Judgment:
1. The appeal has been directed by the Revenue against the order of the CIT(A) dt. 28th Nov., 1997 pertaining to asst. yr. 1994-95.
2. In the sole ground, the Revenue has challenged the direction of the CIT(A) to allow deduction under Section 80-I of the Act despite the fact that the product being manufactured by the assessee came under the XIth Schedule of the Act.
2A. Briefly, the facts of the case are that the assessee company is engaged in the production and manufacture of photo colour films. When the assessee claimed deduction under Section 80-I/80-IA of the Act the same was denied by the AO on the ground that the product manufactured/produced by the assessee fell in XIth Schedule of the Act.
On appeal the CIT(A) allowed the claim of the assessee by observing that in asst. yr. 1990-91 he has allowed the claim of the assessee.
This finding of the CIT(A) has been challenged before us. While learned Departmental Representative supported the order of the AO the learned Counsel supported the order of the CIT(A).
3. We have considered the rival submissions. Section 80-I/80-IA provides for deduction of the profits derived from industrial undertaking. Sub-section (2) provides for deduction in cases where the industrial undertaking manufactures or produces an article or thing not being any article or thing specified in the list in XIth Schedule. The AO felt that the items manufactured/produced by the assessee fell in the list in XIth Schedule and denied the deduction. But, we find that in asst. yr. 1990-91 when the claim was denied by the AO the same was allowed by the CIT(A). This finding has not been reversed by the Tribunal. Similarly, in asst. yr. 1991-92 when the AO denied the assessee's claim, the same was allowed by the CIT(A). In the asst. yrs.
1992-93 and 1993-94, the AO himself has allowed deduction by his order under Section 143(3) of the Act. The facts being the same there appears to be no apparent reason for departure from the earlier finding.
Hon'ble Delhi High Court in the case of CIT v. A.R.J. Security Printers (2003) 183 CTR (Del) 323 : (2003) 131 Taxman 297 (Del) has held that following the principles of consistency if there was no change in the facts or no new material has been brought on record, no departure from the earlier finding was warranted. Keeping in view the ratio down by the Hon'ble jurisdictional High Court, we hold that the CIT(A) has rightly allowed the claim of the assessee. While upholding his finding we dismiss the grounds of appeal raised by the Revenue.
1. I have carefully gone through the order proposed by my learned Brother. After a careful perusal of the same, I regret that I am unable to concur with the reasoning and conclusion of my esteemed colleague.
Being of the view that the issue cannot be considered to have attained finality by the order of the CIT(A) in asst. yr. 1990-91, as such, the issue of deduction of about Rs. 4.41 crores, to my mind, needs to be considered vis-a-vis the specific provisions of the Act which have been invoked by the AO and which are as per the ground raised by the Revenue before us. Thus, being of the view that the specific provisions of the Act under challenge vis-a-vis the facts of the case have to be considered, after due deliberations and mutual discussions, I propose to write my separate order for the reasons given hereinafter.
2. Before proceeding to deal with the issue in the present appeal, it would be pertinent first to bring out the specific ground raised by the assessee before us which reads as under: On the facts and in the circumstances of the case the CIT(A) has erred in directing the AO to allow the assessee's claim of deduction of Rs. 4,41,87,425 under Section 80-I despite the fact that the products (photographic apparatus and goods) being manufactured by the assessee came under the XIth Schedule and that therefore the assessee was not eligible for deduction under Section 80-I.3. The relevant facts pertinent to the issue before us for the sake of clarity may also be briefly referred to.
4. A perusal of the assessment order brings out the fact that the assessee company is dealing in production and manufacture of photo colour films. It is seen from a perusal of the same that vide order-sheet entry dt. 19th Dec, 1996, the assessee was required to justify its claim for deduction under Section 80-I of the IT Act. The AO in the course of the assessment proceedings brought the attention of the assessee to the provisions of Sections 80-I and 80-IA r/w XIth Schedule of the IT Act, 1961. According to the AO, as per the said Schedule, photographic apparatus and goods were not entitled to deduction under Section 80-I of the Act. Confronted with this, the assessee's counsel relied upon the order of the CIT(A)-XVI in assessee's own case for asst. yr. 1990-91 wherein he had concluded that the colour roll film was not a Schedule XI entry. It was also pointed by him that the then AO, Range-I had accepted the order of the CIT(A) and had not recommended second appeal on this issue.
5. Considering these submissions, the AO in the year under consideration did not accept the explanation offered by the assessee and rejected its claim for deduction under Section 80-I giving the following reason: While a particular provision may be interpreted in one way or the other, it cannot change the clear-cut motive and impute of the legislature. The learned CIT(A) has argued that cinematographic films had been excluded from the list of articles at point No. 9 of XIth Schedule. Hence, the definition of photographic apparatus and goods would not include in its ambit the colour roll films. This interpretation is difficult to accept. While cinematographic films and projectors as shown at point No. 9 of the XIth Schedule were in respect of cinema and big screen and subsequently the cinematographic films were removed from the list of XIth Schedule because the educational documentaries' were made on these films and the Government wanted to give impetus to this industry, by no stretch of imagination can we take out the colour roll films from the definition of photographic apparatus and goods as contained in XIth Schedule at point No. 10. When we talk of photographic apparatus and goods, any layman would say that while apparatus would include camera and zoom lense, etc., photographic goods would definitely include the photographic films. I would, therefore, disallow the assessee's claim for deduction under Section 80-I.7. In the appellate proceedings, it was again pointed out on behalf of the assessee that the CIT(A) in asst. yr. 1990-91 had an occasion to consider the Entries 9 and 10 in Schedule XI of the IT Act while considering the deduction under Section 32A(2)(b)(iii)/32AB(4)(e). It was also canvassed before him that the said order of the CIT(A) had not gone in for second appeal before the Tribunal. The arguments were also advanced that Section 80-I can be examined only in the initial year i.e. 1992-93 and this in fact was the third year of the claim. It was also canvassed that the Department in Section 143(3) proceedings in asst. yr. 1991-92 had accepted the claim of the assessee by way of a speaking order. It was also canvassed that the AO had not given any specific opportunity disallowing the claim under Section 80-I and has only asked for justifying the claim under Section 80-IA of the Act.
