Aban Offshore Ltd., CHENNAI v. DCIT, CHENNAI

MA 67/CHNY/2017 | 2010-2011
Pronouncement Date: 29-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 6721724 RSA 2017
Assessee PAN AAACA3012H
Bench Chennai
Appeal Number MA 67/CHNY/2017
Duration Of Justice 8 month(s) 22 day(s)
Appellant Aban Offshore Ltd., CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Miscellaneous Application
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 29-11-2017
Date Of Final Hearing 16-06-2017
Next Hearing Date 16-06-2017
First Hearing Date 16-06-2017
Assessment Year 2010-2011
Appeal Filed On 08-03-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI ! ' ! # . $ % &' BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY JUDICIAL MEMBER M.P.NOS.67 & 68/MDS./2017 (ITA NOS.585 & 267/MDS./2016 A.YS: 2010-11 & 2011-12 ) M/S. ABAN OFFSHORE LTD. 113 JANPRIYA CREST PAANTHEON ROAD EGMORE CHENNAI 600 008. PAN AAACA3012H ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-1(1) CHENNAI. RESPONDENT) / APPELLANT BY : SHRI P. MURALI MOHANA RAO CA /RESPONDENT BY : SHRI AR. V.SREENIVASAN JCIT DR / DATE OF HEARING : 01 - 09 - 2017 / DATE OF PRONOUNCEMENT : 29 - 1 1 - 2017 ( / O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THESE TWO MISCELLANEOUS PETITIONS ARE FILED BY TH E ASSESSEE SEEKING RECTIFICATION IN THE COMMON ORDER OF THE TR IBUNAL IN ITA NOS. 585 & 267/MDS./2016 FOR THE ASSESSMENT YEARS 2010-1 1 & 2011-12 DATED 14.09.2016. M.P NOS.67 & 68/MDS./17/ :- 2 -: 2. THE LD.A.R SUBMITTED THAT FOR THE ASSESSMENT YE ARS 2010-11 & 2011-12 THE ASSESSEE INTER ALIA CAME IN APPEAL BE FORE THIS TRIBUNAL CHALLENGING THE SUSTAINING THE ADDITION OF ` 57 46 43 700/- AND ` 328 65 69 654/- FOR THESE ASSESSMENT YEARS RESPECTI VELY BY THE LD.CIT(A). THE TRIBUNAL SET ASIDE THIS ISSUE TO TH E FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDERATION BY GIVING FINDINGS IN PARA NOS. 29 TO 31.08 AS FOLLOWS:- 29. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE QUESTION INVOLVED IN THIS CASE IS O NLY ABOUT THE ALLOWABILITY OF THE INTEREST ON BORROWED FUNDS AND HENCE WE ARE DEALING ONLY WITH THAT QUESTION. IN THIS CONNECTI ON WE REFER TO S. 36(1)(III) OF THE IT ACT 1961 WHICH STATES THAT 'THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FO R THE PURPOSES OF THE BUSINESS OR PROFESSION' HAS TO BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME-TAX UNDER S. 28 OF THE ACT. 29.1 IN OUR CONSIDERED OPINION THE EXPRESSION ' FOR THE PURPOSE OF BUSINESS' OCCURRING UNDER THE PROVISION IS WIDER IN SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNING INCOME PROFITS OR GAINS'. 29.2 IN OUR OPINION THE LOWER AUTHORITIES HAV E APPROACHED THE MATTER FROM AN ERRONEOUS ANGLE. IN THE PRESENT CASE THE ASSESSEE BORROWED THE FUND FROM THE BANK AND LENT I T TO ITS SISTER-CONCERN WHICH IS A WHOLLY OWNED SUBSIDIARY M/S. ABAN OFFSHORE PTE. LTD. AS INTEREST-FREE LOAN LATER CON VERTED INTO SHARE CAPITAL. THE TEST IN OUR OPINION IN SUCH A CASE I S REALLY WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY . M.P NOS.67 & 68/MDS./17/ :- 3 -: 29.3 IN OUR OPINION THE DECISIONS RELATING TO S. 37 OF THE ACT WILL ALSO BE APPLICABLE TO S. 36(1)(III) BECAUSE IN S. 37 ALSO THE EXPRESSION USED IS 'FOR THE PURPOSE OF BUSINESS'. I T HAS BEEN CONSISTENTLY HELD IN DECISIONS RELATING TO S. 37 TH AT THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY AND IT IS IMMAT ERIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. 29.4 IN OUR CONSIDERED OPINION IN ORDER TO C LAIM A DEDUCTION IT IS ENOUGH TO SHOW THAT THE MONEY IS EXPENDED NO T OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE B ENEFIT BUT VOLUNTARILY AND ON GROUNDS OF COMMERCIAL EXPEDIENCY AND IN ORDER TO INDIRECTLY FACILITATE THE CARRYING ON THE BUSINESS. THE ABOVE TEST HAS BEEN APPROVED BY THE SUPREME COURT IN SEVERAL DECISIONS E.G. EASTERN INVESTMENTS LTD. VS. CIT (19 51) 20 ITR 1 (SC) CIT VS. CHANDULAL KESHAVLAL & CO. (1960) 38 I TR 601 (SC) SA BUILDERS LTD. V. CIT (SUPRA) ETC. 29.5 IN OUR OPINION THE LOWER AUTHORITIES SHOULD HAVE APPROACHED THE QUESTION OF ALLOWABILITY OF INTEREST ON THE BORROWED FUNDS FROM THE ABOVE ANGLE. IN OTHER WORD S THE LOWER AUTHORITIES SHOULD HAVE ENQUIRED AS TO WHETHER THE INTEREST-FREE LOAN WAS GIVEN TO THE SISTER COMPANY WHICH IS A WHO LLY OWNED SUBSIDIARY OF THE ASSESSEE AS A MEASURE OF COMMERCI AL EXPEDIENCY AND IF IT WAS IT SHOULD HAVE BEEN ALLO WED. 29.6 THE EXPRESSION 'COMMERCIAL EXPEDIENCY' IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A P RUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATI ON BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS IN CURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. M.P NOS.67 & 68/MDS./17/ :- 4 -: 29.7 THUS THE RATIO OF MADHAV PRASAD JATIAS CASE (118 ITR 200) (SC) IS THAT THE BORROWED FUND ADVANCED TO A T HIRD PARTY SHOULD BE FOR COMMERCIAL EXPEDIENCY IF IT IS SOUGHT TO BE ALLOWED UNDER S. 36(1)(III) OF