Modi Entertainment Ltd, V. DCIT Circle 5 (1),

ITA 3051/DEL/2007

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3044 (ITAT-DELHI)
• Duration Of Justice: 16 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 16-01-2024
• Assessment Year: 2001-2002
• Appeal Filed On: 20-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Question of law; Speculation loss; Difference of opinion; Change of opinion; Rule 8D; Liquidation
• Section: 263; 28; 10; 2; 143(3); 14A; 115JB; 10B; 191; 113; 43; 48; 10(33); 10(33); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI Before Sh. Saktijit Dey, Vice President Dr. B. R. R. Kumar, Accountant Member ITA No. 3051/Del/2007 : Asstt. Year: 2001-02 Modi Entertainment Ltd., 49, Community Centre, New Friends Colony, New Delhi Vs DCIT, Circle-5(1), New Delhi (ASSESSEE) (RESPONDENT) PAN No. AAACM8283G Assessee by : Sh. Rohit Garg, Adv. Sh. Deepesh Jain, Adv. Revenue by : Sh. Sanjay Kumar, Sr. DR Date of Hearing: 17.01.2024 Date of Pronouncement: 12.04.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-VIII, New Delhi dated 02.03.2007. 2. The assessee has raised the following grounds of appeal: “1. That on the facts and circumstances of the case, the Commissioner of Income-tax(Appeals) erred in not holding that reassessment was bad in law, beyond jurisdiction and void-ab- initio. 1.1 That the Commissioner of Income-tax(Appeals) erred on facts and in law in not holding that the reassessment being based merely on change of opinion, was bad in law and void ab- initio. 2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in making an addition of Rs.19,40,928/ while computing 'book profit under section 115JB of the Income Tax Act, 1961('the Act'), on account of alleged ITA No. 3051/Del/2007 Modi Entertainment Ltd. 2 expenditure incurred by the appellant to earn tax free dividend income without appreciating that the appellant has purchased the shares/securities out of own funds and no expenditure has been incurred to earn dividend income thereon. 3. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in disallowing Rs.12,06,000/- being cost of investment written off, alleging the same to be capital in nature. 3.1 That the CIT(A) erred on facts and in law in not appreciating that the aforesaid amount of Rs. 12,06,000 represented cost of acquiring certain rights, which were assigned to a third party by the appellant for valuable consideration and was required to be set off against the same.” 3. Ground No. 1 is not pressed. Addition of Rs.19,40,928/-: 4. The relevant part of the order of the Assessing Officer and adjudication of the ld. CIT(A) is as under: “The case of the AO as per assessment order is, "The assessee has argued that there was no occasion for any addition u/s 14A on the dividend earned. As this aspect has been dealt in the assessment order u/s 143(3) and which was later on confirmed by the CIT (A), it is not the subject matter here under re-assessment proceedings for the additions so made in the original assessment order. Thus, no comments are warranted on the assessee's argument that no addition should have been made u/s 14A. The assessee has however, argued that the Assessing Officer does not have the jurisdiction to behind the net profit shown in the P & L account except to the extent provided in the explanation. The Assessee has placed its reliance on Apollo Tyres Ltd. Vs. CIT 255 ITR 273 (SC) and Sutlej Cotton Mills ITA No. 3051/Del/2007 Modi Entertainment Ltd. 3 Ltd. Vs. ACIT 45 ITD (SB) 22. The assessee's contention is rejected." Then, I may also reproduce here under the main points of reasoning given by the AO for rejecting contentions of the assessee company. These are:  Explanation (f) to sub-section 2 of section 115JB expressly provides that book profit means the net profit as shown in the P&L account and increased by inter alia, the amount or amounts of expenditure relatable to any income to which Sections 10, 10A, 10B, 11 and 12 apply.  It has been established during the assessment proceeding and the appellate proceedings at ld. CIT(A) that the assessee had incurred expenses of Rs. 19,40,928/- relatable to earning of dividend income which was exempted u/s 10(33) of the I. T. Act.  Thus, this expenditure of Rs.19,40,928/- has to be added to the net profit for computation of the book profit as per the express provisions of sub-section 2 of section 115JB.  