8. Considering these arguments, the CIT(A) proceeded to delete the addition made by way of disallowing the deduction claimed by the assessee vide paras 7 and 8 of his order observing as under: 7. I have considered the submissions. Section 80-I of the IT Act provides that where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, a deduction from such profits equal to 20 per cent (25 per cent in the case of the company) thereof is to be allowed provided, the industrial, undertaking does not manufacture or produce any article specified in the list in the Eleventh Schedule. The relevant entries in the Eleventh Schedule at serial 9 and 10 are as below: 8. Entry 9 was later (w.e.f. 1st April, 1989 by Finance Act, 1988) substituted by the words 'projectors', that is to say cinematographic films were taken out of the purview of the Eleventh Schedule. The case of the D.C. is that the photo colour films which the appellant is manufacturing falls under Entry 10 of the Eleventh Schedule, as according to him photographic apparatus and goods would include camera and zoom lense, etc., and photographic goods would definitely include photographic films. My predecessor in appellant's own case for asst. yr. 1990-91 (Appeal No. 63/1993-94) vide order dt. 28th Feb., 1994 held on this issue as below: I have carefully considered the arguments put forth by the Authorized Representative which have no doubt great force. After the exclusion of the term cinematographic films from Entry No. 9 colour film which is normally used in an important sector of tourism there does not appear to be any justification in holding the view that colour roll films is included in XIth Schedule. All films whether cinematographic and colour films must be taken in one category and since the legislature has excluded the term cinematographic films from Entry No. 10 of the Eleventh Schedule, the AO was not justified in holding the view that the machineries purchased by the appellant relating to manufacturing of colour roll films where machineries covered by the provision of Eleventh Schedule of the IT Act.
10. Learned Departmental Representative relying upon the assessment order and Entry No. 10 in Schedule XI of the IT Act contended that the action of the AO in the facts and circumstances of the case was justified. With regard to the fact whether the 1990-91 order of the CIT(A) had become final or not, he was unable to state. It was his contention that photographic apparatus and goods would necessarily include the films. As such, reliance in the ultimate analysis was placed upon the provisions of the Act and the assessment order.
11. Learned Authorised Representative, Mr. Ajay Vohra placed heavy reliance upon the impugned order. It was also contended by him that it is a fact that order for asst. yr. 1990-91 had not been appealed against by the Revenue which fact was brought to the notice of the AO also. As such, it was contended, as far as the issue is concerned, it is decided and finally concluded in favour of the assessee. It was further contended that in asst. yr. 1991-92, the AO has allowed the claim of the assessee. Reliance was placed upon pp. 19 to 26 of the paper book containing the Section 143(3) order. Attention was also invited to the assessment order for asst. yr. 1992-93 placed at pp. 27 to 32. Similarly, assessment orders for 1993-94 and for 1995-96, CIT(A)'s order were also referred to.
12. In the light of the above background, the issue which arises for consideration is that can the appeal of the Revenue challenging the deletion of the addition made by way of disallowance of deduction under Section 80-I of the magnitude of Rs. 4,41,00,000 be dismissed purely on account of the fact that the then AO did not challenge the appellate order of the CIT(A) in asst. yr. 1990-91. To my mind, on a careful analysis of the past history, it emerges that the issue of deduction under Section 80-I on the basis of entry in the XIth Schedule has never been examined by the Tribunal. At the cost of repetition, it may be mentioned again that the issue was concluded by the CIT(A) in asst. yr.
1990-91 which for some reason was not challenged by the then AO and in subsequent years, as per the submissions of the learned Authorised Representative, the AO himself has followed the interpretations given by the CIT(A) in asst. yr. 1990-91 in Section 143(3) proceedings.? 13. However, on an examination of the issue, it is borne out that there is a slight twist in the factual history as presented before the Bench.
From the copy of the CIT(A)'s order for asst. yr. 1995-96 at p. 3, para 28, the same appended at p. 38, it is seen that the assessee went to the High Court in Section 147/148 proceedings for asst. yrs. 1991-92 to 1993-94. Thus, it can be seen that the picture unfortunately is not as clear as we were led to believe as far as the assessee's version is concerned and conversely not as muddy as far as the Revenue is concerned. The Department has not acted irresponsibly and absurdly by erratically having woken up one fine morning to take a contrary stand in the year under consideration as has been naively presented to us on behalf of the assessee. It has been canvassed before us while advancing the argument that the issue was settled in favour of the assessee by the order of the CIT(A) in asst. yr. 1990-91 and in subsequent years, the Department has quietly accepted the stand and only in asst. yr.
1993-94, it has for no reason rejected the claim of the assessee. From a copy of the CIT(A)'s order for asst. yr. 1995-96 at p. 3, para 2 it is seen that in Section 147 proceedings for 1991-92 to 1993-94 the issue travelled to the High Court. From a perusal of the judgment of the High Court, it is seen that in asst. yr. 1991-92, the assessee did not claim deduction under Section 80-I in its original return filed and similarly, in original return filed by the assessee in asst. yrs.
1992-93 and 1993-94 Section 80-I deduction was not claimed. However, after the passing of the order dt. 28th Feb., 1994, of the CIT(A) in asst. yr. 1990-91, the assessee claimed deduction under Section 80-I by way of revised return in asst. yrs. 1991-92, 1992-93 and 1993-94 and these deductions were allowed by the AO following the CIT(A)'s order for asst. yr. 1990-91. The said appellate order at the cost of reiteration it is worth stating for some reason best known to the then AO was not appealed against by the Revenue and it is this inaction on which the principle of consistency is being relied upon by the assessee to claim this deduction.
14. It may be pertinent to bring out the fact that it were these assessment orders for 1991-92 and 1993-94 where the assessee had filed revised returns, that the AO subsequently issued notice under Section 147/148 of the Act against which, the assessee had invoked the writ jurisdiction of the Hon'ble High Court.
15. Their Lordships, in the circumstances, while disposing the writs of the assessee, quashed the reopening holding that between the date of orders of assessment sought to be reopened and date of forming opinion by the AO nothing new happened, no change of law, no new material came on record and no information was received. As such, the reopening was quashed. Their Lordships while disposing the writ did not consider the Entries 9 and 10 of Schedule XI of the IT Act vis-a-vis Section 80-I as there was no occasion for them to consider the same in writ of certiarari as the writs could be disposed on the preliminary issue itself, namely, whether the AO had reason to believe that the income of the assessee had escaped assessment. It may be pertinent to state that a superior Court while exercising its writ jurisdiction in a writ of certiorari does not supplant its reasoning on the impugned order. The said writ is destructive in nature and as a result of the same, the impugned order is quashed and no new order as such stands. Accordingly, the Section 147/148 reopening was quashed by their Lordships in the writ of certiorari and the relevant entries of Schedule XI were not gone into. Reference may be made for the said purpose to Jindal Photo Films Ltd. v. Dy. CIT and Anr. .
16. Accordingly, in this background, it is seen that the provisions of the Act vis-a-vis the dispute in the present proceedings were not considered by their Lordships. In the circumstances, it can be seen that on this issue in the case of the assessee, it is coming for the first time by way of the present appeal before the Tribunal. Thus, for the reasons given hereinabove, I am constrained to write my separate order.
