Affection Investments Ltd. vs A.Commissioner of Income Tax

D.A. Mehta, J.—In all the four Appeals by a common order dated 25.06.2003, following common questions have been formulated by this Court at the time of admission:

Whether the Tribunal has rightly applied the principles of finding out the cost of right shares laid down by the Supreme Court in the decision of Miss Dhun Dadabhoy Kapadia Vs. Commissioner of Income Tax, Bombay,

Whether the Tribunal should have referred the matter to the special bench in accordance with the law laid down by Gujarat High Court in Sayaji Iron and Engg. Co. Vs. Commissioner of Income Tax, and whether its decision is bad and deserves to be quashed for the reason that the matter was not referred to the special bench.?

All the four Appeals are taken up for hearing and disposal for together as they arise out of common order of the Tribunal dated 19.02.2003.

Heard learned Counsel appearing for the respective parties. In relation to question No. 1, it is common ground between the parties that the controversy now stands answered by judgment rendered today in case of The Assistant Commissioner of Income Tax v. Amazon Investments Ltd. in Tax Appeal No. 556 of 1999. Hence, it is not necessary to set out facts and contentions in detail.

Question No. 1 is therefore answered in ''negative''. The Tribunal was in error in reading and applying the Apex Court decision in case of Miss Dhun Dadabhoy Kapadia Vs. Commissioner of Income Tax, Bombay, in the manner it did so as to hold that the renunciation of entitlements to the rights to subscribe to convertible debenture/shares will not permit computation of short term capital loss as claimed by the assessee.

In so far as the second question is concerned, the Tribunal has misdirected itself in law. In paragraph No. 11 of the impugned order, the Tribunal has recorded ''It is true that the facts relating to the case of Amazon Investments Ltd. in ITA No. 3610/Ahd/97 dated 20.4.99 and in the cases Nos. 3704/Ahd/97 and others dated 17.8.99 decided by the Tribunal are absolutely identical.'' Thereafter, the Tribunal has gone on to take a different view in relation to the present four cases for various reasons stated in the impugned order.

The law is well settled on this subject. As laid down by this Court in case of Sayaji Iron and Engg. Co. Vs. Commissioner of Income Tax, , once the Tribunal had come to the conclusion that the fact situation was identical, to the one obtaining in a decided matter, no coordinate bench of the Tribunal has any right or jurisdiction to record a contrary decision, entirely contrary to the one reached by another coordinate Bench of the same Tribunal on same set of facts and circumstances. Mere difference in the Members manning the Tribunal does not vest the subsequent Bench with such power. The principle is based on judicial propriety and the confidence which the litigating public has in judicial hierarchy and the institution. The only course, that is open to the subsequent coordinate bench, would be to make a Reference to the President of the Tribunal as provided in Section 255(3) of the Income Tax Act, 1961 (''the Act'') to constitute a Special Bench to resolve the controversy.

The reasons given in the impugned order by the bench of the Tribunal for not making a Reference to the President under provisions of Section 255(3) of the Act, are, to say the least, not germane and on such specious reasons a coordinate bench could not have taken a different view of the matter. The second question stands answered accordingly.

In the facts and circumstances of the case, the impugned order dated 19.02.2003 is bad in law and the decision on merits cannot be sustained.

The Appeals are accordingly allowed in the aforesaid terms with no order as to costs.