THE ACT. 29.8 IN THE PRESENT CASE THE LOWER AUTHORITIES H AVE NOT EXAMINED WHETHER THE AMOUNT ADVANCED TO THE SISTER- CONCERN WAS BY WAY OF COMMERCIAL EXPEDIENCY. IT HAS BEEN R EPEATEDLY HELD BY SUPREME COURT THAT THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' IS WIDER IN SCOPE THAN THE EXPRESSION 'FO R THE PURPOSE OF EARNING PROFITS' VIDE CIT VS. MALAYALAM PLANTATI ONS LTD. (1964) 53 ITR 140 (SC) CIT VS. BIRLA COTTON SPINNING & WE AVING MILLS LTD. (1971) 82 ITR 166 (SC) ETC. 29.9 THE LOWER AUTHORITIES SHOULD HAVE EXAMINE D THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY TO ITS SI STER-CONCERN AND WHAT THE SISTER-CONCERN DID WITH THIS MONEY IN ORDER TO DECIDE WHETHER IT WAS FOR COMMERCIAL EXPEDIENCY BU T THAT HAS NOT BEEN DONE. 29.10 IT IS TRUE THAT THE BORROWED AMOUNT IN QU ESTION WAS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT H AD BEEN ADVANCED AS INTEREST-FREE LOAN TO ITS SISTER-CONCER N AND LATER CONVERTED INTO SHARE CAPITAL. HOWEVER IN OUR OPIN ION THAT FACT IS NOT REALLY RELEVANT. WHAT IS RELEVANT IS WHETHER TH E ASSESSEE ADVANCED SUCH AMOUNT TO ITS SISTER-CONCERN AS A MEA SURE OF COMMERCIAL EXPEDIENCY. 30. THE DELHI HIGH COURT IN CIT VS. DALMIA CEME NT (BHARAT) LTD. 254 ITR 377 (DEL) IS APPLICABLE TO THE FACTS O F THE PRESENT CASE WHEREIN IT WAS HELD THAT ONCE IT IS ESTABLISH ED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE O F THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINES S OF THE M.P NOS.67 & 68/MDS./17/ :- 5 -: ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CL AIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITI ON OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMS TANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE ITS PROFIT. THE LOWER AUTHORITIES MUST PUT THEMSELVES IN THE SH OES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD AC T. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEWPOINT BUT THAT OF A PRUDENT BUSINESSMAN. AS ALREADY STATE D ABOVE WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER- CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDI ENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVAN CED FOR EARNING PROFITS. FURTHER IT IS ALSO TO BE NOTED T HAT THE INCOME EARNED BY THE ASSESSEE FROM FOREIGN SUBSIDIARY IS T AXED IN INDIA WHICH IS EVIDENT FROM THE INCOME OFFERED BY THE ASS ESSEE IN ITS RETURN OF INCOME. IN SUCH CIRCUMSTANCES IT IS NOT POSSIBLE TO US TO CONFIRM THE DISALLOWANCE OF INTEREST OF H 57 46 43 700/ - U/S.36(1)(III) OF THE ACT. 30.1 THE LD. DR RELIED ON THE JUDGMENT OF THE M ADRAS HIGH COURT IN THE CASE OF TRISHUL INVESTMENTS LTD. 305 I TR 434 WHEREIN IT WAS HELD THAT THE INTEREST ON CAPITAL BO RROWED FOR INVESTMENT IN SHARES TO BE ADDED TO THE COST OF ACQ UISITION OF SHARES. AS THE ASSESSEE HAS UNDERTAKEN THE ACTIVIT Y OF INVESTMENT IN SHARES THE SHARES ARE CAPITAL ASSET S. 31. WE FIND THAT THE RELIANCE PLACED ON BY THE LD. DR ON THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF TRISHU L INVESTMENTS (SUPRA) IS MISPLACED. THE MAIN CONTE NTION OF THE LD. DR IS THAT THE INTEREST EXPENDITURE ON BORROWIN GS USED FOR INVESTMENT IN WHOLLY OWNED SUBSIDIARY CANNOT BE ALL OWED AS DEDUCTION U/S.36(1)(III) OF THE ACT INSTEAD IT SHOU LD BE ADDED TO M.P NOS.67 & 68/MDS./17/ :- 6 -: THE COST OF INVESTMENT IN VIEW OF THE ABOVE JUDGME NT OF THE MADRAS HIGH COURT. IN OUR OPINION WHEN ACTIVITY IS UNDERTAKEN AS AN INVESTMENT ACTIVITY AND INTEREST INCURRED UP TO THE ACQUISITION OF THE SHARES OF SUBSIDIARY COMPANY COU LD BE CONSIDERED AS PART OF INVESTMENT. ONCE IT IS ACQUI RED THEN IT WILL BE A REVENUE EXPENDITURE. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE WHOLLY OWNED SUBSIDIARY COMPANY HAS A LREADY ACQUIRED SHARES AND IT IS FUNCTIONING. 31.2 IN THIS CASE THE ASSESSEE CLAIMED THE INTE REST INCURRED ON LOAN WHICH WAS USED FOR THE PURPOSE OF PURCHASE OF SHARES AS REVENUE EXPENDITURE BUT IT WAS NOT CAPITALIZED AS PART OF THE INVESTMENT IN SHARES. THE CONTENTION OF THE DR WAS THAT IT IS TO BE ADDED TO THE COST OF THE INVESTMENT SO AS TO INC REASE THE VALUE OF THE CAPITAL ASSET. 31.3 IN THE PRESENT CASE THERE IS NO DISPUTE T HAT THE ASSESSEE HAS BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT IN SHARES AND THEREAFTER THE ASSESSEE HAS INCURRED INTEREST ON IT . IN OUR OPINION THE INTEREST IS TO BE CONSIDERED AS PART OF THE COS T OF INVESTMENT TILL DATE OF ACQUISITION AND INTEREST PAID BY THE A SSESSEE COMMENCING FROM THE DATE OF ACQUISITION OF SHARES T ILL THE DATE OF SALE WOULD NOT FORM PART OF THE COST OF ACQUISITION . 