDA under Section 154/250 of the IncomeTax Act, 1961 (hereinafter referred to as the Act), dated 30.11.2015.For the sake of convenience, the present writ petition is being decidedas the lead case. Challenge raised is to the jurisdiction of theCommissioner of Income Tax (Appeals)-1, NOIDA to pass any orderunder section 150/254 of the Act, in view of the order dated 02.12.2013(order sought to be rectified) having merged in the order in the order ofthe Income Tax Appellate Tribunal dated 07.08.2015. 3. Admittedly, the petitioner in the normal course of its business asa banker had received deposits from the New Okhla IndustrialDevelopment Authority (NOIDA in short), for different terms atfixed/contracted rates of interest to be paid by the Bank. The interestthat thus became due was also paid by the Bank to the NOIDA. Onthese interest payments made by the petitioner did not make any tax-deduction-at source (T.D.S. in short). The revenue claims suchdeduction should have been made before making payments of interest,to NOIDA. Such obligation is stated to have arisen by virtue of Section194A of the Act. The petitioner bank on its part claimed to be exemptfrom that liability by virtue of Section 194 A(3)(iii)(f) of the Act, it havingmade payments to NOIDA, perceived to be an authority established under an enactment of the State of U.P. 4. The petitioner's assessing authority differed in its understandingof the law and by order dated 28.02.2013 he passed an order underSection 201(1)/201(1A) read with Section 194A of the Act and declaredthe petitioner an assessee-in-default under the Act on account of non-deduction of T.D.S. on interest payments made to NOIDA. Accordinglya demand was raised on the petitioner. 5. The petitioner-bank carried the matter in appeal before theCIT(Appeals), NOIDA who by his order dated 02.12.2013 set aside theorder treating the petitioner bank to be an assessee-in-default. Arisingfrom that order the revenue appears to have availed two remedies, byfiling appeal before Income Tax Appellate Tribunal, which appeal cameto be dismissed by order dated 07.08.2015, and also another remedyin the shape of rectification application under Section 154 of the Act. Itwas allowed by the Commissioner of Income Tax (Appeals), NOIDA byorder dated 30.11.2015, more than three months after the originalorder dated 02.12.2013 came to be upheld by the Tribunal, by its orderdated 07.08.2015. 6. It has also come on record that subsequently, the further appealfiled by the revenue against the order of the Income Tax AppellateTribunal dated 07.08.2015 came to be dismissed by this Court videorder dated 04.04.2016 passed in Income Tax Appeal No.64 of 2016.That judgment itself became subject matter of appeal before theSupreme Court in Civil Appeal No.6020 of 2018 which appeal was alsodismissed by the Supreme Court by judgment dated02.07.2018. 6. It has also come on record that subsequently, the further appealfiled by the revenue against the order of the Income Tax AppellateTribunal dated 07.08.2015 came to be dismissed by this Court videorder dated 04.04.2016 passed in Income Tax Appeal No.64 of 2016.That judgment itself became subject matter of appeal before theSupreme Court in Civil Appeal No.6020 of 2018 which appeal was alsodismissed by the Supreme Court by judgment dated02.07.2018. 7. In the aforesaid factual background, learned counsel for thepetitioner has submitted that in the first place, the issue whetherNOIDA is a corporation formed by a State enactment (which is a pre-condition for claiming exemption under section 194A(3)(iii)(f) of theAct), was considered by the CIT(Appeals) where after he had reacheda conclusion that NOIDA was a corporation entitled to the benefit ofSection 194A(3)(iii)(f) of the Act since it was incorporated under a notification no. 50348 dated 22.02.1979 issued by the CentralGovernment. In any case, it has been submitted that the issue waselaborately further thrashed out at all forums starting from the Tribunalas also before this court and subsequently before the Supreme Court.In such facts, once the order of the CIT(Appeals) had merged in theorder of the Tribunal on 07.08.2015, the rectification order has tonecessarily fall on merits. 8.Second, even if the subsequent order passed by this Court andthe Supreme Court are ignored, still, upon merger of the order of theCIT(Appeals) dated 02.12.2013 in the order of the Tribunal on07.08.2015, it was no longer open to the CIT(Appeals) to revisit orreconsider his earlier order dated 02.12.2013 so as to reach differentconclusion on the issue dealt with by the Tribunal. 9.Third, it has been submitted, in any case, the issue itself beingdebatable, that had been dealt with and decided in the Original Orderdated 02.12.2013, even if it were to be assumed that some power ofrectification survived on the CIT(Appeals), it would still fall outside thescope of jurisdiction of the CIT(Appeals) to make any alteration in theorder dated 02.12.2013 being a wholly debatable issue. Reliance hasbeen placed on the decision of the Supreme Court in the case of T.S.Balram, Income Tax Officer, Company Circle IV, Bombay Vs.Volkart Brothers, Bombay reported in 1971 82 ITR 50 (SC). 