ZIN ZARA BUILDERS Vs CTO: KERALA HIGH COURT (Dated: March 5, 2018)
Kerala Value Added Tax - Writ Keywords - Attachment of property - Tax default THE assessees herein are individuals and are spouses. The first assessee is a dealer, who filed returns for the relevant AY. On assessment, the Department alleged that some portion of the assessee's turnover for two AYs had escaped assessment. Duty demands were raised for both AYs. Such orders were confirmed by the appellate authority. The assessees filed the present writ, claiming that some property belonging to them was attached for default in payment of tax. They also claimed to be burdened with other liabilities, which could be liquidated only if they are able to liquidate the attached property. Hence the assessees sought that the attachment of their property be lifted and offered another property as security.
On hearing the writ, the High Court held that, Whether attachment of property for default in tax payment can be lifted, where the assessee needs to liquidate the attached property, and willingly offers another property of equivalent value as security - YES: HC
++ the liability of the first assessee under the Act is only about Rs 21,00,000/-, and the said liability of the first assessee has not become conclusive. Also, the property of the second assessee which the assessees are offering as a security for the liability is more than Rs 40,00,000/-. Moreover, one of the respondents is prepared to purchase the property of the first assessee subject to the charge of the State. Hence, the second assessee shall execute appropriate documents before the third respondent to furnish her property referred to in the writ petition as security for the amounts due from the first assessee and surrender the original title deed of the property. The first assessee shall pay a sum of Rs 5,00,000/- towards the liability subject to the outcome of the appeals pending before the Tribunal. On compliance of direction Nos.(i) and (ii), the third respondent shall lift the attachment over the property of the first assessee.
Assessees' Writ Petition Allowed
2018-TIOL-610-HC-MAD-CUS
NANDI MARKETING Vs DGFT: MADRAS HIGH COURT (Dated: January 29, 2018)
DGFT - the assessee imported toys - The consignment was detained by the Customs authorities - An order was passed directing examination of the consignment - Hence the present writ seeking release of the goods. Held - the assessee cannot claim that the DGFT Notfn directing examination of the goods, would be inapplicable, since such Notfn was made public after the consignment was dispatched - This court in Cascade Energy Private Limited Vs. Union of India and Ors. had held that date of uploading in the Electronic Gazette was inconsequential and the date of notification would be the date on which it comes into force - Hence the cargo cannot be released without appropriate testing at the prescribed lab - The assessee claimed that due to the variety of toys, the testing process would be long and expensive - Hence Department directed to draw representative samples of the goods - Upon testing and considering final report, the Department may pass appropriate order - Assessee to bear cost of testing: High Court (Para 2,3,4,6,7)
Writ Petition Dismissed
2018-TIOL-605-HC-DEL-CUS
SAIL Vs DESIGNATED AUTHORITY DIRECTORATE GENERAL OF ANTI-DUMPING: DELHI HIGH COURT (Dated: February 13, 2018)
Anti Dumping Duty [ADD] -Writ Petition questions and seeks the quashing of para 7 of Annexure-1 of the Anti-Dumping Rules as being ultra vires section 9A of the Customs Tariff Act, 1975 [Act] and for a direction to not levy ADD charged on the graphite electrode imported from China - according to the petitioner, the CESTAT incorrectly assessed the ADD without proper appreciation of the law - petitioner also consequently questions the CESTAT's final order dismissing its appeal and confirming the findings of the Designated Authority for imposition of ADD on Graphite Electrode [the product]
HELD - The Supreme Court, in its judgment dated 17.4.2017, observed that no challenge to the validity of any provision of the Anti-Dumping Rules was laid before the Appellate Tribunal - the Supreme Court held that the findings recorded by the Appellate Tribunal are findings of fact - in the present proceedings, the petitioner again questions the CESTAT's order dated 6.9.2016, this time saying that the determination of 'normal value' as provided in para 7 of Annexure-1 read with rule 10 of the Anti-Dumping Rules is ultra vires section 9A of the Act - the question cannot be considered as it would be affording the petitioner a fresh round to litigate the self same cause of action - the petitioner was well aware about the applicable law - yet, in the previous round of litigation, it did not urge about the alleged ultra vires of the said rule - res judicata and constructive res judicata are well