The facts and circumstances of the case laws relied by the assessee are different from the instant case. 4.1 In proceedings before me appellant has filed a detailed written submission on this issue. The crux of that, however, is that the AO failed to appreciate that shares had been purchased out of own funds and there was no nexus between the borrowed funds and investment made in shares. The disallowance u/s 14A has been challenged on this basis and detailed arguments and case laws have been given in this regard. However, in the facts of the case before me this aspect is already settled by decision of CIT(A) on this issue whereby disallowance u/s ITA No. 3051/Del/2007 Modi Entertainment Ltd. 4 14A has been confirmed by him - this is clearly stated so in the order of the AO himself and is not disputed by the assessee company. In a situation like that the limited issue before is only in regard to applicability of Explanation (f) to sub-section (2) of section 115JB. And in the facts of the matter before me there is no reason for me to disagree with the reasoning given by AO in this regard as quoted above. The express provisions of this explanation require that book profits need to be increased by the amount/s of expenditure relatable to any income to which section 10, 10A, 10B etc. apply. As such, the action of the AO on this issue is considered to be fair and reasonable and is, hereby, confirmed.” 5. This issue stands covered by the order of Hon’ble Delhi High Court in the case of PCIT Vs. Bhushan Steel Ltd. in ITA Nos. 593 & 594/2015, order dated 29.09.2015 and the order of Co-ordinate Bench of Tribunal in the case of Vireet Investment Pvt. Ltd. (58 ITR(T) 313). 6. The relevant part of the order in the case of Vireet Investment Pvt. Ltd. (58 ITR(T) 313) is reproduced as under: ”6.10. Thus, the submission of ld. CIT(DR) IS that when basic object and purpose of section 14A and clause (f) to Explanation 1 to section 115JB(2) is same, then it cannot be said that merely because section 14A has not been mentioned in clause (f), therefore, it has no application. The mode of computation with same purpose cannot be differently made merely because section 115JB creates a deeming section. The object of deeming provisions is to substitute the total income computed under normal provisions by that computed under MAT provisions. Submission of ld. CIT(DR) is that this cannot be ITA No. 3051/Del/2007 Modi Entertainment Ltd. 5 extended to computation for same items under normal as well as MAT provisions. Under the provisions of section 14A, both direct and indirect expenses in relation to earning of exempt income are to be reduced. Therefore, different meaning cannot be ascribed in clause (f) and, therefore, the submission of ld. counsel for the assessee that only directly relatable expenditure is to be reduced, cannot be accepted. 6.11. Ld. CIT(DR) further submitted that the term "relatable to" used in clause (f) cannot be ascribed a restrictive meaning as compared to the term used "in relation to" in section 14A. Both terms are with the same purport and object. 6.12. Ld. counsel has submitted that the AO cannot go beyond audited financial statements of the assessee while computing book profits u/s 115JB. However, the submission of ld. CIT(DR) IS that this argument is fallacious, because here the AO is not going beyond the audited accounts but is computing the expenditure debited in the P&L A/c, which is relatable to earning of exempt income. This is as per clause (f) itself. 6.13. Further reasoning advanced by ld. CIT(DR) is that section 14A has been incorporated much after the incorporation of Chapter XIIB in 1987. Section 14A was incorporated just after section 14, which classifies the head of income for computation of total income. This section was made applicable with respect to determination of total income. The MAT provisions are for computation of income from business in case of specific companies. Therefore, it cannot be said that section 14A had no applicability to MAT provisions, which were existing when section 14A was introduced for the first time. Therefore, section 14A is applicable for all kinds of incomes, which are claimed as exempt by assessee in the Income-tax Act. ITA No. 3051/Del/2007 Modi Entertainment Ltd. 6 6.14. There cannot be any quarrel with the proposition that clause (f) of Explanation 1 to section 115JB(2) is in conformity to matching principles of accounting. Ld. counsel has submitted that matching principle of accountancy provides that expenses are debited in the P&L A/c only to the extent relatable to the accrual of the corresponding income and, therefore, only expenses debited to the P&L A/c which have direct and proximate nexus with the exempt income credited to the P&L A/c are to be added back. 6.15. Ld. CIT(DR), however, submits that this argument cannot be accepted because if assessee has made provision in respect of expenditure accrued, a part of which is relatable to exempt income, then it does not imply that to that extent the expenditure should not be added back. 6.16. The submission of ld. CIT(DR) is, thus, that the phrase "in relation to" as used in section 14A and the expression "expenditure relatable to", as used in clause (f) of Explanation 1 to section 115JB(2), are in the same context and, therefore, have to be understood in the same sense. 