10.Responding to the above submissions, Sri Manish Goyal wouldconcede though as on date, the order of the CIT(Appeals) dated02.12.2013 stands merged not only in the order passed by the IncomeTax Appellate Tribunal but as on date, it stands merged in the finaljudgment of the Supreme Court dated 02.08.2018. However, in thoseorders an important aspect of the matter had escaped consideration.Placing reliance on the language of Section 194A(3)(iii) Clauses (a) to(f) it has been submitted, the principle of ejusedem generis had to beapplied to interpret the words 'such other Institution' (which the CentralGovernment may notify in this behalf), appearing in section 194A(3)(iii) of the Act. According to him Clause (f) cannot be read in isolation todetermine the eligibility of exemption for the applicability of T.D.S.provisions. The exemption has been made available to specific entitiesdescribed in Clause (a) to (f) of clause (iii) of sub-section 3 of section194A of the Act. He thus submits the NOIDA is neither a Tribunal thatmay fall within description of a banking company nor a financialcompany nor the Unit Trust of India nor any entity carrying business ofbanking. Also, no specific reason emerges from the relevant notificationissued by the Central Government being No.3489 dated 02.04.2017 asmay warrant inclusion of NOIDA as an entity having special statusentailing the benefit of exemption under Section 194A(3)(iii) of the Actto it. He therefore submits, the bar created under section 154 does notapply and the decision of the Supreme Court is not binding on therevenue. 11. On the question of debatable issue being involved, Sri ManishGoyal would submit that once the NOIDA is not shown to be coveredunder the clear language of the exemption clause, it was no longer adebatable issue and the CIT(Appeals) had the jurisdiction to decide therectification application on merits. 12. Having heard learned counsel for the parties and having perusedthe record, in the first place, without adverting to the issue on merits, itis seen that by the order dated 02.12.2013, the CIT (Appeals) hadupon consideration of the case set up by the present petitioner passedan order to the effect that NOIDA was eligible to the benefit of Section194A(3)(iii)(f) of the Act. Accordingly, he opined that the petitioner-Bankwas entitled in law not to make deduction of TDS on interest paymentmade to NOIDA. That issue was specifically carried in appeal by therevenue to the Tribunal who by its order dated 07.08.2015, held asbelow : “Adverting to the facts of the instant case, we find that theassessee is a statutory corporation established by means ofthe U.P. Industrial Area Development Act, 1976. It has beennoticed above from the preamble of this Act that it has beenmade for development of certain areas in the State intoassessee is a statutory corporation established by means ofthe U.P. Industrial Area Development Act, 1976. It has beennoticed above from the preamble of this Act that it has beenmade for development of certain areas in the State into industrial and urban township. Instead of enacting area-wiseIndustrial Area Development Acts, the U.P. Governmentenacted a common U.P. Industrial Area Development Act, 1976to cover Authorities under different areas with its distinct name.But, for the creation of various area-wise authorities such asNOIDA and Ghaziabad Authorities, there is no other purpose ofthe U.P. Industrial Area Development Act, 1976. In otherwords, we can also say that this Act is nothing but aculmination of several area-wise Industrial Area DevelopmentActs. Since NOIDA has been notified under the U.P. IndustrialArea Development Act, we are of the considered opinion thatthe expression 'any corporation established by a State Act'shall include NOIDA (New Okhla Industrial DevelopmentAuthority) in the given circumstances. We find that identical issue involving payment of interest bysome banks to Ghaziabad Development Authority without taxwithholding came up for consideration before the Delhi Benchof the Tribunal in the case of Chief/Senior Manager, OrientalBank of Commerce Vs. ITO. Vide its order dated 15.07.2011 inITA No.2228/Del/2011, the Tribunal has held that the paymentof interest by Oriental Bank of Commerce to GhaziabadDevelopment Authority is covered within the provisions ofSection 194A(3)(iii)(f) and, hence, there is no obligation fordeduction of tax at source. Consequently, the order passed u/s201(1) was set aside. Similar view has been taken by theAmritsar Bench of the Tribunal in the case of ITO (TDS) Vs.Branch Manager Jammu & Kashmir Bank Ltd. Vide its orderdated 24.04.2012 in ITA No.206 to 210/Asr/2011, the Tribunalhas held that payment of interest by the bank to JammuDevelopment Authority (Jammu) is exempt u/s 194A(3)(iii)(f)and, hence, there can be no liability u/s 201(1A) on the bankand resultantly, the bank cannot be treated as an assessee indefault u/s 201(1) and 201(1A). Likewise view has been takenby the Amritsar Bench of the Tribunal in ITO Vs. the BranchManager, Jammu, Jammu & Kashmir Bank Ltd., by its orderdated 02.07.2012, a copy of which has also been placed onrecord. All these precedents support the proposition that thepayment of interest by banks to the State IndustrialDevelopment Authorities does not require any deduction of taxat source in terms of Section 194A(3)(iii)(f) and, hence, thefailure to deduct tax at source on such interest cannot lead tothe banks being treated as assessee in default. No materialhas been placed on record to demonstrate that all/any of theabove