recognized principles that the courts in India follow, to screen out multifarious litigation by the same parties on the same issue - its failure to do so, now results in this Court's exercise of discretion not to entertain the challenge on substantive basis - the Supreme Court, in its decision, has already examined and apprised the correctness of the method employed by the Designated Authority of determining the normal value of electrodes within China by comparing individual work undertaken by an exporter vis-a-vis the export price imposed - the Apex Court did not find any repugnancy in the congruity of the Anti-Dumping Rules with the Act, specifically in the determination of the normal value - it is established that there emerges no lack of legislative competence to make the Anti-Dumping Rules or violation of fundamental rights or any provision of the Constitution of India - neither has there been any repugnancy to the laws of the land or demonstration of manifest arbitrariness/unreasonableness - per contra, the levy, exactitude of the rate of the ADD, and the correctness of the procedure to be followed by the specific authorities has only been reaffirmed to subscribe to the true purpose of the Act - thus, the Anti-Dumping Rules cannot be impugned as contrary to the larger purpose and spirit of anti-dumping law, a determining requirement in deciding the legitimacy of sub-ordinate legislation - therefore, it logically follows, that the petitioner's submission that the determination of 'normal value' as provided in para 7 of Annexure-1 read with rule 10 of the Anti-Dumping Rules is ultra vires section 9A of the Act is invalid - it is now established that there is no inconsistency or non-conformity of rule 10 of the Anti-Dumping Rules (that provides that normal value, export price and margin of dumping is to be determined taking into account the principles laid down in Annexure 1 to these Rules) with section 9A of the Customs Tariff Act, and the subordinate legislation in the present case is not contrary to the purpose of imposing ADD as imbibed in the parent Act - it is also evident that the petitioner is seeking to agitate the same grievance, but now in the guise of challenging the vires of rules, which are alleged to have prejudiced its case - this challenge could have been made at the stage when the grievance first arose, i.e., when the initiation of anti-dumping proceedings was undertaken - having undertaken the entire process, participated in the process and suffered an order on the merits, which was upheld by the Supreme Court, it is now not open to the petitioner to initiate a fresh round, albeit with a new ground, on the pretext that it seeks to challenge the vires of a rule - the petition lacks merit, it is accordingly dismissed : HIGH COURT [para 5, 6, 7, 8, 13, 14, 15, 16, 17, 18]
Writ Petition dismissed
2018-TIOL-604-HC-KERALA-CUS
CC Vs PARAG DOMESTIC APPLIANCES: KERALA HIGH COURT (Dated: March 14, 2018)
Cus – The respondents had imported Multi Function Devices being Digital Photocopiers and Printers [MFD], which import was alleged to be in violation of the various enactments regulating import; upon which the authorities initiated proceedings for confiscation of goods and imposition of penalties - the Commissioner, by the orders impugned before the Tribunal, imposed redemption fine and penalties with a rider that the redemption of the goods shall solely be for the purpose of re-export as specified in Rule 15(2) of the Hazardous and Other Waste (Management and Transboundary Movement) Rules, 2016 [H&OW Rules] - the Tribunal, by the impugned order, reduced the redemption fine and penalty under section 112(a) of the Customs Act, 1962 and deleted penalties under section 114AA of the Customs Act - the Tribunal having upheld the confiscation, however, directed release of the goods on payment of redemption fine and deleted the condition of re-export as mandated by the Commissioner's order – revenue before High Court (i) Whether the Tribunal was justified in referring to the definition of “waste” under the H&OW Rules to permit release of the goods when the original authority had specifically found the goods to be as defined under “other waste” of the very same Rules ? (ii) Whether the Tribunal was justified in ordering release of goods on payment of redemption fees merely relying on the principles of redemption when the subject goods were prohibited from being imported without sanctions and authorizations as per the Foreign Trade Policy [FTP] framed under the Foreign Trade (Development and Regulations) Act, 1992 [FTDR Act, 1992], H&OW Rules and e-Waste (Management and Handling) Rules, 2011 [e-Waste Rules]? (iii) Whether the Tribunal acted erroneously in law in permitting the release of goods which come under the category of “other waste” as defined in H&OW Rules when an illegal traffic of such goods, under