17. To my mind, the issue cannot be decided solely relying upon the principles of consistency without referring to the relevant provisions.
The fact that the CIT(A)'s order for 1990-91 has not been appealed against by the Revenue for the reasons best known to them cannot pre-decide the present appeal filed by the Revenue. As I have already observed, the present appeal cannot be decided purely on the basis of action or inaction on the part of a particular AO who, in his wisdom, thought that the issue is not worth filing an appeal against. Once we are seized of an appeal filed against a particular order specifically challenging that a deduction has not rightly been granted making specific references to a particular section of the Act then, we are necessarily required to consider and examine the provisions of the Act, the arguments, facts and position of law vis-a-vis the ground raised.
19. Before proceeding any further, it would be necessary to briefly refer to Section 80-I of the Act which deals with deduction in respect of profits and gains from industrial undertakings after a certain date, etc.
20. In the present appeal, we are only concerned with Section 80-I(2)(iii). As such, only provisions relevant for adjudication on the issue are being reproduced: 80-I Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. (1) ...
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely: (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of (ten) years next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; Provided further that the condition in Clause (Hi) shall, in relation to a small-scale industrial undertaking, apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted.
21. In the present appeal, we are not concerned with the percentage of deduction and confine ourselves to the issue before us. It is seen that the deduction is to be given to an assessee who fills all the conditions listed in Section 80-I(2). In the present appeal, we are concerned only with the requirements of Section 80-I(2)(iii). A perusal of it shows that an assessee can claim deduction under the said section only if he is not manufacturing or producing any article or thing not listed as an article or thing specified in the Eleventh Schedule. A perusal of the second proviso given below Section 80-I(2) also shows that the legislature has been careful to create an exception vis-a-vis an assessee who produces or manufactures any article or thing specified in the list in the Eleventh Schedule if the assessee is a small scale industrial undertaking. As far as we are concerned, it has not been canvassed either before the authorities below or before us that the assessee falls in the exception carved out by the legislature in Section 80-I(2)(iii). A perusal of the list of articles or things given in the Eleventh Schedule shows that before the Finance Act, 1988, Entries 9 and 10 were as under:Entry 9.
Cinematograph films and projectors.Entry 10.
Photographic apparatus and goods.
22. It is necessary to appreciate that the Entry 9 was subjected to an amendment by the Finance Act, 1988 w.e.f. 1st April, 1989 and it was substituted in the following terms: 23. At this juncture, it may be relevant to briefly refer to the relevant Explanatory Notes on Provisions Relating to Direct Taxes in the Finance Act 1988 1(1989) 76 CTR (St) 93 : (1989) 176 ITR (St) 193] while referring to the exclusion of cinematograph films from the Eleventh Schedule; para 46.1 of the same may be reproduced: 46.1 The Eleventh Schedule to the IT Act contains a list of non-priority articles and things to which the benefits of provisions of Section 32AB and other sections of the Act are not applicable.
Item 9 of this Schedule relates to 'cinematograph films and projectors'. The articles that fall under the category of cinematograph films cater to the priority needs of the country in various vital fields like medicine, communication and education.
Cinematograph films have, therefore, been excluded from the non-priority list of articles or things from the Eleventh Schedule.
'Projectors' will, however, continue to be included as an item in the Eleventh Schedule. (Section 53 of the Finance Act, 1988).
24. Thus, the position of law as it stands is whereas Entry 9 was subjected to amendment for a specific purpose. Entry 10 continued to remain the same. The legislature in its wisdom for a specific purpose has considered to take "cinematograph films" from the list of items on which, earlier, deduction was not allowable for the reason stated in the Explanatory Notes reproduced above.
25. I would briefly like to state that the principles of consistency, which are generally brought out in a situation like this, would not be relevant as there is ample case law on the issue that each assessment year is an independent assessment year and there is also ample case law on the issue that if an error had been committed once, then, there is no heroism in perpetuating that error. In the facts of the present case, being of the view that the CIT(A) in asst. yr. 1990-91 has committed an error of interpretation of a provision of the Act by resorting to consider what was irrelevant and ignoring to consider what was relevant, the conclusion drawn by him in the circumstances is vitiated.
26. In the present facts of the case, it is not a situation of application of rule of consistency to a particular fact or method adopted by the assessee in valuing or recording its affairs. Here, the issue is pertaining to the interpretation to be given to Entry 10 of Schedule XI of the IT Act and I am of the view that the reasons for amending Entry 9 of Schedule XI of the Act cannot be resorted to for interpreting Entry 10 of Schedule XI of the IT Act which has remained as it was. Accordingly, the rule of consistency will not be relevant and, in fact, there is ample case law on the issue that if an interpretation to a provision of law has wrongly been given, then even in that situation, the rule of consistency will not stand and bar the Courts to correct that error. In the present facts of the case, as has been observed, it is not a case of error of fact but an error of application/interpretation of law which is coming for the first time before the Tribunal. Accordingly, in the circumstances, I am of the view that in the peculiar facts, rule of consistency does not have much sway. The principle of consistency can never be said to stand before the provisions of the Act and as far as this forum is concerned, the appeals are to be decided on facts and law in the light of the guiding principles of the Act and the judicial interpretation given thereto.
The principle of consistency can never be understood to stand in the way of legislative intent before a fact-finding body. It may be pertinent to state that when superior Courts on account of consistency decide an issue then they on account of peculiar facts are not inclined to disturb a settled position on account of consistent facts. However, when the Tribunal is called upon to decide an issue, then facts are required to be addressed and principles of law applicable under the relevant provisions have to be examined since the only view cited before us is the appellate impugned order and no view or decision of the co-ordinate Bench or a High Court is placed before us.
27. It is worth stating that under the scheme of the Act, an assessment may be reopened in Section 147/148 proceedings if the AO has reason to believe that income has escaped assessment or may be reviewed if the CIT on examination of record of proceedings is of the view that the order passed is erroneous and is prejudicial to the interests of the Revenue. Accordingly, in the circumstances, the issue, which is required to be examined, is that if any interpretation of law is given by the AO, then, in Section 147/263 proceedings, the same may be reopened/examined under the relevant provisions. Similarly, if an interpretation of law is given to the facts of an assessee's case which if challenged by the assessee is decided in a particular manner by the CIT(A), then any side aggrieved by the said order can come to the Tribunal. In the situation where the aggrieved party does not come to the Tribunal, then as far as the facts are concerned, the issue could be said to have achieved finality unless the said party shows and demonstrates that on account of some fact/circumstance/advice, etc., it could not or did not appeal against the same. However, in case the issue is challenged as having been settled contrary to the provisions of the Act then, the said interpretation given by the CIT(A) and the action of the then AO not considering it relevant or appropriate to file an appeal against the same cannot and would not be understood to mean and imply that the present appeal filed by the Revenue is to be decided purely on the basis of the CIT(A)'s order for asst. yr. 1990-91 and not referring to the provisions of the Act. The legislature has been very careful in ensuring that benefits under the Act are afforded to what is considered at that point of time a "priority industry".