orders have either been reversed or modified in anymanner by the Hon'ble High Courts. Further, the learned DRfailed to point out any contrary decision. In view of the legalposition discussed supra and these precedents, we are of theconsidered opinion that the learned CIT(A) was justified inreversing the order passed by the Addl. CIT(TDS), Ghaziabaddeclaring the assessee liable u/s 201(1) and 201(1A) of theAct. We, therefore, uphold the impugned order. ” That being the finding of the Tribunal it has to be accepted that the order of the CIT (Appeals) stood merged in the order of the IncomeTax Appellate Tribunal, Delhi dated 07.08.2015. Further merger of thatorder in the subsequent orders of the High Court and the SupremeCourt apart, their did not remain or survive any jurisdiction with theCommissioner to seek any rectification or correction in his order dated02.12.2013 on an issue specifically examined by the Tribunal. Clearly,that exercise undertaken and completed (on 30.11.2015), after theorder of the Tribunal dated 07.08.2015 had come into existence, waswithout jurisdiction. In Kunhayammed v. State of Kerala, (2000) 6SCC 359, the Supreme Court reasoned as under: “12. The logic underlying the doctrine of merger is that therecannot be more than one decree or operative orders governingthe same subject-matter at a given point of time. When adecree or order passed by an inferior court, tribunal or authoritywas subjected to a remedy available under the law before asuperior forum then, though the decree or order underchallenge continues to be effective and binding, neverthelessits finality is put in jeopardy. Once the superior court hasdisposed of the lis before it either way — whether the decree ororder under appeal is set aside or modified or simplyconfirmed, it is the decree or order of the superior court,tribunal or authority which is the final, binding and operativedecree or order wherein merges the decree or order passed bythe court, tribunal or the authority below. However, the doctrineis not of universal or unlimited application. The nature ofjurisdiction exercised by the superior forum and the content orsubject-matter of challenge laid or which could have been laidshall have to be kept in view.” 14.It then held - 14.It then held - “44. To sum up, our conclusions are: (i) Where an appeal or revision is provided against an orderpassed by a court, tribunal or any other authority beforesuperior forum and such superior forum modifies, reverses oraffirms the decision put in issue before it, the decision by thesubordinate forum merges in the decision by the superior forumand it is the latter which subsists, remains operative and iscapable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitutionis divisible into two stages. The first stage is upto the disposalof prayer for special leave to file an appeal. The second stagecommences if and when the leave to appeal is granted and thespecial leave petition is converted into an appeal. (iii) The doctrine of merger is not a doctrine of universal orunlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall bedeterminative of the applicability of merger. The superiorjurisdiction should be capable of reversing, modifying oraffirming the order put in issue before it. Under Article 136 ofthe Constitution the Supreme Court may reverse, modify oraffirm the judgment-decree or order appealed against whileexercising its appellate jurisdiction and not while exercising thediscretionary jurisdiction disposing of petition for special leaveto appeal. The doctrine of merger can therefore be applied tothe former and not to the latter. (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does notattract the doctrine of merger. An order refusing special leaveto appeal does not stand substituted in place of the order underchallenge. All that it means is that the Court was not inclined toexercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i.e.,gives reasons for refusing the grant of leave, then the order hastwo implications. Firstly, the statement of law contained in theorder is a declaration of law by the Supreme Court within themeaning of Article 141 of the Constitution. Secondly, other thanthe declaration of law, whatever is stated in the order are thefindings recorded by the Supreme Court which would bind theparties thereto and also the court, tribunal or authority in anyproceedings subsequent thereto by way of judicial discipline,the Supreme Court being the Apex Court of the country. But,this does not amount to saying that the order of the court,tribunal or authority below has stood merged in the order of theSupreme Court rejecting the special leave petition or that theorder of the Supreme Court is the only order binding as resjudicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellatejurisdiction of Supreme Court has been invoked the orderpassed in appeal would attract the doctrine of merger; the ordermay be of reversal, modification or merely affirmation. (vii) On an appeal having been preferred or a petition seekingleave to appeal having been converted into an appealbefore the Supreme Court the jurisdiction of High Court toentertain a review petition is lost thereafter as provided by sub-rule (1) of Rule 1 of Order 47 CPC.” 15.Therefore, applying that principle, on 30.11.2015, there did notexist any order of the CIT(Appeals) dated 20.12.2013 as may havebeen open to rectification proceedings. That order having merged inthe order of the Tribunal dated 7.08.2015, rectification application if anyor other statutory remedy of appeal could have been invoked andpursued only with reference to the order of the Tribunal dated 7.8.2015and no other. 