31.4 FURTHER IT IS A SETTLED LEGAL POSITION TH AT INCOME OF AN ASSESSEE HAS TO BE COMPUTED UNDER VARIOUS HEADS SPE CIFIED UNDER SECTION 14 OF THE ACT. THEREFORE THE DEDUCTI ONS ARE TO BE ALLOWED IN COMPUTING THE INCOME UNDER VARIOUS HEADS ONLY TO THE EXTENT IT IS PROVIDED BY THE LEGISLATURE UNDER THAT VERY HEADS. THE COMPUTATION OF CAPITAL GAIN IS PROVIDED IN SECT ION 48 OF THE ACT. ACCORDING TO THIS SECTION THE ONLY DEDUCTIONS WHICH ARE ALLOWABLE ARE - (1) THE COST OF ACQUISITION OF THE ASSET (2) THE M.P NOS.67 & 68/MDS./17/ :- 7 -: COST OF ANY IMPROVEMENT THERETO AND (3) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANS FER OF THE ASSET. THE COST OF ACQUISITION IN OUR OPINION MEA NS THE AMOUNT PAID FOR ACQUIRING THE ASSET. ONCE THE ASSET IS ACQ UIRED THEN ANY EXPENDITURE INCURRED THEREAFTER CANNOT BE CONSIDERE D AS THE COST OF ACQUISITION SINCE SUCH EXPENDITURE WOULD NOT HA VE ANY NEXUS WITH THE ACQUISITION OF THE ASSET. WHEREVER THE LEG ISLATURE INTENDED TO ALLOW SUCH EXPENDITURE AS DEDUCTION IT HAD SPECIFICALLY PROVIDED SO UNDER VARIOUS HEADS. FOR E XAMPLE IN COMPUTING THE INCOME FROM HOUSE PROPERTY THE ASSES SEE IS ALLOWED DEDUCTION UNDER SECTION 24 OF THE ACT ON AC COUNT OF INTEREST PAID ON THE BORROWED FUNDS UTILISED FOR AC QUIRING THE IMMOVABLE PROPERTY. SIMILARLY WHEN THE INCOME IS T O BE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS FROM BUS INESS OR PROFESSION' THE DEDUCTION ACCOUNT OF INTEREST ON B ORROWED FUND IS PROVIDED UNDER SECTION 36(1)(III) THE ACT WHERE THE BUSINESS ASSETS ARE ACQUIRED OUT OF BORROWED FUNDS. AT THIS STAGE IT MAY BE PERTINENT TO NOTE THAT DEPRECIATION IS ALSO ALLO WABLE AS DEDUCTION UNDER SECTION 32 IN RESPECT OF BUSINESS A SSETS ON THE COST OF ACQUISITION. IN DETERMINING THE COST OF ACQ UISITION THE INTEREST COMPONENT AFTER BRINGING THE ASSET INTO EX ISTENCE IS NOT TAKEN INTO CONSIDERATION AS EXPLANATION 8 TO SECTIO N 43 OF THE ACT. IF THE INTEREST IS TO BE ADDED TO COST OF ACQUISITI ON THEN THE ASSESSEE WOULD BE ENTITLED TO DOUBLE DEDUCTION ONCE UNDER SECTION 36(1)(III) AND THE OTHER UNDER SECTION 32 O F ACT WHICH IS NOT PERMISSIBLE IN VIEW OF THE DECISION OF THE SUPR EME COURT IN THE CASE OF ESCORTS LTD. V. UOI[1993] 199 ITR 43. 31.6 SIMILARLY WHEN THE SHARES ARE PURCHASED BY W AY OF INVESTMENT AND THE DIVIDEND IS RECEIVED IN RESPECT OF SUCH SHARES THE INTEREST PAID ON BORROWED FUNDS HAS BEE N HELD TO BE ALLOWABLE AS DEDUCTION AGAINST DIVIDEND INCOME. THE SUPREME COURT HAS GONE A STEP FURTHER IN THE CASE OF CIT VS . RAJENDRA M.P NOS.67 & 68/MDS./17/ :- 8 -: PRASAD MOODY [1978] 115 ITR 519 WHEREIN IT HAS BEE N HELD THAT DEDUCTION ON ACCOUNT OF INTEREST PAID ON BORROWED F UNDS IS ALLOWABLE AS DEDUCTION IN COMPUTING THE INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES EVEN WHERE THE DIVIDEN D IS NOT RECEIVED IN A PARTICULAR YEAR. IF THIS IS THE LEGAL POSITION THEN WE ARE AFRAID HOW THE INTEREST PAID BY THE ASSESSEE C AN BE CONSIDERED AS PART OF THE COST OF ACQUISITION OF TH E SHARES. IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED THEN IT WOUL D AMOUNT TO ALLOWING DOUBLE DEDUCTION I.E. UNDER SECTION 57 AS WELL AS UNDER SECTION 48 OF THE ACT WHICH CAN NEVER BE THE INTEN TION OF THE LEGISLATURE. AS ALREADY STATED THE DOUBLE DEDUCTIO N IS PROHIBITED AS LAID DOWN BY THE SUPREME COURT IN THE CASE OF ES CORTS LTD. (SUPRA). THE ENTIRE SCHEME OF THE ACT THEREFORE R EVEALS THAT INTEREST COMPONENT AFTER THE DATE OF ACQUISITION AN D TILL THE DATE OF SALE CANNOT BE TREATED AS THE COST OF ACQUISITIO N. IT IS ONLY ALLOWABLE AS A REVENUE DEDUCTION ON YEAR TO YEAR BA SIS AGAINST THE INCOME GENERATED FROM SUCH ASSET OR LIKELY TO B E GENERATED TO THE EXTENT PROVIDED BY THE LEGISLATURE UNDER DIF FERENT HEADS. 31.6 THE ABOVE VIEW IS ALSO FORTIFIED BY THE D ECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MAC INTOSH FINANCE ESTATES LTD. VS. ACIT(12 SOT 324) WHEREIN IT HAS BEEN HELD 'ONCE WE FIND THAT INTEREST EXPENSES IS AN ALL OWABLE EXPENDITURE UNDER THE HEAD 'INCOME FROM OTHER SOURC ES IT CANNOT BE ALLOWED TO BE ADDED TO THE COST OF INVEST MENT ONLY BECAUSE IN THIS YEAR NO DEDUCTION IS ALLOWABLE BECA USE THE DIVIDEND INCOME HAS BEEN MADE EXEMPT. THE FOLLOWI NG OBSERVATIONS OF SUPREME COURT IN THE CASE OF SAHARA NPUR ELECTRIC SUPPLY CO. LTD VS. CIT (1992) 194 ITR 294 (SC) WER E RELIED ON BY THE COURT:- IN CASE MONEY IS BORROWED BY A NEWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT THE INTEREST INCURRED BEFORE THE COMMENC EMENT OF PRODUCTION ON SUCH BORROWED MONEY CAN BE CAPITALISE D AND M.P NOS.67 & 68/MDS./17/ :- 9 -: ADDED TO THE COST OF THE FIXED ASSETS. 31.7 A BARE LOOK AT THE ABOVE OBSERVATIONS REVEALS THAT ACTUAL COST WOULD INCLUDE ALL EXPENDITURE NECESSARY TO BRING TH E ASSETS INTO EXISTENCE AND PUT THEM IN WORKING CONDITION. NOWHE RE IN THE ABOVE OBSERVATIONS THE SUPREME COURT HELD THAT THE EXPEN DITURE INCURRED AFTER THE ACQUISITION OF ASSET WOULD BE INCLUDED IN THE COST OF ASSETS. THE TERMINAL POINT IS THE TIME WHEN THE ASSET IS BR OUGHT INTO EXISTENCE OR WHEN THE ASSET IS PUT IN A WORKING CON DITION. THEREFORE ON THE BASIS OF THE SUPREME COURT JUDGMENT IT CANN OT BE SAID THAT EXPENDITURE INCURRED AFTER THE ASSET BROUGHT INTO E XISTENCE I.E. AFTER THE ACQUISITION OF THE ASSET WOULD FORM PART OF THE ACTUAL COST. THE SUPREME COURT LAID DOWN THE PROPOSITION THAT INTERE ST PAID ON MONIES BORROWED FOR ACQUISITION OF CAPITAL ASSET AND TO ME ET EXPENSES CONNECTED WITH ITS INSTALLATION ETC. AND CAPITALIZE D HAS TO BE ADDED TO THE COST OF ASSET FOR THE PURPOSE OF DEPRECATION. 