Rule 15, mandates re-export of the goods at the importer's cost or transmission to authorized treatment, storage and disposal facility ? (iv) Whether the Tribunal seriously erred in not looking into the provisions of FTP framed under the FTDR Act, 1992, H&OW Rules and e-Waste Rules ? (v) Whether the Tribunal was justified in releasing the goods, in total disregard to the anti-dumping laws, the import of which were in violation of the mandatory requirements and preventive and precautionary conditions of import of 'other wastes', as defined under the H&OW Rules and e-Waste Rules ? (vi) Whether the Tribunal acted erroneously and in a perverse manner in releasing the goods when the assessee had been indulging in a regular pattern of import of prohibited goods, obtaining release of the same on payment of redemption fees and not complying with the modality of getting registered with the Central and State Pollution Control Boards as also filing of annual returns to the Board; of effective disposal of the goods after use by the consumers, resulting in a habitual non-compliance of the laws of import ? (vii) Whether on the facts and the circumstances of the case and the pattern of similar imports having been made without proper follow up of statutory dictates; the Tribunal acted with total disregard to environment laws and in a perverse manner to find that there was no intentional malfeasance or deliberate default on the part of the assessee ? (viii) Whether the Tribunal was justified in interfering with the redemption fee and penalty applying 'consistent practices' when no such practice is sanctioned by law ? (ix) Whether the decisions relied on by the Tribunal to understand the scope of section 125 of the Customs Act, 1962, was relevant in the facts and circumstances of the instant case where the Tribunal itself had found violations manifest in the conduct of the assessee ? (x) Whether the Tribunal was justified in holding that the goods were not “expressly prohibited” but only restricted thus redeemable under section 125 of the Customs Act, 1962, based on wrong interpretation of the terms “prohibition” and “restriction” HELD – The Tribunal could not have relied on the definition of “waste” under the H&OW Rules to permit release of the goods finding that the goods do not come under that definition - merely for the reason that the subject goods do not come under the definition of “waste”, it cannot be released since they come under the definition of “other waste” and are restricted items requiring authorisation from the appropriate authorities - on the 1st question of law framed, it is found that the Tribunal was not justified in referring to the definition of 'waste' under the H&OW Rules, since the subject goods, MFDs, were 'other wastes' under the said Rules - however, there would be no consequence adverse to the importer merely for the goods being classified as 'other wastes' since then it only means that they are restricted items possible of import if they have a functionality of minimum five years [para 38] With respect to questions raised as nos.(ii) to (vii), it cannot but be observed that the primary document required for import of restricted goods,viz: the Authorisation of the DGFT is not available - the importers do not even have a case that they had applied for one - but the fact remains that even in the teeth of the violation alleged the goods can be redeemed - the violation being evident only to the extent of the authorisation under the FTP, the redemption under section 11 of the Foreign Trade Act alone can facilitate release of the goods - this Court agrees that the Commissioner who has issued the SCN under the Customs Act could not have adjudicated the violation under the Foreign Trade Act and the FTP and in such circumstance ought to have forwarded the files for adjudication to the DGFT - in the consequence of the violation of the Foreign Trade Act and FTP, the Commissioner could not have released the goods nor could the Tribunal do so - however the re-export ordered by the Commissioner was not warranted since even a violation of the FTP permitted redemption of goods - this Court has the solemn duty to apply the correct law as has been declared in paragraph 16 of 2018 (1) KLT 784 (SC) Authorised Officer, S.B.T Vs Mathew - this Court cannot ignore the dictate of the statute though constrained to confirm the order of the Tribunal for release of the goods - hence the questions of law framed is answered in favour of the importer in so far as the violations alleged of the H&OW Rules, the e-Waste Rules, 2011 and e-Waste Rules, 2016 - as far as the violation of FTP is concerned, the question is answered in favour of the importer in so far as the release of the goods since there is a redemption possible by the Adjudicating Authority under the Foreign Trade Act, who has not even been apprised of the violation [para 38, 39] Questions (viii) to (x) relate to the issue of reduction of redemption fee - the Tribunal relied on the consistent practices in reducing the redemption fee and penalty and has relied on two decisions of this Court, Office Devices [2009 (240) ELT 336 (Ker.)] and Navpad Enterprises [2012 (278) ELT 172 (Ker.)] - the principle of redemption fine in lieu of confiscation, as the importer in the afore-cited decision, stated correctly, is with a view “to prevent the importers from earning any profits by such import done contrary to the exemption rules” - this was accepted by the Division Bench of this Court – no need to interfere with the reduction of the redemption fine as made by the Tribunal - admittedly the goods were imported without an authorisation from the DGFT, which was an essential requirement as per the FTP - the Commissioner has thought it fit to impose 20% of the value as redemption fine, obviously without looking into the Foreign Trade Act - the Tribunal reduced it to 10% - this Court would not interfere with that, since the appeal to the Tribunal was only by the importer - the penalty imposed under section114AA of the Customs Act has been deleted by the Tribunal, which is found to be proper - there cannot be any allegation of false or incorrect material, statement or declaration having been produced - the penalty under section 112 (a) of the Customs Act sustained by the Tribunal cannot also be interfered with - on the reasoning above, considering the fact that the goods detained, but for the violation of FTP, are restricted goods possible of importation and even in the teeth of the violation could be redeemed, the release of the goods is directed on payment of the redemption fine as modified by the Tribunal, the penalty under section 112(a) as also a simple bond without sureties for 90% of the enhanced valuation - it is, however, made clear that this Court does not mean to, in any manner, pre-empt the consideration of redemption fine by the DGFT – this Court directs the release on payment of the amounts as above, because the fine that could be imposed by the DGFT for redemption, is the market value for which provision is made by way of security bond - if at all the DGFT imposes fine then the 10% imposed by the Commissioner shall be given set-off since then there was no ground on which the Commissioner could have imposed a redemption fine - if not, the violation on import shall be sufficient ground for the redemption fine, as imposed by the Commissioner, since the DGFT either has to impose fine at the market value or decide not to confiscate the goods and then release the goods without any condition - the question of law at (viii) to (x) are answered in favour of the importer subject, however, to the proceedings before the DGFT - if the release is not effected within 90 days then the Commissioner would be entitled to sell the goods to any person with EPR under the e-Waste Rules, 2016 and all consequences under the Customs Act and the Foreign Trade Act would follow - de-hors that, the files would be transmitted to the DGFT for adjudication under the Foreign Trade Act within two weeks - the appeals are partly allowed : HIGH COURT [para 40, 41, 42, 43 ]
Appeals partly allowed
2018-TIOL-501-ITAT-DEL + Story
ACIT Vs SAMSUNG INDIA ELECTRONICS PVT LTD: DELHI ITAT (Dated: March 15, 2018)
The assessee company filed return for relevant AY, claiming deduction u/s 10A of Act. The case was selected for scrutiny by issuance of notice u/s 143(2) which ensued passing of assessment order u/s 143(3), at a huge income as against the loss reflected in return filed. But the AO had allowed the claim of deduction u/s 10A. Post passing of such an order, assessee had filed application u/s 154 and on such an application, order was passed u/s 154/143 (3) and revised income was assessed. After completion of the assessment, the assessee's case was sought to be reopened u/s.147 by issuance of notice u/s 148 for the reason that mistake had occured in allowance of deduction u/s 10A and their was escapement of income. The assessee objected to the reopening of assessment u/s 147 on the ground that it was barred by limitation and based on "change of opinion" which was not permissible in law. The AO rejected the assessee's objections on the ground that due law had been followed for reopening the case. AO held that freight and insurance on export was not deducted from export turn over and this had resulted business loss to the assessee. Therefore, deduction u/s 10A was not allowable to the assessee. Therefore an amount of Rs. 2,09,37,331/- claimed and allowed to the assessee during the course of original assessment u/s 143(3) was being disallowed and added back to the total taxable income of the assessee. On appeal, CIT(A), deleted the addition on merits. The CIT(A) held that AO was wrong in reopening the assessment u/s.147.
