The short question involved in this appeal is, whether the respondent assessee is entitled to claim investment allowance under Section 32A of the Income Tax Act, 1961, on the value of bottle washer machine, leased out by the assessee, as part of its business, and even assuming that the assessee is so entitled, whether the learned Tribunal could have, in the facts and circumstances of the case, rectified and recalled its earlier order in the appeal, confirming disallowance of investment allowance on the machine.
The respondent assessee carries on business, inter alia, of leasing and hiring out plant, machinery, equipment, vehicles etc. The assessee filed its Income Tax Return for the Assessment Year 1989-90 inter alia claiming investment allowance under Section 32A of the Income Tax Act at the rate of 20 per cent of Rs. 7,36,650/-, that is, the value of bottle washer machine.
An order of assessment was passed under Section 143(3) of the Income Tax Act, rejecting the claim of the respondent assessee to investment allowance on bottle washer machine. The appeal filed by the assessee before the Commissioner of Income Tax (Appeals) was dismissed.
The assessee filed an appeal before the Income Tax Appellate Tribunal. The learned Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), relying on the judgment of the Supreme Court in C.I.T. Vs. Narang Dairy Products reported in 219 ITR 470.
In C.I.T. Vs. Narang Dairy Products (supra) the Supreme Court held that under Section 33(1)(a) of the Income Tax Act, 1961, development rebate was only allowed in respect of new machinery and plant, which was owned by the assessee and was wholly used for the purpose of business carried on by the assessee.
The assessee filed a Miscellaneous Application under Section 254(2) of the Income Tax Act praying for rectification of the order of the learned Tribunal, relying on judgment of the Supreme Court in Commissioner of Income Tax Vs. Shaan Finance (P) Ltd. reported in 231 ITR 308 where the Supreme Court, upon consideration of Sub-section (2)(B) of Section 32(A) of the Income Tax Act, came to the conclusion that the relevant provision does not specify that the assessee himself should use the machinery for claiming deduction.
In Commissioner of Income Tax Vs. Shaan Finance (P) Ltd. (supra) the Supreme Court held that where the business of the assessee consisted of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery, was business income, the assessee must be considered as having used the machinery for the purpose of its business. Therefore, a leasing or finance company, which leased out machinery owned by it, to third parties, who used the machinery for manufacture of articles or things as specified in Section 32A(2)(b)(III) would be entitled to investment allowance in respect of such machinery under Section 32A of the Income Tax Act.
Having regard to the judgment of the Supreme Court in Shaan Finance (P) Ltd. (supra), the learned Tribunal was pleased to allow the Miscellaneous Application filed by the assessee and recall its earlier order in part, in so far as the same confirmed the disallowance of investment allowance. The registry was directed to fix the appeal for hearing on the limited issue of admissibility of deduction under Section 32A of the Income Tax Act.
The Revenue has challenged the order of the learned Tribunal allowing the Miscellaneous Application inter alia contending that the appeal having earlier been disposed of, the Miscellaneous Application could not have been entertained.
Mr. Bhowmik appearing on behalf of the petitioner submitted that the appeal was finally decided by the learned Tribunal in favour of the Revenue and against the assessee by its order dated 13th August, 1997. There were no grounds for recalling the order.
Mr. Bhowmik submitted that there were contradictory decisions of the Supreme Court on the issue of admissibility of a claim in a case like this. The issue was, therefore, a debatable one, according to Mr. Bhowmik.
Mr. Bhowmik argued that rectification ought not to have been allowed when the issue was debatable. In support of his submission, Mr. Bhowmik cited Jiyajeerao Cotton Mills Ltd. Vs. Income-Tax Officer, “C” Ward, Companies District I, Calcutta, and Ors. reported in (1981) 130 ITR 710.
Mr. Bhowmik submitted that the learned Tribunal has in effect and substance reviewed its order. Relying on the judgment of the Orissa High Court in Commissioner of Income-Tax Vs. Jagabandhu Roul reported in (1984) 145 ITR 153. Mr. Bhowmik submitted that the learned Tribunal does not have power of review.
In Controller of Estate Duty Vs. V.G. Badamia reported in (1990) 186 ITR 170 a Division Bench of Bombay High Court relying on the decision of the Supreme Court in CED Vs. C.R. Ramachandra Gounder reported in (1973) 88 ITR 448 held that the learned Tribunal had power to rectify its own mistake.
In Assistant Commissioner of Income-Tax Vs. Saurashtra Kutch Stock Exchange Ltd. reported in (2008) 305 ITR 227 (SC) the Supreme Court affirmed that the Appellate Tribunal had jurisdiction to rectify a mistake apparent on record.
The issue of whether the learned Tribunal could have rectified its mistake, is settled by the judgment of the Supreme Court in Assistant Commissioner of Income-Tax Vs. Saurashtra Kutch Stock Exchange Ltd. (supra). The Admissibility of the claim of the assessee to investment allowance under Section 32A of the Income Tax Act, in a case like this, has been decided in favour of the assessee and against the revenue in Shaan Finance (P) Ltd. (supra).
The judgment of the Supreme Court in Shaan Finance (P) Ltd. (supra) relates directly to Section 32A of the Income Tax Act, which was in issue in the case of the assessee, Mr. Bhowmik’s submission, that the issue was debatable, cannot be accepted.
An order, which is contrary to a judgment of the Supreme Court, is patently erroneous. When the Supreme Court renders a decision enunciating a principle of law, it is assumed that, what was enunciated by the Supreme Court, was in fact, the law from the inception.
We are, thus, constrained to hold that the learned Tribunal was justified in recalling its earlier order.
The appeal is thus dismissed.
Let photostat certified copy of this judgment and/or order, if applied for, be supplied to the learned advocates appearing for the parties expeditiously subject to compliance of requisite formalities.