AMPACET CYPRUS LTD, PUNE V. DCIT (IT) 1(1)(1), MUMBAI

ITA 1518/MUM/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9253 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AV A NEESH TIWARI SPECIAL BENC
• Keywords: Transfer pricing; Double taxation relief; Notional interest
• Section: 201; 13; 11

Judgement Text

IT (TP) A NOS. 1518/MUM/16 AND 560/MU M/2017 ASSESSMENT YEARS: 2011 - 12 AND 2012 - 13 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI [CORAM: PRAMOD KUMAR (VICE PRESIDENT) , AND RAVISH SOOD (JUDICIAL MEMBER)] IT (TP) A NO S . 1518/MUM/16 AND 560/MUM/2017 ASSESSMENT YEAR S : 20 11 - 12 AND 2012 - 13 AMPACE T CYPRUS LIMITED . APPELLANT PLOT NO D 267 , 277 AND 283 , RAJANGAON INDUSTRIAL AREA, PUNE 41 2 220 [PAN: AAACL6740M] VS DY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 1 ( 1 )(1), MUMBAI RESPONDENT APPEARANCES BY M P LOHIA FOR THE APPELLANT AV A NEESH TIWARI FOR THE RESPONDE NT SPECIAL BENCH REFERENCE PER PRAMOD KUMAR, VP: 1. IN BOTH OF THESE AP PEALS, THE ASSESSEE - APPELLANT HAS RAISED TWO SEPARATE, BUT MATER IALLY IDENTICAL, PETITIONS SEEKING ADDITIONAL GROUNDS OF APPEAL WHICH A RE MATERIALLY SI MILAR , EXCEPT FOR THE VARIATION IS I N RESPECT OF THE QUANTUM O F AMOUNT INVOLVED . THE ADDITIONAL GROUND SO SOUGHT TO BE RAISED , SO FAR AS THE ASSESSMENT YEA R 2012 - 13 , IS AS FO LLOWS: ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON BLE DRP, THE LEA RNED ASSESSING OFFICER AND THE LEARNED TRANSFER PRICING OFFICER HAVE: 2. ERRED IN MAKING TRANSFER PRICING AD JUSTMENT OF RS 2,62,69,721 AS NOTIONAL INTEREST AND CHARGING IT TO TA X, DISREGARDING THE PROVISIONS OF ARTICLE 11 OF INDIA CYPRUS DTAA 2.1 ERRED IN IMPUTING AND CHARGING NOTIONAL INTEREST OF RS 2,62 ,69,721 BY APPLYING TRANSFER PRI CING PRO VISIONS (UNDER CHAPTER X OF THE ACT) TO TAX IN INDIA DISREGA RDIN G THE PROVISIONS OF ARTICLE 11 OF INDIA - CYPRUS DTAA, WHICH PROVIDES FOR TAXABILITY OF I NTEREST ON LY ON PAID BASIS; 2.2 OUGHT TO HAVE CONSI DERED THE FACT T HAT ASSESSEE IS A RESIDENT OF CYPRUS AND LIABLE TO BE TAXED ON INTEREST INCOME AS PER ARTICLE 11 OF INDO CYPRUS DTAA, WHICH STATES THAT INTEREST IS CHARGEABLE TO TAX ONLY WHEN IT IS ARISIN G AND PAID TO NON - RESIDENT. 2. THE ADDITIONAL GROUND OF APPEAL FOR THE ASSESSMENT YEAR 2011 - 12 I S EXACTLY THE SAME BUT THE AMOUNT OF INTEREST ADJUSTME NT INVOLVED, IMPUGNED IN THIS APPEAL, IS RS 55,08, 678. IT (TP) A NOS. 1518/MUM/16 AND 560/MU M/2017 ASSESSMENT YEARS: 2011 - 12 AND 2012 - 13 PAGE 2 OF 5 3. ON A PERUSAL OF P ETITIONS SEEKING ADMISSION OF ADDITION AL GROU NDS, AND HAVING H EARD THE RIVAL CONTENTIONS O N THE SAME , THESE ADDITIONAL GROUNDS WERE ADMITTED BY U S. THE SE ADDITIONAL GROUND S WERE , ACCORDINGLY, TA KEN UP FOR H EARING. 