6.17. Ld. Principal CIT(DR) has pointed out that the phrase "expenditure relatable to" as used in clause (f) of Explanation 1 to section 115JB(2) will take its color from the phrase in "in relation to", used in section 14A. The contention of ld. CIT(DR) is that If we apply principles of literal interpretation, then that would lead to an anomalous situation, in which higher expenditure, to the extent of indirect expenses, will be charged towards the earning of exempt income u/s 14A, thereby reducing the exempt income as compared to expenditure charge while computing book profits u/s 115JB because no indirect expenditure will be allocated towards earning of exempt income. The submission is that obviously, this cannot be the ITA No. 3051/Del/2007 Modi Entertainment Ltd. 7 intention of legislature. As per the provisions of section 115JB(1), a comparison of the total income computed under the normal provisions of the Income-tax Act is to be made with the book profits as computed u/s 115JB. This makes it clear that total income as contemplated under normal provisions is inextricably linked to book profits under MAT provisions and it is wrong to suggest that both operate in entirely different fields. This interpretation overlooks the very object of insertion of MAT provisions. Therefore, the submission is that when we resort to comparison between computation under normal provisions of the Income-tax Act and MAT provisions, the comparison will not be on same footing. Submission of ld. CIT(DR) is that it cannot be denied that the legislative intent regarding disallowance of expenditure relating to earning of exempt income was same, whether under normal provisions or under the MAT provisions. Hence, the whole object of comparison between the total income under normal provisions and MAT provisions will get frustrated. 6.18. Ld. CIT(DR) submitted that the above interpretation, will ensure in arriving at the same figure of expenditure relatable to exempt income under normal provisions and also while computing the book profits u/s 115JB. If different modes of computation are followed u/s 14A and in clause (f) of Explanation 1 to section 115JB(2), then the comparison will not be on same footing and will produce absurd results. He further clarified that even if we resort to plain meaning rule, the phrase "in relation to" used in section 14A and the phrase "expenditure relatable to earning of exempt income", under clause (f) of Explanation 1 to section 115JB(2), the word "relatable to" has wider connotation than the words "in relation to", where the proximate relationship is required and, therefore, the contention of ld. counsel for the assessee that, while computing book ITA No. 3051/Del/2007 Modi Entertainment Ltd. 8 profit u/s 115JB, only those expenses which have direct nexus to the earning of exempt income have to be considered under clause (f) of Explanation 1 to section 115JB(2), cannot be accepted. 6.19 Ld. CIT(DR)'s aforementioned submissions are fortified by the decision of Hon'ble Delhi High court in the case of Goetze (India) Ltd.(supra). Admittedly the decision is on the point in issue under consideration. The submission of ld. Senior Counsel is that the decision of Hon'ble Delhi High Court is by way of concession by assessee as they have recorded the statement of assessee's counsel to answer the question of law. Per contra the submission of ld. Principal CIT(DR) is that the decision is after due consideration of provisions of law. We find considerable force in the submission of ld. CIT(DR) that the decision cannot be said to be by way of concession more particularly when a substantial question of law and not question of fact was under consideration of Hon'ble High Court. In that case proceedings u/s 263 were initiated, inter alia, on the ground that the expenditure of Rs. 183.63 lacs, incurred for earning of exempt dividend income u/s 14A of the Act was not disallowed, though the assessee had earned dividend income of Rs. 157.85 lacs, which was exempt u/s 10(33) of the Act. The computation of income was made u/s 115JA and in that context the Hon'ble High Court, inter alia, observed as under: "By order dated May 16, 2012, the following substantial questions of law were framed in the present appeals. "(i) Whether the Income-tax Appellate Tribunal was right in holding that while computing