On appeal, Tribunal held that,
Whether reopening of assessment is valid if assessee has made full and true disclosure of all the material facts relevant for the claim u/s 10A - NO : ITAT
Whether if entire turnover of the software sale is through online transmission and no expenditure is incurred towards freight and insurance then reassessment on ground that freight and insurance on export is not deducted from export turnover is wrong - YES : ITAT
++ all material facts clearly indicate that not only in the return of income but also during the course of the original assessment proceedings, the assessee had made full and true disclosure of all the material facts relating to computation of deduction u/s.10A; working of freight and insurance that it pertains to the entire business and not to the undertaking; and also the calculation of the total turnover of the business along with calculation of deduction from the profit of the undertaking. Not only that, such a disclosure and material facts have been examined by the AO during the course of the assessment proceedings, and after such examination, assessee's claim for deduction has been accepted. Now the assessee's assessment has sought to be reopened on the ground that 'freight and insurance' on exports has not been deducted from the export turnover and that is the reason why it has resulted into business loss and hence deduction u/s.10A should have been disallowed completely. From a bare perusal of the "reasons recorded", first of all, it is noticed that Assessing Officer has referred to the records which were already available at the time of original assessment and secondly, he has held that deduction u/s.10A should have been disallowed by the Assessing Officer and such a mistake has resulted into incorrect allowance. After ascribing such a failure in the original assessment order, he mentions that escapement of income has been by the reasons of failure on the part of the assessee to disclose full and true all material facts. Nowhere has he brought out even remotely as to what was the failure on the part of the assessee in making the true and full disclosure. Mere stating these words will not suffice, because Assessing Officer while acquiring jurisdiction u/s 147 beyond the period of four years from the end of the relevant Assessment Year for reopening an assessment which has been completed u/s.143(3) in terms of proviso, can acquire jurisdiction only when the condition precedent given in the proviso has been satisfied, that is, firstly, there is a failure on the part of the assessee to file return of income u/s.139 or in response to notice issued u/s.142(1) or Section 148; and or secondly, there has been failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year. If such conditions are not satisfied then assessment completed u/s. 143(3) cannot be reopened beyond the period of four years. It appears that Assessing Officer has blindly gone by the objections raised by the Revenue's Audit party without his own independent application of mind or the actual verification of the assessment records;
++ AO in the course of the original assessment proceedings had raised the query on deduction u/s.10A to which assessee had duly responded and explained the entire computation and this goes to show that the assessee has disclosed full and true disclosure of all the material facts relevant for the claim of deduction u/s.10A. The deduction of Section 10A has been claimed in respect of an undertaking which is completely into computer software export and whether the freight and insurance at all pertains to such an export turnover or to total turnover of the business has neither been examined by the Assessing Officer nor has he applied his mind at the time of assuming the jurisdiction u/s.147. Freight and insurance if at all will come into the picture, once there is a physical movement in the form of hard-discs/CDs etc. The entire turnover of the software sale pertaining to the STPI unit has been stated to be made through online transmission only and no expenditure has been stated or found to be incurred by the company towards freight and insurance. When all these facts are there on record, then where is the question of either failure on the part of the assessee to disclose fully and truly all material facts or any wrong or incorrect allowance of deduction given by the Assessing Officer at the time of original assessment proceedings. The duty cast upon the assessee is only to disclose truly and fully all material fact necessary for computation of its income and what legal inference which has to be drawn on such material fact is upon the Assessing Officer. If Assessing Officer on perusal of the entire material fact disclosed and after raising a specific query has accepted the computation of the claim, then there cannot be any failure ascribed to the assessee so as to warrant acquiring of jurisdiction for reopening the assessment beyond the period of four years in terms of proviso to Section 147. Here in the "reasons recorded" the Assessing Officer has simply tried to use the phraseology appearing in the proviso to Section 147, without even actual examination as to what is the actual failure on the part of the assessee. Though there are catena of decisions both on the issue of, what is the meaning of failure on the part of the assessee to disclose fully and truly all material facts; and also on the issue of 'change of opinion' which has been elaborated and discussed in the impugned order and also referred and relied upon by the parties in the open court, therefore, we are not referring to these judgments as these proposition are quite settled. On the facts and the record itself, we hold that there is no failure on the part of the assessee in terms of proviso to Section 147, and therefore, the CIT (A) has rightly held that reopening of assessment u/s.147 in terms of aforesaid "reasons recorded" is unjustified in law. Thus, order of the CIT (A) on the issue of validity of the reopening is upheld and the grounds raised by the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed.