4. WHEN THE HEARING COMMENCED ON MERITS, ON 11 TH AUGUST 2020 AND, THEREAFTER, ON 13 TH AUGUST , 20 20, IT WAS POINTED OUT THAT IN T HE EVENT OF THE ADDITIONAL GROU NDS OF APPEAL BEING ALLOWED, ALL OTHER ISSUES RAISED IN THE APPEALS WILL BE REND ERED INFRUCTUOUS. O UR AT T ENTION WAS INVITED TO THE WOR DINGS OF ARTICLE 11 (1) AND (2) OF INDIA CY PRUS DOUBLE TAXAT ION AV OIDANCE AGREEMENT ( INDO C YPRUS TAX TREATY , IN SHORT ) WHICH ARE AS FOLLOWS: ARTICLE 11 - INTEREST 1. INTEREST ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH INTER EST MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH IT ARISES , AND ACCORDING TO THE LAWS OF THAT STATE, BUT IF THE BENEFICIAL OWNER OF THE INTEREST IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED 10 PERCENT OF THE GROS S AMOUNT OF THE INTEREST. [ 3 TO 7 - NOT RELEVANT IN THE PRESENT CONTEXT AND, THEREFOR E, NOT REPRODUCED HERE] [EMPHASIS , BY UNDERLINING, SUPPLIED] 5. LEARNED C OUNSEL SUBMITS THAT A PLAIN READING OF THE AB O VE PROVISION SH OWS THAT THE TW IN CONDITIONS O F (A) INTEREST ARISING IN A CONT RAC TING STATE , AND (B) THE INTEREST BEING PAID TO THE RESIDENT OF THE OTHER CONTRACTING STAT E ARE REQUIRED TO BE SAT ISFIED FOR BRINING THE INTEREST TO TAX UNDER ARTICLE 11 . HE SUBMITS THAT IT I S AN ADMITTED P OSITION THAT NO INTEREST WAS PAID IN THE RELEV AN T PERIOD AS THE SAID PERIOD WAS COVERED BY THE MORATORIU M U NDER THE LOAN A GREEMENT WITH ITS INDIAN SUBSIDIAR Y AMPACET SPEC IALITY PRODUCTS P VT L TD, INDIA [ AMP ACET INDIA , IN SHORT ] A ND IT IS FOR THIS REASON , I.E. TREATING MORATORIUM AS IS SAID TO BE INFLUENCED BY THE INTRA AE RE LATIONSHIP, T H AT THE IMPUGNED ARM S LENGTH PR ICE ADJUSTME NT IS MADE. IN EFFECT THUS, LEARNED COUNSEL S SUBMISSION IS THAT WHEN THE INTEREST IS NOT ACTUALLY PAID BY T HE I NDIAN SUBS IDIA RY COMPANY TO THE PARENT COMPANY, I.E. ASSESSEE BEFORE US, THERE CANNOT BE ANY QU ESTION OF ANY TAXABILITY OF INTEREST INCOME IN THE HANDS OF THE ASSESSEE , AND, SINCE THERE IS NO TAXABILITY OF INCOME IN THE HANDS OF THE ASSESSEE, THERE CANNOT BE ANY QUESTION OF AN ARM S LENGTH PRICE ADJUSTMENT TO SUCH AN INCOME. OUR ATTENTION IS THEN IN VIT ED TO A SERIES OF DECISIONS OF THE COOR DINATE BENCHES HOLDING SO. 6. IN RESP ONSE TO A QUESTION FROM THE BENCH WHETHER THE EXPRESSION PA ID IS DEFINED UNDER THE TREATY, AND , IF NOT, WHY SHOULD THE MEANINGS OF EXPRESSION PAID , AS ASSIGNED UNDER SECTI ON 43(2) OF THE INCOME TAX ACT, 196 1 (HEREIN AFTER REFERRED TO A S THE ACT ) BE CONSIDERED UNDER ART ICLE 3(2) OF INDO CYPRUS TAX TREATY, LEARNED COUNSEL SUBMITTED THAT THERE ARE DI RECT DECISIONS OF THE