the book profit under section 115JA (sic. Section 115JB) of the Income-tax Act, 1961, no disallowance under section 14A was required to be made? ITA No. 3051/Del/2007 Modi Entertainment Ltd. 9 (ii) Whether the Income-tax Appellate Tribunal was right in deleting interest under section 234D of the Income-tax Act, 1961? Learned counsel for the respondent-assessee, during the course of hearing, has fairly conceded that the first question has to be answered in favour of the Revenue and against the assessee in view of the specific provisions in the Explanation 1 below section 115JB(2) clause (f). The Assessing Officer it is stated had made an addition of Rs. 88,292 to the book profits towards expenditure incurred having nexus with dividend income, which were exempt under section 10(33). Recording the said statement, the first question is answered in favour of the appellant- Revenue and against the respondent-assessee." 6.20. Thus, it cannot be said that Hon'ble Delhi High Court has not considered this issue and merely allowed the revenue's appeal on concession. The substantial question of law framed by Hon'ble Delhi High Court clearly shows that the specific issue was whether disallowance u/s 14A was required to be made while computing book profit u/s 115JA/115JB. The Hon'ble Delhi High Court has not only recorded assessee's plea of merely not contesting the issue in view of specific provisions but has recorded that the counsel fairly conceded. The expression "fairly" implies that Hon'ble High Court was also of the view that the provisions of section 14A were applicable with full force to the corresponding provisions u/s 115J. 6.21. Ld. Principal CIT(DR) has, in this regard, referred to the decision of Hon'ble Supreme Court in the case of CIT Vs. K.Y. Pilliah & Sons (1967) 63 ITR 411 (SC), wherein in para 10, it has been observed as under: “10. The form of the second question needs some explanation. The Income-tax Officer worked out the gross profit on the estimated turnover of Rs. 12 lakhs at 6.5% and that the profit amounted to Rs. 78,000. The assessees had by their return disclosed a gross profit of Rs. 36,858. ITA No. 3051/Del/2007 Modi Entertainment Ltd. 10 In adopting the rate of 6.5% on the estimated turnover, the Income-tax Officer added to the income returned Rs. 41,142 being the additional profit, and levied tax thereon. It was not suggested that there were any other admissible outgoings which could not debited against that amount. The question whether Rs. 41,142 were liable to be taxed falls to be determined under the first question. The second question only relates to the amount of Rs. 7,000 which was the cash credit item which represented an unexplained entry in the books of account of the assessees. In respect of that amount, the Income-tax Officer held that the explanation of the assessee was untrue and the Appellate Assistant Commissioner and the Tribunal agreed with the view. The Income-tax Appellate Tribunal is the final fact- finding authority and normally to should record its conclusion on every disputed question raised before, it setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department. The criticism made by the High Court that the Tribunal had "failed to perform its duty merely affirming, the conclusion of the Appellate Assistant Commissioner" is apparently unmerited. On the merits of the claim for exclusion of the amount of Rs. 7,000, there is no question of law which could be said to arise out of the order of the Tribunal. The assessee had credited Sampangappa with two sums of Rs. 6,000 and Rs. 1,000 in the months of November and December, 1950, respectively. It was clear that Sampangappa had not advanced at the material time any amount to the assessees. The explanation of the assessees was, therefore, untrue." Thus, it is evident that in every case it is not necessary that long drawn reasoning should be given before arriving at any conclusion more particularly when both the parties are agreed on certain ITA No. 3051/Del/2007 Modi Entertainment Ltd. 11 provision of law. We, therefore, reject the assessee's contention that the decision of Hon'ble jurisdictional High Court in Goetze (India) Ltd. does not constitute a binding precedent more particularly in respect of subordinate courts including Tribunal functioning within its jurisdiction. However, Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel (supra) wherein it has been held as under:- ............................... 