28. While interpreting the statute, no Court or Tribunal can sit in the seat of legislature and decide what should or should not be a priority industry, let alone the first appellate authority. The fact that while making changes in Entry 9, the legislature in its wisdom considered it necessary to take out the words "cinematograph films" would not mean that Entry 10 also has to be interpreted differently because if that had been the intention, then necessary changes in Entry 10 could also have been easily made. On a perusal of the stated reasons in the Explanatory Notes to the amendment, the reason thereof has been considered to be that cinematograph films cater to the priority needs of the country in various fields like medicine, communication and education. For the said purpose, cinematograph films had been excluded from the non-priority list of articles or things from the XIth Schedule. It is worth noting "Projectors" have continued to be included as an item of non-priority list of article or thing and, as such, are denied the exemption under Section 80-I of the Act. For a Court or a Tribunal let alone the first appellate authority to say that the benefit should also be afforded to the "Projectors" since they perform the function of dissemination and spreading/communicating knowledge in vital fields like medicine, communication and education would be unthinkable. To sit in the seat of legislature while discharging the powers of an appellate authority required to adjudicate upon the issues as per the statute by which the appellate authority itself is governed does not require any case law for support to say that such an act is against all norms of jurisprudence. There being no doubt that Entry 10 on the statute stands as it is and by virtue of it, the industries manufacturing or producing the articles or things therein come in the non-priority sector. "Photographic apparatus and goods" thus by virtue of being in Schedule XI of the Act would not be allowed to claim deduction under Section 80-I.29. In the said situation, the reason given for amending Entry 9, namely, that cinematograph films cater to the vital fields in the priority sector like medicine, communication and education, in these circumstances, by virtue of this reason itself cannot be stretched to include Entry 10. The interpretation that photographic apparatus and goods cannot include photo films cannot be accepted. Being of the view that the cameras and photographic apparatus like zoom lens, etc. can come in the definition of photographic apparatus and "goods" necessarily would include photo films, a common man from the words "photographic apparatus and goods" would understand the inclusion of photo films in the same and to hold that they fulfil a priority need which the legislature has not intended would be going too far. As observed earlier, while discharging judicial function, the powers of the legislature cannot be usurped, as then what is to stop anyone from arguing that even projectors perform a laudable function as such should be given exemption. The photographic films are relatable and relevant for interpretation as goods related to photographic apparatus and is so understood by a layman in common parlance or even taking a technical view the input in the photographic apparatus would necessarily include the photo films and thus bring it in the definition. While adjudicating upon the exemption available under the section, we cannot deal with each and every entry in Schedule XI of the Act by sitting down to decide what to our minds is fulfilling the priority needs in various vital fields like medicine, communication and education. Till the entry stands in the Schedule XI, the claims have to be decided as per the entry in the Schedule and the interpretation to be given thereto. In the facts of the present case, I am of the view that the learned CIT(A) in asst. yr. 1990-91 has not correctly interpreted the relevant entry while interpreting the same for deduction under Section 32AB and deciding Section 32A claim of the assessee. The learned CIT(A) in his order has taken note of Circular No. 528 dt. 16th Dec., 1988 (1989) 76 CTR (St) 69 and has been swayed by the submissions which read as under: It was further urged that all films, whether cinematograph or colour roll films or even graphic art films or x-ray films belong to the same class or genies. Since they are all used to record visual images and their reproduction. In case of cinematographic films (negative) visual scenes are sought through movie-camera, prints are taken on cinematographic (positive) film rolls and through cinema projectors, such visual scenes are reproduced in fast movement in quick succession. Since all such visual scenes are recorded in cinematographic film rolls having large number of frames of equal size, the fast movement of each frame in quick succession on spools in cinema projector reproduces film images of each frame in quick succession, making an illusion that it is a movie though visuals recorded in each frame is still. In colour roll films also, visual images are recorded in frames and are reproduced in the shape of positive prints on colour photographic paper, as against reproduction in case of movies on cinema screen. Thus function-wise the end results are identical. Even in case of graphic art films, or x-ray films, the end user is the same, more or less, recording of visual images.
30. On the basis of these submissions, he came to the following conclusion: There is hardly any distinguishing characteristics between cinematographic films (negative) and colour roll films, as far as their role in photography is concerned. Cinematographic film rolls (negative) which are used in shooting movies with movie camera can also be used to take still photography snaps. The only difference is that movie shot in cinematographic film (negative) is first taken as prints in cinematographic film rolls (positive) before such positive prints can be used in cinema projectors to project and reproduce the visuals on cinema screen, while in case of camera roll, from the negative frames positive prints are taken and visuals recorded are reproduced on colour photographic paper.
There is hardly any justification for treating one kind of film such as cinematographic film, differently from other kind of films, such colour roll films, or x-ray films graphic and photographic colour paper.
In any case all the above kinds of films belonging to the same class, the removal of cinematographic films from the list of non-priority list would imply removal of all films. Films cannot be still regarded as prohibitive articles on the basis that colour roll films would be covered under photographic goods, still retained in Entry No. 10 of the Schedule Eleven. Photographic goods used in just a position with photographic apparatus would take the same colour meaning thereby that photographic goods would relate to accessories, such as lenses, stand, trolly, arch lamps, etc. without which photographic apparatus cannot function effectively and would not necessarily include films, whether cinematographic or colour roll films, x-ray films, graphic art films which belong to a different class altogether.
I have carefully considered the arguments put forth by the Authorized Representative which no doubt has great force. After the exclusion of the term cinematographic film from Entry No. 9 colour film which is normally used in an important sector of tourism there does not appear to be any justification in holding that view that colour roll film is included in XIth Schedule. All films whether cinematographic and colour roll films must be taken in one category and since the legislature has excluded the term cinematographic film from Entry No. 9 of Eleventh Schedule, the AO was not justified in holding the view that the machineries purchased, by the appellant relating to manufacturing of colour roll films were machineries covered by the provision of Eleventh Schedule of the IT Act.
However, after detailed discussion I have held that the appellant is not entitled to investment allowance during the current year and appellant shall be free to claim investment allowance in the next assessment year because whether the appellant is allowed investment allowance in this year or next assessment year does not make any gross total income of Rs. 4,77,27,307 even in asst. yr. 1991-92 after deduction of depreciation claimed as per calculation given by the appellant.