COORDINATE BENCHE S ON THE ISSUES WHICH HOLD THA T TAXABILITY OF INTEREST UNDER INDO CY PRUS TAX TREATY COULD ONLY BE DONE ON CASH BASIS. WHEN HE WAS ASKED WHETHER THESE DECISIONS HAVE DEALT WITH THE IMPLICATIONS OF ARTICLE 3(2), READ WITH DEFINITION UND ER SECTION 43(2), AND WHETHER , IN THE ABSENCE OF SUC H AN A NALYSIS - WHICH I S RELEVANT IN THE PRESENT CONTEXT, THESE DECISIONS COULD BE TREATED AS PER INCURI A M , LEARNE D COUNSEL SUBMITTED THAT ANSWERING THIS QUESTION WILL NEED REFERENCE TO A LOT OF PAPERS . HE THEN WITHD R EW HIS CONSENT FOR THE VIRTUAL COURT AND PRAYED THAT THE MATTER BE ADJOUR NED FOR HEARING BEFORE A PHYSICAL COUR T. IT (TP) A NOS. 1518/MUM/16 AND 560/MU M/2017 ASSESSMENT YEARS: 2011 - 12 AND 2012 - 13 PAGE 3 OF 5 7. W HI LE WE REFRA IN FROM MAKING ANY OBSERVATIONS ON THE MAN NER IN WHICH, AND STAGE A T WHICH, THE CONSENT FOR VIRTUAL HEARING WAS WITHD RAWN, WE SEE MERITS IN THIS M ATTER BEING REF ERRED TO A BENCH OF THREE OF MORE MEMBERS UNDER SECTION 255(3) OF THE ACT. THE REASON IS THIS. IN ALL THE COORDINATE BE NCH DECISIONS, THERE IS NO DISCUSSION WHATSOEVER TO THE CONNOTATIONS OF THE E XPRESSION PAID AND THE SE DECISIONS SIMPLY P ROCEED ON THE BASIS THAT BECAUSE THE EXPRESSION PAID IS USED ARTI CLE 11(1) OF INDO CYPRUS TAX TREATY, THE TAXABILITY OF INTEREST CAN ONL Y BE ON CASH BASIS. THE EXPRESSION PAID IS ADMITTEDLY NOT DEFINED IN THE TREATY BUT ARTICLE 3(2) OF INDO C YPRUS TAX TRE ATY PROVIDES THAT AS REGARDS THE APPLICATION OF THE AGREEMENT AT ANY TIME BY A CONTRACTING STATE ANY TERM NOT DEFINED THEREIN SHALL, UNLESS THE CONTEXT OTHERWISE REQ UIRES, HAVE THE MEANING THAT IT HAS AT THAT TIME UNDER THE LAW OF THAT STATE FOR THE PU RPOSES OF THE TAXES TO WHICH THE AGREEMENT APPLIES AND ANY MEANING UNDER THE APPLICABLE TAX LAWS OF THAT STATE PREVAILING OVER A MEANING GIVEN TO THE TERM UNDER OTHER LA WS OF THAT STATE . WHAT ESSENTIALLY FOLL O WS IS THAT UNLESS THE CONTEXT OTHERWISE REQUIR ES , THE DEFINITION OF THE UNDE FINED TREATY TERM, UNDER THE DO MESTIC LAW OF T HE SOURCE COUNTRY I.E. INDIA - AND PREFER ABLY UNDER THE DO MESTIC TAX LA W S, IS TO BE ADOPTED. IT IS IN THIS CONTEXT, SECTIO N 43(2) OF THE INCOME TAX ACT, 1961 MAY PERHAPS BE RELEV ANT BECAUSE IT PROVIDES THAT PAID MEANS ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH THE PROFITS OR GAINS ARE COMPUTED UND ER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' (EMPHASIS, BY UNDERLINING, S UPPLI ED BY US ) . WHILE IT IS INDEED TRUE THAT TH IS MEANING CANNOT BE IMPORTED IN THE TAX TREATY MECHANICALLY, WITHOUT ANY APPLICAT ION OF MIND AND AS A SORT OF AUTOMATED PROCE SS, UNDOUBTEDLY A CALL IS TO BE TAKEN BY THE BENCH AS TO WHETHER OR N