31.8 THUS IN OUR OPINION IF THE MONEY WAS BORROWED FOR PURCHASE OF SHARES OF SUBSIDIARY COMPANY FOR THE PURPOSE OF ACQ UIRING CONTROLLING INTEREST AND ACQUISITION OF SUCH CONTROLLING INTERE ST WAS OF THE BUSINESS OF THE ASSESSEE AND IT RESULTED IN PROMOTE THE BUSINESS OF THE ASSESSEE AS WELL AS HELPFUL TO THE ASSESSEE FO R HAVING MANAGEMENT CONTROL OVERSAID SUCH SUBSIDIARY COMPANY THEN THE INTEREST EXPENDITURE SHOULD BE ALLOWED U/S.36(1)(II I) OF THE ACT. FURTHER IF THE ASSESSING OFFICER FOUND THAT INVESTM ENT IN SHARES OF SUBSIDIARY COMPANY NOT FOR MAINTAINING CONTROLLING INTEREST THEN THE ASSESSING OFFICER SHOULD SEE THAT THERE CANNOT BE A NY DISALLOWANCE IN RESPECT OF INVESTMENT OF ASSESSEES OWN FUND. THIS IS SO BECAUSE THE BORROWED FUNDS AND OWN FUNDS ARE ADMITTEDLY MIXED U P IN SUCH CASES THE DISALLOWANCE OF INTEREST HAS TO BE MADE ON PROPORTIONATE BASIS AND BENEFIT HAS TO BE GIVEN TO THE ASSESSEE T OWARDS INVESTMENT OF OWN FUND. IT IS ALSO TO BE NOTED THAT WHILE COM PUTING DISALLOWANCE IF ANY U/S.36(1)(III) OF THE ACT INTEREST CONSIDER ED FOR DISALLOWANCE M.P NOS.67 & 68/MDS./17/ :- 10 - : U/S.14A OF THE ACT WAS REQUIRED TO BE EXCLUDED. WI TH THIS OBSERVATION WE RESTORE THE ISSUE TO THE FILE OF TH E ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RES ULT ITA NO.585/MDS/2016 IS PARTLY ALLOWED FOR STATISTICAL P URPOSE. 2.1 FOR THE ASSESSMENT YEAR 2011-12 THE TRIBUNAL DIRECTED THE LD. ASSESSING OFFICER IN PARA NO.49 TO FOLLOW THE F INDINGS OF THE TRIBUNAL FOR ASSESSMENT YEAR 2010-11 AS THE ISSUE WAS SIMILAR IN NATURE. 3. BEFORE US LD.A.R SUBMITTED THAT THE FOLLOWING FINDINGS IN PARA NO.31.8 IS NOT AT ALL REQUIRED WHICH AMOUNTS TO DUPLICATION OF THE DIRECTION TO AO WHICH WOULD CONFUSE HIM. ACCORDING LY HE PRAYED TO DELETE THE FOLLOWING PORTION:- FURTHER IF THE ASSESSING OFFICER FOUND THAT INVEST MENT IN SHARES OF SUBSIDIARY COMPANY NOT FOR MAINTAINING CONTROLLI NG INTEREST THEN THE ASSESSING OFFICER SHOULD SEE THAT THERE CA NNOT BE ANY DISALLOWANCE IN RESPECT OF INVESTMENT OF ASSESSEES OWN FUND. THIS IS SO BECAUSE THE BORROWED FUNDS AND OWN FUND S ARE ADMITTEDLY MIXED UP IN SUCH CASES THE DISALLOWANCE OF INTEREST HAS TO BE MADE ON PROPORTIONATE BASIS AND BENEFIT H AS TO BE GIVEN TO THE ASSESSEE TOWARDS INVESTMENT OF OWN FUN D. IT IS ALSO TO BE NOTED THAT WHILE COMPUTING DISALLOWANCE IF AN Y U/S.36(1)(III) OF THE ACT INTEREST CONSIDERED FOR DISALLOWANCE U/ S.14A OF THE ACT WAS REQUIRED TO BE EXCLUDED. WITH THIS OBSERVATION WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH M.P NOS.67 & 68/MDS./17/ :- 11 - : CONSIDERATION AFTER NECESSARY EXAMINATION AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 3.1 FURTHER THE LD.A.R RELIED ON THE ORDER OF TRI BUNAL IN THE CASE OF M/S.KOYA CONSTRUCTIONS PVT LTD. HYDERABAD VS. D CIT HYDERABAD REPORTED IN (2014) 147 ITD 582 WHEREIN HELD THAT:- THE AO IS DUTY BOUND TO PASS CONSEQUENTIAL ORDER I N CONFORMITY WITH ORDER OF TRIBUNAL AND HE HAS NO DISCRETION OR CHOIC E TO OVERLOOK ORDER OF TRIBUNAL ON THE IMPUGNED ISSUE. 4. ON THE OTHER HAND LD.D.R RELIED ON THE ORDER O F TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL HAS SIMPLY REMITTE D THE ISSUE BACK TO THE FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDE RATION. BEING SO THERE CANNOT BE ANY CORRECTION IS REQUIRED IN THE ORDER O F TRIBUNAL AND NOW CONSIDERATION OF THE PLEA OF THE LD.A.R IT AMOUNTS TO REVIEW THE EARLIER ORDER OF TRIBUNAL WHICH IS NOT PERMITTED U/S.254( 2) OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. FOR THESE ASSESSMENT YEARS THE ASSESSEE C AME IN APPEAL BEFORE THIS TRIBUNAL WITH REGARD TO DISALLOWANCE OF INTEREST EXPENDITURE. THE TRIBUNAL CONSIDERED THE ISSUE AND GAVE FINDINGS IN PARA NOS.29 TO 31.8 FOR ASSESSMENT YEAR 2010-11 AS REPRODUCED EARLIER. THE SAME IS FOLLOWED FOR THE NEXT ASSESSME NT YEAR 2011-12. AS READING OF THE ABOVE ORDER OF TRIBUNAL ON THIS ISSU E SHOWS THAT THE M.P NOS.67 & 68/MDS./17/ :- 12 - : TRIBUNAL RESTORED THE MATTER TO THE FILE OF LD. ASS ESSING OFFICER FOR FRESH CONSIDERATION WITH CERTAIN DIRECTIONS. ONCE THE ISS UE IS SET ASIDE FOR FRESH CONSIDERATION THE LD. ASSESSING OFFICER IS D UTY BOUND TO PASS FRESH ORDER IN ACCORDANCE WITH THE DIRECTION OF THE TRIBUNAL. THE FINDINGS OF THE TRIBUNAL ARE UNAMBIGUOUS CLEAR AND CATEGORICAL IN AS MUCH AS IT IS SPECIFICALLY DIRECTED THE AO TO CONSI DER THE COMMERCIAL EXPEDIENCY OF INCURRING INTEREST EXPENDITURE. IT WA S ALSO OBSERVED THAT IF THE MONEY WAS BORROWED FOR THE PURCHASE OF SHARE S OF SUBSIDIARY COMPANY WHICH IS FOR THE PURPOSE OF ACQUIRING OR M AINTAINING CONTROLLING INTEREST AND ACQUISITION/MAINTAINING OF SUCH CONTROLLING INTEREST WAS FOR THE BUSINESS OF THE ASSESSEE AND I F IT IS RESULTED IN PROMOTION OF THE BUSINESS OF ASSESSEE COMPANY AS WE LL AS HELPFUL TO THE ASSESSEE FOR HAVING MANAGEMENT CONTROL OVER SUC H SUBSIDIARY COMPANY THEN SUCH INTEREST EXPENDITURE SHOULD BE A LLOWED U/S.36(1)(III) OF THE ACT. THUS IT MEANS THAT THE TRIBUNAL HAS NOT REJECTED THE CLAIM OF ASSESSEE AND THE AO HAS TO RE AD THE PARA NOS.31 TO 31.8 OF THE ORDER OF TRIBUNAL IN A CUMULATIVE MANNER AND HE SHALL NOT READ THE PARA NO.31.8 IN AN ISOLATE MANNER WHI CH WOULD GIVE ABSURD RESULT THAT SHALL BE AVOIDED. 