16.Also, it may be noted, in Union of India v. Kamlakshi FinanceCorporation Ltd., 1992 Supp (1) SCC 648, the Supreme Court held : “6. ............................. 15.Therefore, applying that principle, on 30.11.2015, there did notexist any order of the CIT(Appeals) dated 20.12.2013 as may havebeen open to rectification proceedings. That order having merged inthe order of the Tribunal dated 7.08.2015, rectification application if anyor other statutory remedy of appeal could have been invoked andpursued only with reference to the order of the Tribunal dated 7.8.2015and no other. 16.Also, it may be noted, in Union of India v. Kamlakshi FinanceCorporation Ltd., 1992 Supp (1) SCC 648, the Supreme Court held : “6. ............................. ..................................It cannot be too vehemently emphasisedthat it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by thedecisions of the appellate authorities. The order of theAppellate Collector is binding on the Assistant Collectorsworking within his jurisdiction and the order of the Tribunal isbinding upon the Assistant Collectors and the AppellateCollectors who function under the jurisdiction of the Tribunal.The principles of judicial discipline require that the orders of thehigher appellate authorities should be followed unreservedly bythe subordinate authorities. The mere fact that the order of theappellate authority is not “acceptable” to the department — initself an objectionable phrase — and is the subject-matter of anappeal can furnish no ground for not following it unless itsoperation has been suspended by a competent court. If thishealthy rule is not followed, the result will only be undueharassment to assessees and chaos in administration of taxlaws". 17.Almost by way of corollary or perhaps an exception section 154(1-A) of the Act reads as under: “Section 154. Rectification of mistake ........ (1-A) Where any matter has been considered and decided inany proceeding by way of appeal or revision relating to anorder referred to in sub-section (1), the authority passing suchorder may, notwithstanding anything contained in any law forthe time being in force, amend the order under that sub-sectionin relation to any matter other than the matter which has beenso considered and decided.” 18.As noted above, the Tribunal having dealt with the issue ofinterest income of NOIDA being eligible to exemption under section194A(3)(iii)(f) of the Act, the provision of section 154(1-A) of the Actalso did not come into play, to any extent. 19.Even on merits, as on date, the matter had been carried to theSupreme Court, by the revenue, and the Supreme Court had also heldthe interest income of NOIDA to be eligible to exemption under Section194A(3)(iii)(f) of the Act. No contrary decision is permissible to bereached by any revenue authority, on any reasoning. The revenue authorities are solemnly obliged to efficiently and promptly apply thatlaw without offering the least resistance to the decision reached by theSupreme Court. That being the necessary and unavoidable obligation. 20. As to the second aspect, whether even otherwise such an issuemay have been permitted to be raised by way of rectification, it is seeneven if the submissions advanced by Shri Goyal could be examined toany extent so as to draw a point of distinction in the decision of theSupreme Court, even then, certainly a wholly new and debatable issuewould be involved in such a scenario. One opinion having been formedby the CIT(Appeals) in his order dated 02.12.2013, it no longerremained open to him to engage in a fresh exercise to determinewhether another opinion could be formed on the same issue. Theposition in law is fairly settled in view of the decision of the SupremeCourt in the case of T.S. Balram, Income Tax Officer, CompanyCircle IV, Bombay Vs. Volkart Brothers, Bombay (supra). 20. As to the second aspect, whether even otherwise such an issuemay have been permitted to be raised by way of rectification, it is seeneven if the submissions advanced by Shri Goyal could be examined toany extent so as to draw a point of distinction in the decision of theSupreme Court, even then, certainly a wholly new and debatable issuewould be involved in such a scenario. One opinion having been formedby the CIT(Appeals) in his order dated 02.12.2013, it no longerremained open to him to engage in a fresh exercise to determinewhether another opinion could be formed on the same issue. Theposition in law is fairly settled in view of the decision of the SupremeCourt in the case of T.S. Balram, Income Tax Officer, CompanyCircle IV, Bombay Vs. Volkart Brothers, Bombay (supra). 21.Even if any point of debate may ever arise, then in absence ofany legislative action preceding, the forum for that debate, wouldremain only before the highest Court of the land and before no otherauthority, Tribunal or Court. 22. Therefore, the CIT(Appeals) wholly lacked in jurisdiction to passthe impugned order. . 23.The order dated 30.11.2015 is quashed. The writ petition isallowed. No order as to costs. Order Date :- 3.12.2018Abhilash