OT THIS DO MESTIC LA W MEANING OF THE EXPRESSION PAID WILL BE RELEVANT. THERE COUL D POSSIBLY BE A SCH OOL OF T HOUGH T THAT A DECISION RENDERED IN THIS CONTEXT, WITHOUT SPECIFICALL Y DEALING WITH THE IMPLICATIO NS OF SECTION 43(2) READ WITH ARTICL E 3 (2), COULD POSSIBLY BE PER I NCURIAM . A CONSCIOUS CALL IS REQUIRED TO BE T AKEN ON THESE ASPECTS . WHILE ON THIS ISSUE, WE MAY FURTHER ADD THAT ONE WILL HA VE TO SEE WHETHER HON BLE S UP REME CO URT S JUDGMENT IN THE CASE OF STANDARD TRIUMPH MOTOR CO PV T LTD VS CIT [(1993) 201 ITR 391 (SC) ] WH ICH , INTER ALIA , OBSERVES THAT IT MUST BE HELD IN THIS CASE THAT THE CREDIT ENTRY TO THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE IN DIAN COMPANY DOES AMOUNT TO ITS RECEIPT BY THE ASSESSEE AND IS ACCORDINGLY TAXABLE AND THAT IT IS IMMATERIAL WHEN DID IT ACTUALLY RECEIVE IT IN UK , WILL HAVE ANY BEARING ON THE CONNOTATIONS OF EXPRESSION S PAID APPEARING IN THE INDO CYPRUS TAX TREATY. AS A COROLLARY TO THESE DISCUSSIONS, CONNOTATIONS OF THE EXPRESSION PAID APPEARING IN ARTICLE 11 OF IN DO CYPRUS TAX TREATY AR E R EQUIRED TO BE EXAMINED IN SOME DE TAIL , AND THAT EXERCISE CAN AT BEST BE CONDUCTED B Y A BENCH OF THREE OR MORE MEMBERS SO THAT THE DECISION IS UNFETTER ED BY THE DECISIONS OF THE D IVISION BE NCHES IN THI S REGARD. T H E I S S U E R A I S E D I N T H E S E A P P E A L S N E E D S T O B E D E C I D E D I N A H O L I S T I C M A N N E R , UNFETTERED BY THE DECISIONS OF THE DIVI SION BENCHES , EXAMINING ALL THE RELEVANT FACETS , INCLUDING THE FACETS WHIC H ARE GERMANE IN TH E PRESENT CONTEXT HAVE REMAINED TO BE EXAMINED BY THE COORD INA TE BENCHES . 8. HAVING SAID THAT WE MAY ADD THAT WE ARE A L IVE TO THE FACT THAT THERE IS A DECISION OF HON BLE JURISDICT IONAL H I GH COURT, IN THE CASE O F DIRECTOR OF INCOME TAX VS SIEMENS A G WHICH DOES OBSERVE AS FOLLOWS: AS REGARDS FIRST QUESTION IS CONCERNED, THE INCOME TAX APPELLATE TRIBUNAL REFERRED TO PARA 1 TO 3 OF ART ICLE IIX - A OF THE DOUBLE TAXATION AVOIDAN CE TREATY WITH THE FEDERA L GERMAN REPUBLIC , AS PER NOTIFICATION DATED 26 TH AUGUST 1985, HELD THAT THE ASSESSMENT OR ROYALTY OR ANY FEES FOR TECHNICAL SERVICES S HOULD BE MADE IN THE YEAR IN WHICH A MOUNT S ARE RECEIVED AN D NOT OTHERWISE. COUNSEL F OR THE REVENUE RELIED UPON THE SPECIAL IT (TP) A NOS. 1518/MUM/16 AND 560/MU M/2017 ASSESSMENT YEARS: 2011 - 12 AND 2012 - 13 PAGE 4 OF 5 BENCH DECISION IN ASSESSEE S OWN CASE, WHICH, IN OUR OPINION, HAS NO RELEVA NCE TO THE FACTS OF T HE PRESENT CASE, AS IT RELATES TO THE PER IOD P RIOR TO THE ISSU ANCE OF NOT IFICATION DATED 26 TH AUGUST 1985. IN THIS V I EW OF THE MATTER THE DEC ISION OF THE INCOME TAX APPELLATE TRIBUNAL IN HOLDING THAT THE ROYALTY AND F EES F OR TECHNICAL SERVICES SHOULD BE T REATED ON RECEIPT BASIS CANNOT BE FAULTED. 