5.1 FURTHER BEFORE US THE LD.A.R MADE ONE MORE S UBMISSION THAT THE AO IS NOT PASSING THE ORDER GIVING EFFECT TO THE ORDER OF TRIBUNAL IN ACCORDANCE WITH THE DIRECTION OF THE TR IBUNAL. M.P NOS.67 & 68/MDS./17/ :- 13 - : 5.2 AT THE OUTSET IT MAY BE APPROPRIATE TO POINT OUT THE WELL SETTLED LEGAL POSITION THAT WHAT IS BINDING ON THE COURTS I S THE RATIO OF A DECISION. THERE IS A CLEAR DISTINCTION BETWEEN ON T HE COURTS IS THE RATIO OF THE 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 W E MAY DISCUSS THE PRINCIPLE OF BINDING PRECEDENT. THIS WILL TAKE US T O THE QUESTION WHOSE DECISION BINDS WHOM. 6. 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. THAT BEING SO SO FAR AS THE DECISIONS OF THE SUPREME COURT ARE CONCERNED IT HAS BEEN STATED IN ARTICLE 141 OF THE CONSTITUTION ITSELF THAT : 'THE LAW DECLARED BY THE SUPREME COURT SHALL BE BIN DING ON ALL COURTS WITHIN THE TERRITORY OF INDIA.' 7. IN THAT VIEW OF THE MATTER ALL COURTS IN INDIA ARE BOUND TO FOLLOW THE DECISIONS OF THE SUPREME COURT. 8. THOUGH THERE IS NO PROVISION LIKE ARTICLE 141 W HICH SPECIFICALLY LAYS DOWNS THE BINDING NATURE OF THE DECISIONS OF T HE HIGH COURTS IT IS A WELL ACCEPTED LEGAL POSITION THAT A SINGLE JUDGE OF A HIGH COURT IS M.P NOS.67 & 68/MDS./17/ :- 14 - : ORDINARILY BOUND TO ACCEPT AS CORRECT JUDGMENTS OF COURTS OF CO- ORDINATE JURISDICTION AND OF THE DIVISION BENCHES A ND OF THE FULL BENCHES OF HIS COURT AND OF THE SUPREME COURT. EQUA LLY WELL SETTLED IS THE POSITION THAT WHEN A DIVISION BENCH OF THE HIGH COURT GIVES A DECISION ON A QUESTION OF LAW IT SHOULD GENERALLY BE FOLLOWED BY A CO- ORDINATE BENCH IN THE SUBSEQUENT CASE WANTS THE EAR LIER DECISION TO BE RECONSIDERED IT SHOULD REFER THE QUESTION AT ISSUE TO A LARGER BENCH. 9. IS EQUALLY WELL SETTLED THAT THE DECISION OF O NE HIGH COURT IS NOT A BINDING PRECEDENT ON ANOTHER HIGH COURT. THE SUPR EME COURT IN VALLIAMA CHAMPAKA PILLAI V. SIVATHANU PILLAI(AIR 19 79 1937) DEALING WITH THE CONTROVERSY WHETHER A DECISION OF THE ERST WHILE TRAVANCORE HIGH COURT CAN BE MADE A BINDING PRECEDENT ON THE M ADRAS HIGH COURT ON THE BASIS OF THE PRINCIPLE OF STARE DECISIS CLE ARLYHELD THAT SUCH A DECISION CAN AT BEST HAVE PERSUASIVE EFFECT AND NOT THE FORCE OF BINDING PRECEDENT ON THE MADRAS HIGH COURT. REFERRI NG TO THE STATES REORGANISATION ACT IT WAS OBSERVED THAT THERE WAS NOTHING IN THE SAID ACT OR ANY OTHER LAW WHICH EXALTS THE RATIO OF THOS E DECISIONS TO THE STATUS OF A BINDING LAW NOR COULD THE RATIO DECIDEN DI OF THOSE DECISIONS BE PERPETUATED BY INVOKING THE DOCTRINE OF STARE DE CISIS. 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. T HIS DOCTRINE IS APPLICABLE ONLY TO DIFFERENT BENCHES OF THE SAME HI GH COURT. M.P NOS.67 & 68/MDS./17/ :- 15 - : 10. IT IS ALSO WELL-SETTLED THAT THOUGH THERE IS N O SPECIFIC PROVISION MAKING THE LAW DECLARED BY THE HIGH COURT BINDING O N SUBORDINATE COURTS IT IS IMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THAT THE TRIBUNALS SUBJECT TO ITS SUPERVIS ION 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 H IGHEST COURT IN THE STATE IS BINDING ON AUTHORITIES OR TRIBUNALS UNDER ITS SUPERINTENDENCE AND THEY CANNOT IGNORE IT..' 11. THIS POSITION HAS BEEN VERY APTLY SUMMED UP BY THE SUPREME COURT IN MAHADEOLAL KANODIA V. ADMINISTRATOR GENERA L OF WEST BENGAL(AIR 1960 SC 936) (AT P.941) : 'JUDICIAL DECORUM NO LESS THAN LEGAL PROPRIETY FORM S THE BASIS OF JUDICIAL PROCEDURE. IF ONE THING IS MORE NECESSA RY IN LAW THAN ANY OTHER THING IT IS THE QUALITY OF CERTAINT Y. THAT QUALITY WOULD TOTALLY DISAPPEAR IF JUDGES OF CO-ORDINATE JU RISDICTION IN A HIGH COURT START OVERRULING ONE ANOTHER'S DECISIONS . IF ONE DIVISION BENCH OF A HIGH COURT IS UNABLE TO DISTING UISH A PREVIOUS DECISION OF ANOTHER DIVISION BENCH AND HO LDING THE VIEW THAT THE EARLIER DECISION IS WRONG ITSELF GIV ES EFFECT TO THAT VIEW THE RESULT WOULD BE UTTER CONFUSION. THE POSI TION WOULD BE EQUALLY BAD WHERE A JUDGE SITTING SINGLY IN THE HIGHCOURT IS OF OPINION THAT THE PREVIOUS DECISION OF ANOTHER SI NGLE JUDGE ON M.P NOS.67 & 68/MDS./17/ :- 16 - : A QUESTION OF LAW IS WRONG AND GIVES EFFECT TO THAT VIEW INSTEAD OF REFERRING THE MATTER TO A LARGER BENCH.' 