31. In these circumstances, I am of the view that the learned CIT(A) has attempted to sit in the seat of the legislature and decided to extend the reasons for making the amendment in Entry 9 applicable to Entry 10 which the legislature has not changed or altered. However laudable a purpose, photographic films may be performing in different areas and sectors of the economy, it is not for us to decide whether it should form part of the priority industry in the face of the legislature having put it in a non-priority industry. It would not be out of place to state here that while allowing deductions to certain class/things/areas of activities, the legislature is attempting to encourage/boost/promote the said class, area or industry. At times, the purpose may be to encourage more productive use of capital and at times, it may be to encourage industrial activity in a certain area and at other times, for instance, the intention may be to boost a certain sector of economy. While adjudicating the claims, we are confined to the particular enactment and give effect to the intention behind the said enactment of the legislature. However, we cannot supplant, add or delete what was thought fit by the legislature to encourage or boost.
Although it is not relevant for the present proceedings, I would merely like to add by way of caution that whether some deductions had been given to some photo films activity either of the assessee or any other assessee, then, the fact that it came under a small scale industry in the case of which an exception has been carved by the legislature itself, would be a different issue and that aspect anyway has legislative mandate.
32. Before parting, I would briefly like to refer to the judgment cited before us, namely, CIT v. A.R.J. Security Printers of the jurisdictional High Court. Herein, the peculiar facts were different. The consistent orders of the Tribunal in favour of the assessee for Section 80-I deductions which were not challenged by the Revenue were taken into consideration. In those circumstances, the Hon'ble High Court concluded the issue in favour of the assessee.
Whereas in the facts of the present case the issue has come up for interpretation for the first time before the Tribunal, as such, these entries of the XIth Schedule have never been interpreted in assessee's case by any superior Court, accordingly, the rule of consistency followed therein in the peculiar facts of the present case as has already been addressed at length earlier, does not have much weight. It may be added that no decision of any Court interpreting the said entries was brought to our notice by either side.
33. Accordingly, for the reasons given hereinabove, I am of the view that on interpreting Entry 10 of Schedule XI of the IT Act, in order to decide the issue whether claim of deductions under Section 80-I of the IT Act can be allowed or not to the assessee, the claim of the assessee has to be rejected. In the face of Entry 10 in Schedule XI and after considering the order of the CIT(A) in asst. yr. 1990-91 and the relevant provisions of the Act and the reasons recorded in CIT(A)'s order for asst. yr. 1990-91 and the quashing of 147/146 by the High-Court in asst. yrs. 1991-92 to 1993-94, I am of the view that in asst. yr. 1994-95, the action of the AO in Section 143(3) proceedings was justified. As such, I hold that the impugned order deserves to be set aside and the assessment order deserves to be restored. Ordered accordingly.
There is an apparent mistake pointed out by the learned AM in p. 23 para 34 wherein the appeal of the Revenue was inadvertently treated as appeal of the assessee and the following conclusion was given: In view of the fact that it is an appeal of the Revenue, para 34 will read as: As there is a difference of opinion, the matter is being referred to the Hon'ble President of the Tribunal with a request that the following question may be referred to a Third Member or pass such order as the Hon'ble President may kindly decide: Whether on the facts and circumstances of the case, the product (photographic apparatus and goods) being manufactured by the assessee did not come under XIth Schedule of the Act and therefore, the assessee was eligible for deduction under Section 80-I/80-IA of the Act.
On a perusal of the questions referred by my learned Brother on account of difference of opinion referred to the Hon'ble President, Tribunal, I am of the view that it would be more appropriate to refer the following questions as they actually bring out the correct difference of opinion for reference to the Hon'ble President with a request that they may be referred to the Third Member: (1) Whether in the facts and circumstances of the case, for asst.
yr. 1994-95, the learned AM is right in dismissing the appeal of the Revenue on the reasoning that the CIT(A) in asst. yr. 1990-91 has allowed identical claim wherein recurring claim which in the year under consideration is amounting to Rs. 4.41 crores odd pertaining to deduction under Section 80-I/80-IA has been challenged or is the JM correct in allowing the appeal of the Revenue after considering the relevant provisions namely Section 80-I which was not considered at all by the learned AM? (2) Whether the learned AM is correct in rejecting the appeal of the Revenue wherein a recurring issue involving provisions of Section 80-I/80-IA are involved without considering the application of the relevant provisions to the facts and circumstances of the case or is the JM correct in considering the provisions of the Act and thereafter decide the appeal on the basis of facts and application of relevant law provisions? (3) When a specific ground is raised by a party, is the Tribunal correct in not touching the relevant provisions of the Act and merely deciding it on the basis of the fact that the CIT(A) has decided the issue in the earlier year or is the Tribunal required to see whether the application of law as per the provisions of the Act has been correctly made or not by the CIT(A)? (4) Is the Tribunal which is a fact finding body required to apply the facts to the relevant provisions under challenge or is the Tribunal to completely ignore the facts as well as the law and uphold the order under challenge without considering the relevant provisions of the Act? (6) Is the Tribunal required to decide the issue where specific challenge is posed on the application of the provisions of the Act to the facts of the case purely in the context that the Revenue in the earlier year has not challenged the CIT(A)'s order or is the Tribunal required to address the provisions of Act vis-a-vis the facts and conclude thereafter whether the CIT(A) has correctly applied the law or not? Let the questions proposed by me and the learned JM be sent to Hon'ble President for consideration of appointing Third Member.
The question as proposed by the learned AM may be referred to the Third Member. The file as such may be sent to the Hon'ble President for his consideration and appointment of Third Member.
1. The following point of difference has been referred to me under Section 255(4) of the IT Act: Whether, on the facts and circumstances of the case, the product (photographic apparatus and goods) being manufactured by the assessee did not come under Eleventh Schedule of the Act and therefore, the assessee was eligible for deduction under Section 80-IA [sic-Section 80-I] of the Act.
2. The assessee is a company engaged in the manufacture of photo colour films. In the return filed for the assessment year under appeal, it claimed deduction under Section 80-I of the Act which was negatived by the AO on the ground that the photo colour films were items prohibited under Eleventh Schedule, Item 10 which read as--"photographic apparatus and goods". According to the AO, photo colour films fell under "photographic goods".
3. On appeal, the CIT(A) noted that the provisions of Sections 80-I and 32A (which related to investment allowance) were similar in the sense that both referred to Eleventh Schedule of the Act and for the asst.
yr. 1990-91, the assessee was granted investment allowance by the CIT(A) on the footing that the photo colour films cannot be considered as photographic goods and the Department not having filed an appeal to the Tribunal against the decision of the CIT(A), the same decision would hold good for the year under appeal in respect of the claim under Section 80-I and accordingly directed the AO to allow the claim. While doing so, the CIT(A) observed that there was no change in the facts and circumstances for the year under appeal. The Revenue filed an appeal before the Tribunal. The learned AM upheld the order of the CIT(A) and further noticed that the order of the CIT(A) for the asst. yr. 1990-91 has become final. He also noted that for the asst. yrs. 1991-92 to 1993-94, the assessee's claim for deduction under Section 80-I was allowed by the IT authorities. He, therefore, held that there was no apparent reason for departing from the earlier finding. He invoked the rule of consistency and applied the judgment of the Hon'ble Delhi High Court in the case of CIT v. A.R.J. Security Printers .