9. A PLAIN READING OF THE AB O VE DECISION S HOWS , EVEN THOUGH THE ISSUE IN THIS CASE WAS MATERIALLY SIMILAR INASMUCH IN THIS CASE ALSO IT WAS INFERRED THAT SINCE THE EXPRESSION USED IS PAID IT REFERS TO THE TAXATION ON RECEIPT BASIS , APART FROM THE FACT THA T THIS DECISION IS IN R E SPEC T OF ROYALTY AND FEES FOR TECHNICAL SERVICES , THAT IT PERTAINS TO THE ANOTHER DTAA, I.E. OLD DOUB LE TAXATION A VOIDANCE AGREEMENT BETWEEN INDIA AND THE FEDERAL REPUBLIC OF GERMANY (AS IT THEN WAS) WHICH CAME T O AN END ON 1 ST AP RIL 1 997 AND INC IDENTALLY IT W AS WITH EFFECT FROM THE SAME DATE THAT H YBRID MET HOD OF ACCOUNTING ALSO CAME TO AN END. CO NSIDERING THAT ESSENTIALLY BUSINESS CONCER NS PREPARE THEIR ACCOUNTS ON THE BASIS OF MERCANTILE MET HO D OF ACCOUNTING IN GENERAL, EVEN ACCOUNTING OF ANY I NCOME, SUCH AS INTEREST AND ROYALTIES, ON CASH BASIS WAS NO LONGER PERMISSIBLE. TO SUGGES T, THERE F ORE, THAT INTEREST OR ROYALTY IN COME COULD BE TAXED IN THE HANDS OF THE FOREIGN COMPANY ON CASH BASIS ON THE FIRST PRI NCIP LES IS NO LONGER PERMISSIBLE, AND, AS FOR THE CON NOTATION S OF THE EXP RESSION S PAID IN THE LIGHT OF ARTICLE 2(2), AS IT WA S NUMBERED IN THE O L D INDO G ERMAN TAX TREATY, READ WITH SECTION 43(2), TH IS ISSUE NEVER CAME UP FOR CONSIDERATION AT ANY STAGE AT ALL. AS ARTICLE 2(2) WAS NOT EVEN DISCUSSED, THE REL EVA NCE OF SECTION 43(2) OR OF HON BLE SUPREME COURT S DECISION IN THE CASE OF STANDARD TRIUMP H MOTOR (SUPRA) DID NOT COME UP FOR THEIR LORDSHIPS KIND CONSIDERATION AT ALL. IT IS ALSO IMP ORTANT TO NOTE THAT SO FAR AS AR TICLE 3(2) OF THE INDO CYP RUS TREATY IS CONCERNED, IT USE S THE EXPRESSION THE MEANING THAT IT ( I.E. THE UNDE FINED TREATY TERM) HAS AT THAT TIME UNDER THE LAW OF THAT STATE ( I.E. UNDER THE INDIAN LAW ) . IT IS ALSO WORTH EXAMINING WHETHER, IN TH IS CONTE XT, THE SCOPE OF INDIAN LAW WILL INCLUDE NOT ONLY TH E LAW LEGISLATED BY THE PARLIAMENT BUT ALSO T HE LAW LAID DOWN BY HON BLE CO URTS ABOVE. A VIEW IS THUS INDEED WORTH EXPLOR ING AS TO WHETHER THE MEANING ASSIGNED TO THE EX PRESSION REC EIVED BY AN ASSESSEE , WHICH ESSENTIALLY CORRESP ONDS TO AND HAS TO TREATED AS EQUI VALENT TO PAID TO THE PAYE E , BY HON BLE SU PR EME CO URT IS TO BE ASSIGNED TO THE TREATY OF THE UNDEFINED TREATY EXPRESSION PAID . OBVIOUSLY, THIS EXERCISE WAS NOT DONE BY THE COORDINATE BE NCH, NOR THIS ASPECT OF THE MATTER WAS POINTED OUT BY THE LEAR NED COUNSEL APPEARING BEF ORE THEIR LORD SHI PS, AND THUS THEIR LORDSHIPS HAD NO OCCASION TO EXAMINE THIS ASPECT OF THE MATTER EITHER. TO THIS EXTENT, THE IMPACT OF JUDGMENT OF HON BLE SUPREME C O URT S JUDGMENT IN THE CASE OF STANDARD TRIUMP H MOTOR (SUPRA) REMAI NED UNEXAMINED. THAT ASPECT OF THE MATTE R IS THUS , DE HORS THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH CO URT, DOES SEEM TO BE IN AN UNCHAR TERED TERRITORY ON WHICH CALL MAY INDEED BE TAKEN BY THE T RIBUNAL. 