Revenue's appeal dismissed
2018-TIOL-496-ITAT-MUM + Story
DCIT Vs KOTAK MAHINDRA BANK LTD: MUMBAI ITAT (Dated: February 28, 2018)
Income Tax - Sections 10(38), 14A, 36(1)(vii), 36(1)(viia), 143(3) & Rule 8D(2)(ii)
Keywords - Dividend income - Disallowance of bad debts - Employees State Option Plan - Claim of expenditure on ESOP - Investment in shares.
A) The assessee company had filed return for relevant AY. The assessee had made investment in shares, subsidiaries and joint ventures and received an exempt income u/s 10(38) of the Act. The AO noticed that the assessee had worked out expenses relatable to exempt income at Rs. 24,07,046/- as inadmissible in view of the provisions of section 14A read with rule 8D(2) of the Rules. The AO rejected the suomoto disallowance made by the assessee and computed the disallowance in respect of interest paid at Rs. 23,73,05,873/- under Rule 8D(2)(ii) and 0.5% of average value investments of Rs. 1,88,46,862/- under Rule 8D(2) (iii) of the Income Tax Rules. On appeal, CIT(A) partly allowed the claim of assessee. Both Revenue and assessee filed appeal before Tribunal.
B) According to AO, the assessee had claimed full bad debts of Rs. 105,67,43,526/- u/s 36(1)(vii) over and above the claim and deduction u/s 36(1)(viia) of the Act. According to AO bad debt allowable to the assessee was nil and hence, the entire bad debts of Rs. 105,67,43,526 added to the total income of the assessee. On appeal, CIT(A) deleted the addition.
C) The assessee claimed expenditure on ESOP by debiting the same to P & L account amounting to Rs. 48,58,60,549/- on the ground that the liability on account of ESOP had been crystallized in the year when the ESOP had been vested and/or exercised during the year under assessment. in view of the decision of Bangalore Tribunal, Special Bench of ITAT in the case of Biocon Ltd. Vs. DCIT. The AO disallowed the claim of assessee on the reason that department had not accepted the decision of Tribunal in special bench in the case of Biocon Ltd. and hence, he disallowed present amount. On appeal, CIT(A), allowed the claim of the assessee. Aggrieved, Revenue filed appeal before Tribunal.