He accordingly dismissed the appeal filed by the Revenue.
4. The learned JM dissented. According to the learned JM, the relevant entry in Eleventh Schedule took in photo colour films also as photographic goods. She rejected the assessee's argument based on the amendment made to Item No. 9 of the Eleventh Schedule by the Finance Act, 1988. Prior to the amendment, Entry No. 9 read as "cinematographic films and projector". After the amendment it read as "projector". The argument of the assessee was that cinematograph films were removed from the non-priority list since they catered to the priority needs of the country in various vital areas such as medicines, communications and education and considering this background, as stated in the memorandum explaining the amendment [(1989) 76 CTR (St) 93 : (1989) 176 ITR (St) 193, para 46.1], it would not be logical to say that photo colour films, which were of the same nature, were taken in by the expression "photographic goods" in Entry 10 of the Eleventh Schedule. This argument was rejected by the learned JM, who observed that it is not for the Tribunal to sit in judgment over the reasons given by the legislature for the amendment and infer that even photo colour films were taken out of the scope of Entry 10 of the Schedule. According to the learned JM, the Tribunal cannot sit in the seat of legislature and decide what should or should not be a priority industry.
5. The other reason given by the learned JM was that the rule of consistency did not apply because the issue regarding interpretation of the relevant entry in the Schedule has come up for the first time before the Tribunal and the entry has never been interpreted in the assessee's case by any superior Court. It was further noticed by the learned JM that the Department had taken action under Section 147 to withdraw the deduction under Section 80-I granted to the assessee for the asst. yrs. 1991-92 to 1993-94, and the notices of reassessment issued on 27th March, 1997 were quashed by the Hon'ble Delhi High Court by judgment in Jindal Photo Films Ltd. v. Dy. CIT and Anr.
and that the quashing of the notices of reopening does not amount to upholding the assessee's claim on merits. In this view of the matter, the learned JM was not prepared to apply the principle of consistency. The learned JM also observed that when the Tribunal is called upon to decide an issue on the basis of the facts and the relevant principles of law, recourse to the principle of consistency is not permissible. In this view of the matter, the learned JM held that the CIT(A) was wrong in directing the AO to allow the assessee's claim for deduction under Section 80-I. There being a difference of opinion between the learned Members, the point of difference has been referred to me for decision.
6. I have considered the facts, the orders of the learned Members and the arguments of both the sides. Before I proceed to decide the issue, a few aspects may be noticed. The learned AM has decided the matter in favour of the assessee purely on the basis of rule of consistency. The learned JM, as noticed earlier, has held that the aforesaid rule has no application to the present case. There is thus a difference of opinion between the two learned Members on the question of the application of the rule of consistency. I note that the learned JM has also rejected the assessee's claim on merits, holding that Entry 10 of the Eleventh Schedule would include photo colour films manufactured by the assessee.
However, there is no decision of the learned AM on this point. The question referred to me, however, seems to proceed only on the interpretation of the relevant entry in Eleventh Schedule. As noticed by me, on this precise question, I have the advantage of only one view, namely, that of the learned JM. The learned AM has not given any decision on the same. The precise difference before me is only on the question of rule of consistency where both the learned Members have taken divergent views. It, therefore, becomes necessary for me to identify the precise controversy and if necessary to reframe the question. In doing so, I am guided, with respect, by the judgment of the Hon'ble Delhi High Court in Saryeev Malhotra v. CIT (2006) 201 CTR (Del) 21. In this judgment, it has been held in para 8 that there is nothing improper or illegal in reframing the question to bring into focus the true controversy between the parties. Before me, it was agreed by both the sides that as the orders of the learned Members stand, the only difference is on the question of the application of the rule of consistency and that on the merits of the assessee's claim based on the interpretation of the relevant entry in the Eleventh Schedule, there being no decision of the learned AM, it cannot be said that there was a difference of opinion between the two learned Members on this point. I, therefore, proceed to reframe the point of difference as follows: Whether on the facts and in the circumstances of the case, the rule of consistency can be invoked to uphold the assessee's claim for deduction under Section 80-I of the IT Act? 7. In the present case, the assessee claimed deduction under Section 32A (investment allowance) for the asst. yr. 1990-91. Section 32A also prescribes the condition that the machinery or plant installed in the industrial undertaking should manufacture or produce an article or thing "not being an article or thing specified in the list in the Eleventh Schedule". Section 80-I also requires the identical condition in Clause (iii) of Sub-section (2). Thus, in order to avail of the deduction under both the sections, the condition is that the assessee should not manufacture any article or thing specified in the Eleventh Schedule. The assessee's claim for deduction in respect of investment allowance was rejected by the AO for the asst. yr. 1990-91 on the ground that manufacture of photographic films is covered by Entry No.10 of Eleventh Schedule. On appeal, the CIT(A) accepted the assessee's argument that after the exclusion of cinematographic films from Entry No. 9 of the Eleventh Schedule, there does not appear to be any justification in holding the view that photo colour films would still be included in Entry No. 10 in the Eleventh Schedule. The CIT(A) opined that all films whether cinematographic or colour roll films must be taken in one category and the legislature having excluded cinematographic films from Entry No. 9 in the Eleventh Schedule w.e.f.
1st April, 1989, it must be taken that photo colour films also stood excluded from Entry No. 10. In this view of the matter, he directed the AO to allow investment allowance.
8. The above order of the CIT(A) was accepted by the Department arid no appeal was filed to the Tribunal.
9. For the asst. yr. 1991-92 the assessee did not claim any deduction under Section 80-I in the original return, but presumably after the decision of the CIT(A) for the asst. yr. 1990-91 in respect of the investment allowance was available, it filed revised return and claimed deduction under Section 80-I of the Act. The AO allowed the claim while completing the assessment under Section 143(3) of the Act. I find that the AO has relied upon the order of the CIT(A) dt. 28th Feb., 1994 rendered for the asst. yr. 1990-91. Similarly, for the asst. yrs.
1992-93 and 1993-94, the claims made in the revised returns were accepted and deduction under Section 80-I was granted in the assessments framed under Section 143(3) of the Act. The Department took proceedings to reopen the assessment and issued notices under Section 148 to the assessee. The assessee filed writ petitions against the issue of notices before the Hon'ble Delhi High Court and the Hon'ble Delhi High Court quashed the notices. The decision of the Delhi High Court is reported in Jindal Photo Films Ltd. v. Dy. CIT and Anr.