12. THE ABOVE DECISION WAS FOLLOWED BY THE SUPREME COURT IN BARADAKANTA MISHRA V. BHIMSEN DIXIT (AIR 1972 SC 24 66) WHEREIN THE LEGAL POSITION WAS REITERATED IN THE FOLLOWING WORD S (AT PAGE 2469): 'IT WOULD BE ANOMALOUS TO SUGGEST THAT A TRIBUNAL O VER WHICH THE HIGH COURT HAS SUPERINTENDENCE CAN IGNORE THE LAW D ECLARED BY THAT COURT AND START PROCEEDINGS IN DIRECT VIOLATIO N OF IT. IF A TRIBUNAL CAN DO SO ALL THE SUBORDINATE COURTS CAN EQUALLY DO SO FOR THERE IS NO SPECIFIC PROVISION JUST LIKE IN TH E CASE OF SUPREME COURT MAKING THE LAW DECLARED BY THE HIGH COURT BI NDING ON SUBORDINATE COURTS. IT IS IMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THAT ALL THE TRIBU NAL SUBJECT TO ITS SUPERVISION SHOULD CONFORM TO THE LAW LAID DOWN BY IT. SUCH OBEDIENCE WOULD ALSO BE CONDUCIVE TO THEIR SMOOTH W ORKING; OTHERWISE THERE WOULD BE CONFUSION IN THE ADMINISTR ATION OF LAW AND RESPECT FOR LAW WOULD IRRETRIEVABLY SUFFER. 13. HAVING DECIDED WHOSE DECISION BINDS WHOM WE M AY NEXT EXAMINE WHAT IS BINDING. IT IS WELL SETTLED THAT IT IS ONLY THE RATIO DECIDENDI THAT HAS A PRECEDENT VALUE. AS OBSERVED BY THE SUPREME COURT IN S. P. GUPTA V. PRESIDENT OF INDIA (AIR 1982 SC 149) (AT P.231) : 'IT IS ELEMENTARY THAT WHAT IS BINDING ON THE COURT IN A SUBSEQUENT CASE IS NOT THE CONCLUSION ARRIVED AT IN A PREVIOUS DECISION BUT THE RATIO OF THAT DECISION FOR IT IS THE RATIO WHICH BINDS AS A PRECEDENT AND NOT THE CONCLUSION.' A CASE IS ONLY A N AUTHORITY FOR WHAT M.P NOS.67 & 68/MDS./17/ :- 17 - : IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW LOGICALLY FROM IT. JUDGMENTS OF COURTS ARE NOT TO BE CONSTRUED AS STAT UTES (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 FA IZULLABHAI (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 SCRIPTU RAL SANCTITY BUT IS OF RATIO-WISE LUMINOSITY WITHIN THE EDIFICE OF FACT S WHERE THE JUDICIAL LAMP PLAYS THE LEGAL FLAME. BEYOND THOSE W ALLS AND DE HORS THE MILIEU WE CANNOT IMPART ETERNAL VERNAL VAL UE 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 CONSIDE RATION AND NOT AFFECTING THOSE MATTERS WHICH MAY LURK IN THE RECOR D. WHATEVER BE THE POSITION OF A SUBORDINATE COURT'S CASUAL OBS ERVATIONS GENERALISATIONS AND SUBSILENTIO DETERMINATIONS MUST BE JUDICIOUSLY READ BY COURTS OF COORDINATE JURISDICTI ON.' 14. DECISION ON A POINT NOT NECESSARY FOR THE PURP OSE OF THE DECISION OR WHICH DOES NOT FALL TO BE DETERMINED IN THAT DEC ISION BECOMES AN OBITER DICTUM. SO ALSO OPINIONS ON QUESTIONS WHICH ARE NOT NECESSARY FOR DETERMINING OR RESOLVING THE ACTUAL CONTROVERSY ARISING IN THE CASE PARTAKE OF THE CHARACTER OF OBITER. OBITER OBSERVAT IONS AS SAID BY M.P NOS.67 & 68/MDS./17/ :- 18 - : BHAGWATI J. (AS HIS LORDSHIP THEN WAS) IN ADDL. DIS TRICT MAGISTRATE JABALPUR V. SHIVAKANT SHUKLA(AIR 1976 SC 1207) WOU LD UNDOUBTEDLY BE ENTITLED TO GREAT WEIGHT BUT 'AN OBITER CANNOT TAKE THE PLACE OF THE RATIO. JUDGES ARE NOT ORACLES.' SUCH OBSERVATIONS D O NOT HAVE ANY BINDING EFFECT AND THEY CANNOT BE REGARDED AS CONCL USIVE. AS OBSERVED BY THE PRIVY COUNCIL IN BAKER V. THE QUEEN (1975) 3 ALL ER 55 (AT PAGE 64) THE COURT'S AUTHORITATIVE OPINION MUST BE DIST INGUISHED FROM PROPOSITIONS ASSUMED BY THE COURT TO BE CORRECT FOR THE PURPOSE OF DISPOSING OF THE PARTICULAR CASE. THIS POSITION HAS BEEN MADE FURTHER CLEAR BY THE SUPREME COURT IN A RECENT DECISION IN CIT V. SUN ENGINEERING WORKS P. LTD. (1992) 198 ITR 297 AT PA GE 320 WHERE IT WAS OBSERVED : 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TRE AT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT H AVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS COURT TAKES ITS COLOUR FR OM THE QUESTION INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND W HILE APPLYING THE DECISION TO A LATER CASE THE COURTS MUST CAREF ULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECIS ION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUD GMENT DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CO NSIDERATION BY THIS COURT TO SUPPORT THEIR REASONING.' M.P NOS.67 & 68/MDS./17/ :- 19 - : 15. IN THE ABOVE DECISION THE SUPREME COURT ALSO QUOTED WITH APPROVAL THE FOLLOWING NOTE OF CAUTION GIVEN BY IT EARLIER IN ( AIR 1971 SC 530) (AT 578) : 'IT IS NOT PROPER TO REGARD A WORD A CLAUSE OR A S ENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT DIVOR CED FROM ITS CONTEXT AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT.' IT IS THUS CLEAR THAT IT IS ONLY THE RATIO DECIDEND I OF A CASE WHICH CAN BE BINDING - NOT OBITER DICTUM. OBITER AT BEST MAY H AVE SOME PERSUASIVE EFFICACY. 