10. AS WE PART WITH THIS NOTE RECOMMENDING CONSTITUTION OF A SPECIAL BENCH, WE MAY A DD THA T, IN OUR HUM BLE UNDERSTANDING, SUCH A REFERENCE IS NOT CONTRARY TO THE PR INCIPLES OF JUDICIAL DISCIPLINE. IN THE EVENT OF A DOUBT ABOUT THE CORRECTNESS OF THE EARLIER DECISION OR , EXTENDING THAT LO GIC A LITT L E FURTHER, CORRECTNESS OF THE P ATH THE EARLIER DECISIONS HAVE TRA VERSED TO CO ME TO A CONCLU S ION , IT IS OPEN TO THE BENCH TO MAKE A REFERENCE TO FOR CONSTITUTING A LARGER B ENCH FOR CONSIDERING THE SAME . IN THE CASE OF UNION OF INDIA V. PARAS LAMINATES (P.) LTD. [ (1990) 186 ITR 722 @ P 726 (SC)] , HON BLE SUPREME COURT RECOGNIZED THE RIGHT OF THE PRESIDENT TO CONSTITUTE SPECIAL BENCHES , AND OBSERVED THAT ' IT IS TRUE THAT A BENCH OF TWO MEMBERS MUST NOT LIGHTLY DISREGARD THE DECISION OF A NOTHER BENCH OF THE SAME TRIBUNAL ON AN IDENTICAL QUESTION. . THE RATIONALE OF THIS RULE IS THE NEED FOR CONTINUITY, CERTAINTY AND PREDICTABILITY IN THE ADMINISTRATION OF JUST ICE. PERSONS AFFECTED BY IT (TP) A NOS. 1518/MUM/16 AND 560/MU M/2017 ASSESSMENT YEARS: 2011 - 12 AND 2012 - 13 PAGE 5 OF 5 DECISIONS OF TRIBUNALS OR COURTS HAVE A RIGHT TO EXPECT THAT THOSE EXERCISING JUDICIAL FUNCTIONS WILL FOLLOW THE REASON ON GROUND OF THE JUDICIAL DECISION IN THE EARLIER CASES ON IDENTICAL MATTERS. . IT IS, HOWEVER, EQUALLY TRUE THAT IT IS VITAL TO THE ADMINISTRATION OF JUSTICE THAT THOSE EXERCISING JUDICIAL POWER MUST HAVE THE NECESSARY FREEDOM TO DOUBT THE CORRECTNESS OF AN EARLIER DECISION IF AND WHEN SUBSEQUENT PROCEEDINGS BRING TO LIGHT WHAT IS PERCEIVED BY THEM AS AN ERRONEOUS DECISION IN THE EARLIER CASE. IN SUCH CIRCUMSTANCES, IT IS BUT NATURAL AND REASONABLE AND INDEED EFFICACIOUS THAT THE CASE IS REFERRED TO A LARGER BENCH . THIS IS WHAT WAS DONE BY THE BENCH OF TWO MEMBERS WHO, IN THEIR REASONED ORDER, POINTED OUT WHAT THEY PERCEIVED TO BE AN ERROR OF LAW IN THE EARLIER DECISION AND STATED THE POINTS FOR THE PRESIDENT TO MAKE A REFERENCE TO A LARGER BENCH .' IT IS NOT SINFUL EITHER, AND IS PERFECTLY NA TURA L - AS WE WILL SEE IN A SHORT WHILE, TO ENTER TAIN DOUBTS AB OUT CORRECTNESS OF THE PATH THAT THE COOR DINATE BENCHES HAVE TRAVERSED . ON THIS ASPECT, ONE MAY USEFULL Y REFER TO THE OBSER VATIONS OF JUSTICE CARDOZO, IN HIS CLASSIC BOOK 'THE NATURE OF JUDICIAL PROCESS', (FIRST PUB LISHED BY YALE UNIVERSITY PRESS, UNITED