(supra). While quashing the notices, the Hon'ble Delhi High Court held as under: Reverting back to the case at hand, it is clear from the reason placed by the AO on record as also from the statement made in the counter-affidavit that all that the ITO has said is that he was not right in allowing deduction under Section 80-I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase 'reason to believe' in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the ITO nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely afresh application of mind by the same AO to the same set of facts. While passing the original orders of assessment the order dt. 28th Feb., 1994, passed by the CIT(A) was before the AO. That order of the CIT(A) while recording reasons under Section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the AO to initiate proceedings under Section 147 of the Act.
It is also equally well-settled that if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the AO, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this Court. If 'reason to believe' be available, the writ Court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the AO to initiate the proceedings under Section 147/148 of the Act.
The aforesaid judgment of the Hon'ble Delhi High Court has become final, the SLP filed by the IT Department having been dismissed by the Supreme Court by order dt. 18th Dec, 1998 (copy filed).
10. The position now is that for the asst. yr. 1990-91, the assessee's claim for investment allowance under Section 32A has been accepted by the Department, no appeal against the order of the CIT(A) for that year having been filed by the Department to the Tribunal. The order of the CIT(A) is a speaking order where he has given his interpretation of Entry 10 of the Eleventh Schedule. That interpretation must be taken as having been accepted by the Department. It is also to be noted that the primary condition for grant of investment allowance and for grant of deduction under Section 80-I is the same, namely, that the assessee should not manufacture or produce any article or thing mentioned in the Eleventh Schedule. The interpretation of this primary condition in favour of the assessee by the CIT(A) has been accepted for the asst.
yr. 1990-91. The AO who completed the assessments for the asst. yrs.
1991-92 to 1993-94 has adopted the reasoning of the CIT(A) and the interpretation placed by the latter on the Entry 10 of the Eleventh Schedule and has applied the same to accept the assessee's claim for deduction under Section 80-I. The Department has thus acted consistently.
11. The principal contention of the learned senior Departmental Representative Smt. Sangeeta Gupta before me is that the Department has not acted consistently so that it can be bound by its conduct. It was pointed out that firstly, the order of the CIT(A) for the asst. yr.
1990-91 was on the question of investment allowance under Section 32A and not under Section 80-I. It is said that the sections and the issues are different and merely because the reasoning applied by the CIT(A) in respect of the investment allowance was accepted by the Department by not filing an appeal to the Tribunal, it cannot be said that the same reasoning was rightly applied by the AC) in respect of deduction under Section 80-I for the asst. yrs. 1991-92 to 1993-94. It is vehemently submitted that the Department realizing its error took proceedings for reopening the assessments for the asst. yrs. 1991-92 to 1993-94, which shows that the Department itself resiled from its conduct and, therefore, the rule of consistency has no place. It was equally vehemently submitted that even the assessee has been inconsistent in the sense that it did not claim deduction in the original returns, but claimed the same only by filing the revised returns after the order of the CIT(A) for asst. yr. 1990-91 became available. It is contended that when both the parties have taken inconsistent stands, the rule of consistency cannot be invoked. It was also pointed out before me to show how the AO showed great haste in accepting the assessee's claim for deduction under Section 80-I by completing the assessments on the basis of the revised returns within a short span of time after the order of the CIT(A) for the asst. yr. 1990-91 became available. On these facts, it is strongly urged that the learned AM was not right, in invoking the rule of consistency to bind the Department.
12. It is difficult for me to accept the above contentions which were very ably presented before me by Smt. Sangeeta Gupta on behalf of the Department. What is the rule of consistency? It has been explained by the Supreme Court in the judgment in Radhasoami Satsang v. CIT and the following passage should be noticed: We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
The above principle has been applied by the Ilon'ble Delhi High Court in the following judgments: (1) Director of IT (Exemption) v. Apparel Export Promotion Council ;CIT v. Neo Poly Pack (P) Ltd. In the first of the above judgments, it was held that though the doctrine of res judicata did not strictly apply to the IT proceedings, but in order to maintain consistency, the Revenue cannot be permitted to rake up stale issues all over again merely because the scope of appeal is wider than the scope of reference. In this case, the assessee had been granted exemption under Section 11 for a long period of years and without there being any change in the objects or activities of the assessee, the IT authorities sought to deny the exemption in a later year. In the case of Neo Poly Pack (supra) it was held that though the doctrine of res judicata is not applicable to IT proceedings since each assessment year is independent of the other, but where an issue has been considered and decided consistently in a number of earlier years in a particular manner the same view should continue to prevail in subsequent years unless there is some material change in the facts. In the case of Allied Finance (P) Ltd. (supra), the Tribunal had decided an issue in favour of the assessee by two orders and these two orders were followed by the Tribunal in the subsequent appeals. The Department had accepted the correctness of the basic two orders and did not file any appeal against them. It, however, challenged the subsequent orders of the Tribunal and while refusing to entertain the appeal, the Hon'ble Delhi High Court held that there is no reason to discard the principle of consistency which requires that when the Revenue has accepted a particular view by not filing an appeal that view should be adhered to, unless there is just cause for departure. The High Court deprecated the practice of pick and choose. This case bears close similarity to the present case in the sense that the order of the CIT(A) for the asst.
yr. 1990 91 granting investment allowance on the ground that photo colour films were not included in Entry 10 of the Eleventh Schedule was accepted by the Department and no appeal to the Tribunal was filed.
Thus, the order of the CIT(A) is the basic order. It was this order which was followed by the AO in the asst. yrs. 1991-92 to 1993-94, albeit while allowing deduction under Section 80-I. I have already noticed that the primary condition for both the Sections 32A and 80-I is that the assessee should not manufacture or produce any item mentioned in the Eleventh Schedule. The objection of the AO to allowing the deduction under Section 32A was overruled by the CIT(A). No appeal was filed by the Department to the Tribunal. It is, therefore, not open to the AO to reiterate the same objection which did not find favour with the CIT(A), whose order was accepted by the Department. One further aspect may be noticed here. The decision to file or not to file an appeal to the Tribunal is taken by the CIT(Admn.). If for the asst.
yr. 1990-91, the CIT(Admn.) had not thought it fit to appeal against the reasoning of the CIT(A), it is perhaps not for the AO, who only performs the ministerial function of filing the appeal on the direction of the CIT(Admn.), to indirectly overrule the decision of his superior officer by rejecting the assessee's claim for deduction under Section 80-I of the Act, for the asst. yrs. 1991-92 to 1993-94. Though in the present case, the AO has referred to the order of the CIT(A) for the asst. yr. 1990-91 while allowing deduction under Section 80-I for the subsequent three assessment years, even otherwise it was proper on his part to allow the deduction when his superior officer, namely, the CIT(Admn.) did not consider it fit to take up the order of the CIT(A) for the asst. yr. 1990-91 in appeal before the Tribunal.