16. FROM THE FOREGOING DISCUSSION THE FOLLOWING P ROPOSITIONS EMERGE: (A) THE LAW DECLARED BY THE SUPREME COURT BEING BIN DING ON ALL COURTS IN INDIA THE DECISIONS OF THE SUPREME COURT ARE BINDING ON ALL COURTS EXCEPT HOWEVER THE SUPREME COURT I TSELF WHICH IS FREE TO REVIEW THE SAME AND DEPART FROM ITS EARLIER OPINION IF THE SITUATION SO WARRANTS. WHAT IS BINDING IS OF COURS E 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 UND ER ITS M.P NOS.67 & 68/MDS./17/ :- 20 - : SUPERINTENDENCE THROUGHOUT THE TERRITORIES IN RELAT ION TO WHICH IT EXERCISES JURISDICTION. IT DOES NOT EXTEND BEYOND I TS TERRITORIAL JURISDICTION. (C) THE POSITION IN REGARD TO THE BINDING NATURE OF THE DECISIONS OF A HIGH COURT ON DIFFERENT BENCHES OF THE SAME CO URT 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 SAM E HIGH COURT. IT WOULD BE JUDICIAL IMPROPRIETY TO IGNORE THAT DEC ISION. JUDICIAL COMITY DEMANDS THAT A BINDING DECISION TO WHICH HIS ATTENTION HAD BEEN DRAWN SHOULD NEITHER BE IGNORED NOR OVERLO OKED. IF HE DOES NOT FIND HIMSELF IN AGREEMENT WITH THE SAME T HE PROPER PROCEDURE IS TO REFER THE BINDING DECISION AND DIRE CT THE PAPERS TO BE PLACED BEFORE THE CHIEF JUSTICE TO ENABLE HIM TO CONSTITUTE A LARGER BENCH TO EXAMINE THE QUESTION (SEE FOOD CO RPORATION OF INDIA V. YADAV ENGINEER AND CONTRACTOR(AIR 1982 SC 1302). (II) A DIVISION BENCH OF A HIGH COURT SHOULD FOLLOW THE DECISION OF ANOTHER DIVISION BENCH OF EQUAL STRENGT H OR A FULL BENCH OF THE SAME HIGH COURT. IF ONE DIVISION BENCH DIFFERS FROM ANOTHER DIVISION BENCH OF THE SAME HIGH COURT IT S HOULD REFER THE CASE TO A LARGER BENCH. M.P NOS.67 & 68/MDS./17/ :- 21 - : (III) WHERE THERE ARE CONFLICTING DECISIONS OF COUR TS OF CO- ORDINATE JURISDICTION THE LATER DECISION IS TO BE PREFERRED IT REACHED AFTER FULL CONSIDERATION OF THE EARLIER DEC ISIONS. (D) THE DECISION OF ONE HIGH COURT IS NEITHER BINDI NG PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUTSIDE ITS OWN TERRITORIAL JURISDICTION. IT IS WELL SETTLED TH AT THE DECISION OF A HIGH COURT WILL HAVE THE FORCE OF BINDING PRECEDENT ONLY IN THE STATE OR TERRITORIES ON WHICH THE COURT HAS JURISDI CTION. IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF T HAT HIGH COURT IT MAY ATBEST HAVE ONLY PERSUASIVE EFFECT. BY NO AMO UNT OF STRETCHING OF THE DOCTRINE OF STARE DECISIS CAN JU DGMENTS OF ONE HIGH COURT BE GIVEN THE STATUS OF A BINDING PRECEDE NT SO FAR AS OTHER HIGH COURTS OR TRIBUNAL WITHIN THEIR TERRITOR IAL JURISDICTION ARE CONCERNED. ANY SUCH ATTEMPT WILL GO COUNTER TO THE VERY DOCTRINE OF STARE DECISIS AND ALSO THE VARIOUS DECI SIONS OF THE SUPREME COURT WHICH HAVE INTERPRETED THE SCOPE AND AMBIT THEREOF. THE FACT THAT THERE IS ONLY ONE DECISION O F ANY ONE HIGH COURT ON A PARTICULAR POINT OR THAT A NUMBER OF DIF FERENT HIGH COURTS HAVE TAKEN IDENTICAL VIEWS IN THAT REGARD IS NOT AT ALL RELEVANT FOR THAT PURPOSE. WHATEVER MAY BE THE CONC LUSION THE DECISIONS CANNOT HAVE THE FORCE OF BINDING PRECEDEN T ON OTHER HIGH COURTS OR ON ANY SUBORDINATE COURTS OR TRIBUNA LS WITHIN M.P NOS.67 & 68/MDS./17/ :- 22 - : THEIR JURISDICTION. THAT STATUS IS RESERVED ONLY FO R THE DECISIONS OF THE SUPREME COURT WHICH ARE BINDING ON ALL COURTS I N THE COUNTRY BY VIRTUE OF ARTICLE 141 OF THE CONSTITUTION. 17. IN THE LIGHT OF THE FOREGOING DISCUSSION THE DECISION OF THE TRIBUNAL IS BINDING ON THE ASSESSING OFFICER AND HE CANNOT PICK UP A WORD OR SENTENCE 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 A S A WHOLE. BEING SO THE ASSESSING OFFICER CANNOT SIT IN JUDGMENT OV ER 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. 18. IT IS NEEDLESS TO SAY THAT THE INCOME-TAX AUTH ORITIES ARE REQUIRED TO EXERCISE THEIR POWERS IN ACCORDANCE WITH LAW AS PER THEPOWER GIVEN TO THEM IN SPECIFIC SECTIONS. IF THE POWERS CONFERR ED ON A PARTICULAR AUTHORITY ARE EXERCISED BY ANOTHER AUTHORITY WITHOU T MANDATE OF LAW IT WOULD CREATE CHAOS IN THE ADMINISTRATION OF LAW AND HIERARCHY OF ADMINISTRATION WOULD MEAN NOTHING. JUDGMENT OF A HI GHER 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 ASSESSIN G OFFICER. WHEN ONCE M.P NOS.67 & 68/MDS./17/ :- 23 - : THE TRIBUNAL DECIDES AN ISSUE IN ONE WAY THE ONLY COURSE AVAILABLE TO THE ASSESSING OFFICER IS TO FOLLOW THE ORDER OF THE TRIBUNAL IN TRUE SPIRITS AND IT IS NOT PERMISSIBLE FOR THE ASSESSIN G OFFICER TO TAKE A DIFFERENT VIEW OR TO SIT IN JUDGMENT OVER THE ORDE R OF THE TRIBUNAL BY INTERPRETING THE SAME IN THE MANNER HE WANTED. 19. IN THE CASE OF WINTER MISRA DIAMOND TOOLS LTD. V/S.COLLECTOR OF CENTRAL EXCISE (1996) 83 ELT 670 TRI DEL CONSIDERI NG THE ROLE OF A SUBORDINATE AUTHORITY WHILE IMPLEMENTING THE ORDERS OF THE SUPERIOR APPELLATE/JUDICIAL AUTHORITIES FOLLOWING THE DECIS ION OF THE APEX COURT IN THE CASE OF UNION OF INDIA V/S. KAMALAKSHI FINAN CE CORPORATION LTD. (1991) 55 ELT 433(SC) IT WAS HELD AS FOLLOWS- '45. AT THE SAME TIME THE APPELLANTS ARE CORRECT I N POINTING OUT THAT ONCE THE ASSISTANT COLLECTOR HAS PASSED AN ORDER AND IT IS CONFIRMED BY THE COLLECTOR (APPEALS) AND NO APPEAL IS FILED AGAINST THE ORDER OF THE COLLECTOR (APPEAL S) THE ORDER ATTAINS FINALITY. THEREFORE THE DEPARTMENT W AS BOUND TO FOLLOW THE ASSISTANT COLLECTOR'S ORDER OF 17/4/1 989 AS CONFIRMED BY THE COLLECTOR (APPEALS)' ORDER DATED 2 8-8-1991 AND FINALISE ALL THE PENDING MATTERS IN THE LIGHT O F THESE ORDERS. THESE WILL INCLUDE CASES IN WHICH THE ASSES SMENT WAS MADE PROVISIONAL AS WELL AS THOSE IN WHICH CASE S DEMAND/SHOW CAUSE NOTICES HAD BEEN ISSUED BUT NOT DISPOSED OF TILL THEN AS ALL THE SUBORDINATE AUTHOR ITIES WERE BOUND BY THE ORDERS OF THE SUPERIOR APPELLATE/JUDIC IAL AUTHORITIES IN VIEW OF THE HON'BLE SUPREME COURT'S DECISION M.P NOS.67 & 68/MDS./17/ :- 24 - : IN THE CASE OF UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LTD. REPORTED IN 1991 (55) E.L.T. 433 ( S.C.). HOWEVER WE NEED NOT LABOUR THIS POINT ANY FURTHER IN VIEW OF OUR FINDINGS ON MERITS RECORDED ABOVE.' 