On appeal, the Tribunal held that, Whether strategic investments cannot be included while making disallowance u/s 14A of Act - YES : ITATWhether if assessee's investments in instruments giving interest free income is in commensurate with that the interest free funds available, the Revenue should not make any disallowance u/s 14A of Act - YES : ITAT
++ the assessee has availability of sufficient own funds which was claimed by assessee before AO as well as before CIT(A). The company has own funds of Rs. 7945.94 crores as on 31-03-2012 as per financial accounts and out of which company has made temporary investments in mutual funds and earned dividend income. The assessee has made investment of Rs. 342.54 crores as on 31-03-2012 in subsidiaries and associate companies as on 31-03-2012. In view of these facts, subject to limited purpose of verification of facts whether the assessee's investments in instruments giving interest free income is in commensurate with that the interest free funds available, the AO will not make any disallowance qua that. Secondly, the AO will not include the strategic investments while computing these disallowances. The AO will accordingly compute the disallowance if any. Accordingly, this issue of Revenue's appeal is dismissed and that of the assessee is allowed subject to verification;
Whether a person can claim bad debts u/s 36(1)(vii) over and above the claim and deduction u/s 36(1)(viia) of the Act as this deduction is independent provision - YES : ITAT
++ the tribunal in earlier years followed the judgment of Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT, wherein it was held that the assessee was entitled for deduction u/s 36(1)(vii) read with section 36(2)(v) of the Act and also this deduction is independent of provisions made in section 36(1)(viia) of the Act. Accordingly, CIT(A) has rightly allowed the claim of the assessee. This issue of Revenue's appeal is also dismissed;
Whether claim of expenditure on ESOP should be allowed following the decision of Special Bench' of the Tribunal in similar issue when the order of Tribunal is neither set aside nor stayed by the High Court - YES : ITAT
++ counsel for the assessee stated that this issue was covered by Tribunal's decision in assessee's own case for AY 2009-10 wherein it was held that " We find that the A.O while framing the assessment had specifically observed that the claim of the assessee towards entitlement of discounted premium on ESOP's as an expenditure under sec. 37(1) was though found to be in accordance with the principle laid down by the 'Special Bench' of the Tribunal in the case of Biocon Ltd. however, as the order of the 'Special Bench' of the Tribunal had not been accepted by the department and had been assailed before the High Court of Karnataka, therefore, the claim of the assessee as regards allowability of discounts on ESOP's could not be accepted. We are unable to persuade ourselves to subscribe to the aforesaid view of the A.O that the order of the 'Special Bench' of the Tribunal was not to be followed for the reason that an appeal had been filed by the department against the said order before the High Court of Karnataka. We find that it is not the case of the department that either the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. had been set aside or the operation of the same had been stayed by the High Court. We are unable to comprehend that as to how the A.O despite conceding that the claim of the assessee as regards allowability of the discount of ESOP's was in accordance with the principle laid down by the 'Special Bench' of the Tribunal in the case of Biocon Ltd., could still decline to adjudicate the issue under consideration in terms with the order of the 'Special Bench'. We are seriously taken aback by the aforesaid observations of the A.O, and are of a strong conviction that as on the date on which the assessment was framed, the order of the 'Special Bench' of the Tribunal did hold the ground, therefore, he remained under a statutory obligation to have passed his order in conformity with the view taken by the 'Special Bench', which we find had also been followed by the jurisdictional Tribunal, viz. ITAT, Mumbai in the case of Mahindra and Mahindra Ltd. We are afraid that the conduct of the A.O in declining to follow the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd., which as observed by us had neither been set aside or stayed by the High Court has to be deprecated. We find that the CIT (A) duly appreciating the serious infirmity in the order of the A.O, therein going by the principle of judicial discipline had set aside the order of the A.O by observing that the issue under consideration was covered by the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. . We find that the department had assailed the order of the CIT (A) before us for the reason that the latter had erred in directing the A.O to follow the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. We would not hesitate to observe that it is absolutely beyond our comprehension that as to how the department could be aggrieved with the order of the CIT (A) who had set aside the observations of the A.O which were palpably found to be in serious contradiction of the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. We may herein clarify that neither anything has been placed on record nor averred before us which could persuade us to conclude that the order of the 'Special Bench' of the Tribunal in the case of Biocon Ltd. had either been stayed or set aside by the High Court of Karnataka, or a view taken by the 'Special Bench' no more holds the ground on account of a contrary view taken by any other High Court. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to accept the ground of appeal raised by the revenue before us, therefore, finding no infirmity in the well-reasoned order of the CIT (A), uphold the same." Respectfully following the Tribunal's decision in assessee's own case, it was decided to confirm the order of CIT(A) and dismiss this issue of Revenue's appeal. In the Result, the appeal of the Revenue is dismissed and that of the assessee is allowed.
Revenue's appeal dismissed