13. The argument of the learned Departmental Representative was that the Department itself resiled from its position by issuing notices to reopen the assessments of the asst. yrs. 1991-92 to 1993-94 to withdraw the deduction granted under Section 80-I, which manifested an intention to rectify the error committed by them in accepting the assessee's claim and, therefore, it cannot be said that the Department consistently accepted the assessee's claim without any demur. In my opinion, the rule of consistency does not get eroded by any subsequent remedial action taken by the Department under Section 148. It is to be remembered that while quashing the notices issued under Section 148, Hon'ble Delhi High Court had held that the notices were prompted by a mere change of opinion without any change in the legal position or without any new material which came on record subsequently and without any information received subsequent to the original assessments. It was held to be a mere fresh application of mind by the AO to the same set of facts. While there may be justification to resile from the position taken earlier on the basis of a change in the facts or in the legal position, which may amount to just cause for the departure, when there are no such developments subsequent to the original assessment and no fresh facts or information have come on record, what actually happens is merely that an attempt is made by the AO to disturb the settled position without any substance or merit in his action. When the remedial action has no basis either on facts or in law, in my humble opinion, it cannot be said that the principle of consistency is eroded.
It would be too much of a hair-splitting exercise to say that a futile attempt to resile from the position taken by the Department amounts to showing inconsistency and can unbind the Department from its earlier position. We are not to lose sight of the bigger picture in our anxiety to find a justification for the departure from the settled position in an abortive attempt to take remedial action. The consequence of holding that a remedial action held (by the Hon'ble Delhi High Court in this case) to have been taken without basis should still be accepted as showing resilience on the part of the Department would be drastic. All that the Department has to show is that they had taken some remedial action, albeit without any basis except for a change of mind, which would exclude the application of the rule of consistency. Permitting the Department to do so would be contrary to the spirit of the rule so meticulously constructed by a series of judgments both of the Supreme Court and of the jurisdictional High Court. The basis of the rule of consistency seems to me, with respect, to be the classic observations of His Lordship Justice H.R. Khanna speaking for the Supreme Court in Parashuram Pottery Works Co. Ltd. v. ITO . It was held that "we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity". It is significant to note that these observations were noticed by the Supreme Court in the judgment in the case of Radhasoami Satsang (supra) and it was held that they equally apply to assessments which are certainly quasi judicial. I am therefore unable to give effect to the spirited argument taken before me by Smt. Sangeeta Gupta, on behalf of the Department.
14. In para 32 of the order of the learned JM, it has been observed that in the absence of any order of the Tribunal interpreting Entry 10 in the Eleventh Schedule in the assessee's case or that of any superior Court, the rule of consistency cannot be given effect to. With respect, it seems to me that there is a mix-up between the principle of binding precedent and the rule of consistency. Herein, we are concerned with the position taken by the Department in the earlier years and their conduct vis-a-vis the assessee's claim. Had there been an order of the Tribunal or a superior Court interpreting Entry 10 of Eleventh Schedule one way of the other that would have been certainly binding on the Tribunal. There can be no dispute with that proposition. It is only because of the absence of any such order or decision that the rule of consistency has been invoked and it has become necessary for the Tribunal to examine the applicability thereof.
15. I must also remind myself that several judgments have deprecated the practice adopted by the Department in accepting a judgment of a High Court on a particular point and filing an appeal to the Supreme Court against the judgment of another High Court on the identical issue. In CIT v. Balkrishna Malhotra , the Supreme Court held that the interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the Department should not be easily departed from. The following observations at p.
762 of the judgment are important: Interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the Department should not be easily departed from. It may be that another view of the law is possible but law is not a mere mental exercise. The Courts while reconsidering decisions rendered a long time back particularly under taxing statues cannot ignore the harm that is likely to happen by unsettling law that had been once settled.
16. In the case of Berger Paints (India) Ltd. v. CIT , it was again held by the Supreme Court that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessee without just cause. Similar observations have been made by the Supreme Court, in the following cases:Union of India v. Kaumudini Narayan Dalai The above judgments of the Supreme Court show the anxiety to prevent the IT authorities from taking different stands in the case of different assessees in respect of the same issue or taking different stands in the case of the same assessee for different assessment years in respect of the same issue.
17. For the above reasons, I agree with the learned AM that the rule of consistency applies to the present case and the AO was not justified in refusing to allow deduction under Section 80-I of the Act.
18. The matter will now go back to the Division Bench for passing the orders in conformity with the decision of the majority.
1. As there was a difference of opinion between the learned JM and learned AM, the following question (as revised) was referred to a Third Member: Whether on the facts and in the circumstances of the case, the rule of consistency can be invoked to uphold the assessee's claim for deduction under Section 80-I of the IT Act? 2. Hon'ble Vice President Shri R.V. Easwar, sitting as a Third Member, vide his order dt. 5th May, 2006 has concurred with the view taken by the learned AM in favour of the assessee. Accordingly, the impugned order of the learned CIT(A) allowing the claim of the assessee for deduction under Section 80-I is upheld and this appeal filed by the Revenue is dismissed.
3. In the result, the appeal of the Revenue is dismissed.
Chart of dates and events10.3.1993 Assessment order The claim unnder Section 32A of the Act was for asst. yr.1990- disauowed by AO on the ground that the 91 passed assessee was manufacturing item covered within the Eleventh Schedule28.2.1994 CIT(A) order for The claim under Section 32A was allowed by asst. yr. 1990-91 the CIT(A) holding that colour roll passed films manufactured by the assessee answered the description of16.3.1994 Assessment order The claim under Section 80-I of the Act was for asst. yr. 1991- allowed by the AO in view of the order of the 92 passed CIT(A) for asst. yr. 1990-91 and further in view of the fact that the Department had31.3.1994 Assessment order Do for asst. yr. 199221.10.1994 Assessment order Do for asst. yr. 199329.1.1997 Assessment order The claim for deduction under Section 80-I of the for asst. yr. 1994 Act was denied by the AO, for the reasons given27.3.1997 Notice under Section The Department reopened the concluded assessments 147 for asst. yrs.
for asst. yrs. 1991-92 to 1993-94 to withdraw 1992-93 and 1993- benefit allowed under Section 80-I of the Act.
94 On a writ petition, the Delhi High Court quashed31.7.1997 Notice under Section _ 147 for asst. yr.28.11.1997 CIT(A) order for The CIT(A) following his predecessor's orderfor asst.
asst. yr. 1994-95 yr. 1990-91, allowed the claim of deduction under passed Section 80-I to the assessee. The Departmentchallenged