20. IT IS TRITE THAT WHEN A STATUTE REQUIRES AN ACT TO BE DONE IN A SPECIFIC MANNER IT HAS TO BE DONE IN THAT MANNER O NLY. THE ASSESSING OFFICER COULD NOT EXPECT IT BEING DONE IN SOME OTHE R MANNER. IT IS ALSO TRITE PRINCIPLE OF LAW THAT IF A PARTICULAR AUTHORI TY HAS BEEN DESIGNATED TO DO PARTICULAR ACT JUST IT IS THAT AUTHORITY ALO NE WOULD COULD APPLY HIS/HER INDEPENDENT MIND TO DISCHARGE HIS DUTIES AN D FURTHER A LOWER AUTHORITY CANNOT SIT IN JUDGMENT OVER THE DECISION OF A SUPERIOR FORUM. BEING SO IN OUR OPINION WHEN THE TRIBUNAL ON EARL IER OCCASION IN ITS ORDER CITED SUPRA HAS GIVEN CERTAIN DIRECTION TO THE ASSESSING OFFICER AND HE SHALL BOUND TO FOLLOW THE SAME. 21. IN OUR OPINION DECISION OF THE TRIBUNAL IS B INDING ON THE AO AND HE CANNOT PICK UP A WORDS OR SENTENCES FROM THE ORD ER OF TRIBUNAL DE HORS THE CONTEXT OR QUESTIONS UNDER CONSIDERATION A ND CONSTRUE IT TO BE COMPLETE LAW DECLARED BY THE TRIBUNAL. WHEN ONCE T HE TRIBUNAL DECIDES THE ISSUE IN ONE WAY ONLY COURSE AVAILABLE TO THE AO IS TO FOLLOW THE ORDER OF TRIBUNAL IN FULL SPIRITS AND I T IS NOT PERMISSIBLE TO THE AO TO TAKE A DIFFERENT VIEW OR TO SIT IN JUDGM ENT OVER THE ORDER OF TRIBUNAL BY INTERPRETING THE SAME IN THE MANNER HE WANTED. THE M.P NOS.67 & 68/MDS./17/ :- 25 - : TRIBUNAL ON EARLIER OCCASION IN ITS ORDER HAS GIVE N DIRECTION TO LD. ASSESSING OFFICER TO ALLOW THE EXPENDITURE U/S.36(1 )(III) OF THE ACT IF THE INVESTMENT WAS MADE IN SUBSIDIARY COMPANY FOR T HE PURPOSE OF ACQUIRING CONTROLLING INTEREST AND ACQUISITION OF S UCH CONTROLLING INTEREST WAS OF THE BUSINESS OF THE ASSESSEE AND IF IT RESULTED IN PROMOTE THE BUSINESS OF THE ASSESSEE AS WELL AS HEL PFUL TO THE ASSESSEE FOR HAVING MANAGEMENT CONTROL OVER SAID S UCH SUBSIDIARY COMPANY THEN THE DUTY OF THE AO IS TO GRANT DEDUCT ION U/S.36(1)(III) OF THE ACT IF IT IS FULFILLED THE CONDITION LAID D OWN BY THE TRIBUNAL. AT THIS STAGE EVEN AT THE COST OF REPETITION IT IS N EEDLESS TO SAY THAT IF THE MONEY WAS BORROWED FOR THE PURPOSE OF PURCHASE OF SHARES OF SUBSIDIARY COMPANY WHICH IS FOR THE PURPOSE OF ACQ UIRING OR MAINTAINING CONTROLLING INTEREST AND ACQUISITION/MA INTAINING OF SUCH CONTROLLING INTEREST WAS OF THE BUSINESS OF THE ASS ESSEE AND IF IT IS RESULTED IN PROMOTION OF THE BUSINESS OF ASSESSEE C OMPANY AS WELL AS HELPFUL TO THE ASSESSEE FOR HAVING MANAGEMENT CONTR OL OVER SUCH SUBSIDIARY COMPANY THEN SUCH INTEREST EXPENDITURE SHOULD BE ALLOWED U/S.36(1)(III) OF THE ACT. IF AO FAILS TO PROPERLY UNDERSTAND OR APPRECIATE THE DIRECTION TO THE TRIBUNAL THEN THE ASSESSEE IS AT LIBERTY TO EXPLORE AND PURSUE THE REMEDIES AVAILABLE UNDER LAW AT ELSEWHERE M.P NOS.67 & 68/MDS./17/ :- 26 - : AS THE AO IS DUTY BOUND TO PASS THE CONSEQUENTIAL O RDER IN CONFORMITY WITH THE ORDER OF TRIBUNAL CITED SUPRA AND HE HAS N O DISCRETION OR CHOICE OR TO OVERLOOK THE ORDER OF TRIBUNAL. IN THE PRESENT CASE THE ASSESSEE HAS NOT POINTED OUT ANY MISTAKE IN THE ORD ER OF TRIBUNAL CITED SUPRA WHICH WARRANTS RECTIFICATION IN TERMS O F SEC.254(2) OF THE ACT. IN ABSENCE OF ANY SPECIFIC MISTAKE WHICH WARR ANTS ANY RECTIFICATION WITHIN THE SCOPE OF PROVISIONS OF THE SECTION 254(2) OF THE ACT IN THE ORDER OF TRIBUNAL CITED SUPRA THERE IS NO REASON TO RECALL THE EARLIER ORDER OF TRIBUNAL OR TO DELETE ANY PAR T THEREIN. 22. IN OUR OPINION THE DECISION OF TRIBUNAL HAS NOT TO BE SCRUTINIZED SENTENCE BY SENTENCE TO FIND OUT WHETHE R ALL FACTS HAVE BEEN SET OUT IN DETAIL BY THE TRIBUNAL OR WHETHER S OME INCIDENTAL FACT WHICH APPEARS ON THE RECORD HAS NOT BEEN NOTICED B Y THE TRIBUNAL IN ITS ORDER IF THE ORDER OF THE TRIBUNAL SHOWS THAT IT HAS IN FACT DONE SO THERE IS NO REASON TO INTERFERE WITH THE DECISI ON OF THE TRIBUNAL VIDE PROVISION OF THE SECTION 254(2) OF THE ACT AND WE MAKE IT CLEAR THAT THE AO SHALL PASS THE ORDER IN CONFORMITY WITH THE ORDER OF TRIBUNAL. WITH THIS OBSERVATION WE DISPOSE OFF THE MISCELLAN EOUS PETITIONS FILED BY THE ASSESSEE. M.P NOS.67 & 68/MDS./17/ :- 27 - : 23. IN THE RESULT THE MISCELLANEOUS PETITIONS FIL ED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE PARTLY A LLOWED. ORDER PRONOUNCED ON 29 TH NOVEMBER 2017 AT CHENNAI. SD/ - SD/ - ! . ' #$ % ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER &' / CHENNAI ()* / DATED: 29 TH NOVEMBER 2017. K S SUNDARAM !)+ -./ 0/ / COPY TO: 1 . / APPELLANT 3. ! ! 1 % / CIT(A) 5. /23 --4 / DR 2. / RESPONDENT 4. ! ! 1 / CIT 6. 3$5 6 / GF