STATES, IN DECEMBER 1921; ALSO AVAILABLE ONLINE AT HTTP://WWW.CONSTITUTION.ORG/CMT/CARDOZO/JUD_PROC.HTM) THAT , ' I OWN THA T IT IS A GOOD DEAL OF A MYSTERY TO ME HOW JUDGES, OF ALL PERSONS IN THE WORLD, SHOULD PUT THEIR FAITH IN DICTA. A BRIEF EXPERIENCE ON THE BENCH WAS ENOUGH TO REVEAL TO ME ALL SORTS OF CRACKS AND CREVICES AND LOOPHOLES IN MY OWN OPINIONS WHEN PICKED UP A FEW MONTHS AFTER DELIVERY, AND REREAD WITH DUE CONTRITION. THE PERSUASION THAT ONE'S OWN INF ALLIBILITY IS A MYTH LEADS BY EASY STAGES AND WITH SOMEWHAT GREATER SATISFACTION TO A REFUSAL TO ASCRIBE INFALLIBILITY TO OTHERS .' THAT IS EQUALLY , AND PERH APS M UCH MORE, TRUE FOR MANY OF US TOO. AS HON BLE SUPREME COURT H AS SAID, IN THE CASE OF DIS TRIBUTORS (BARODA) (P.) LTD. V. UNION OF INDIA [ ( 1985) 155 ITR 120 1 (SC)] , TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY IT IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. IN THIS, WE DERIVE COMFORT AND STRENGTH FROM THE WISE AND INSPIRING WOR DS OF JUSTICE BRONSON IN PIERCE V. DELAMETER (A.M.Y. AT PAGE 18) : A JUDGE OUGHT TO BE WISE ENOUGH TO KNOW THAT HE IS FALLIBLE AND, THEREFORE, EVER READY TO LEARN : GREAT AND HONEST ENOUGH TO DISCARD ALL MERE PRIDE OF OPINION AND FOLLOW TRUTH WHEREVER IT MAY LEAD : AND COURAGEOUS ENOUGH TO ACKNOWLEDGE HIS ERRORS .' THERE IS , THUS, NO HEROISM IN PERPETUATING AN ERROR IN APPR OACH TO A JUDICIAL EXERCISE. THE CONC LUSIONS , EVEN AFTER THE EXE R CISE OF DE TAILED ANALYSIS AS DISCUSSED EARLIER IS CONDUCTED, MAY OR MAY NOT BE THE SAME AS THE COORDINATE BENCHES HAVE ARRI VED , EVEN IF RATHER SERENDIPITOUSLY , BUT THAT DOES NOT REALLY MATTER . ONCE WE REALIZE THAT THERE WAS SOMETHING LACKING IN OUR APPROACH LAST T IME , THERE CANNOT BE ANY JUSTIFICATION IN CONTINUING TO ADOPT THE SAME APPROACH YET A GAIN. IT IS , AFTER ALL, ONE OF THE FUNDAMENTAL DUT IES , UNDER ARTICLE 51A( H ) OF THE CONST ITUTION OF INDIA, OF EV E R Y CITIZEN TO HAVE , INTER ALIA , THE SP IRT OF INQUIRY OF REFORM . IT IS IN THIS BACKDROP, AND WITHOUT MAKING ANY OBSERVATIONS ON CORRECTNESS OR OTHER WISE OF THE CONCLUS IONS ARRIVED AT BY THE COORDINATE BE NCHES , WE DEEM IT FI T AND P ROPER TO REFER THE ADDITIONAL GROUN DS OF APPEAL RAISED BEF ORE US TO A SPECIAL BEN CH OF THREE OR MORE MEMBERS . 11. LET THE MATTER B E PLACED BEFORE HON B LE PRESI DENT FOR HIS KIND CONSIDERATION , AND APPROPRIATE ORDERS. IN THE MEANTIME, AS ALSO PRAYED FOR BY THE LEARNED COUNSEL, THE MATTER STANDS ADJOURNED , AND , IN THE LIGHT OF THIS SPECIAL BENCH RE FERENCE , IT STANDS ADJOURNED SINE DIE . SD/XX SD/XX RAVISH SOOD PRAMOD KUMAR ( JUDICIAL MEMBER ) (VIC E PRESIDENT) MUMBAI, DATED THE 13 TH DAY OF AU GUS T , 20 20