7. Question No.6 concerns deletion of addition of Rs.89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax ('MAT') under Section 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs.89,00,000 was not justified. The view taken by the ITAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax (2002) 255 ITR 273 (SC) which held that "the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J." The Court declines to frame a question on the above issue. Thus, this decision is also on the same issue taking contrary view. Under such circumstances the issue before us is as to follow which decision. Ld. CIT(DR) in course of hearing filed the decision of Tribunal in the case of Goetze (India) Ltd. and referred to para 6 of the said decision which is reproduced hereunder:- ITA No. 3051/Del/2007 Modi Entertainment Ltd. 12 "6. Coming to the sustenance of disallowance of Rs.88,290/- u/s 115JB, the Commissioner of Income-tax (Appeals) has upheld the disallowance under clause (f) of Explanation to section 115JB(2) of the Act. Under section 115JB of the Act, the assessee is required to pay tax on its book profit subject to certain conditions. The books profit is to be determined u/s 115JB(2) as per Part II & III of Schedule VI to Company's act, 1956. Explanation (1) to section 115JB(2) defines the expression "book profit" and means the net profit as shown in the P&L A/c for the relevant previous year prepared under sub-section (2) as increased by the amounts specified in clause (a) to (h) of the Explanation 1. Clause (f) of the Explanation 1 refers to the amount or amounts or expenditure retable to any income to which section 10 (other than provisions contained in clause 38 thereof) or section 11 or section 12 apply. For applying the provisions of clause (f) of Explanation to section 115JB(2), there should be nexus between the amount of expenditure relatable to the income exempt u/s 10 of the Act. The dividend income is exempt u/s 10(33) for assessment year 2001-02. Since the expenditure incurred has not been identified and no nexus has been established with the dividend income, the expenditure could not be disallowed under clause (f) of the Explanation. As per the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd., the Assessing Officer is not entitled to tinker with the book profits as determined as per provisions of Company's Act unless the amount is specified in clauses (a) to (h) of the Explanation. The amount of Rs.88,290/- has not been established to have nexus with the dividend income. The amount of Rs.88,290/- has been estimated at 1% of the income. In our view, no disallowance could be made. Accordingly, we direct the Assessing Officer to delete the amount of Rs.88,290/- from the book profit." Thus, he submitted that the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. was duly considered by Tribunal before taking contrary view in the matter. But Hon'ble Delhi High Court did not accept the Tribunal's reasoning. Ld. CIT(DR) further submitted ITA No. 3051/Del/2007 Modi Entertainment Ltd. 13 that the decision in the case of Bhushan Steel has been rendered without taking into consideration the decision in the case of Goetze (India) Ltd. (supra) of co-ordinate bench of equal strength as both sides had not, brought to the notice of the Bench the said decision in the case of Goetze (India) Ltd. and, therefore, does not constitute binding precedent. Ld. CIT(DR) vehemently contended that when decision in Bhushan Steel was rendered, the issue was no more res- integra in view of Goetze decision. Ld. CIT(DR) submitted that Revenue had filed Review Petition before Hon'ble High Court in the case of Bhushan Steel which has been dismissed in-limine at the threshold on the ground of delay in filing the said Review Petition and, therefore, does not constitute a binding precedent. In support of his contention he has relied on the commentary of Kanga & Palkhivala, vol. I, VIIth Edn.,pag 43 which is reproduced hereunder:- “43. Circumstances that Destroy or Weaken the Binding Force of Precedent. A precedent losses all or some of its binding force in the following circumstances: (i) if it is reversed or overruled by a higher court - reversal occurs when the same decision is taken on appeal and is reversed by the higher court, while overruling occurs when the higher court declares in another case that the earlier case was wrong decided; (ii) when it is affirmed or reversed on a different ground, depending on the circumstances of such affirmation or reversal; (iii) when the legislature enacts a state that is inconsistent with the precedent; ITA No. 3051/Del/2007 Modi Entertainment Ltd. 14 (iv) when it is inconsistent with the earlier decisions of a higher court or a court of the same rank; (v) if it is a precedent sub silentio or not fully argued; (vi) when it is rendered per incuriam, i.e. in ignorance of a statutory provision or binding precedent - however, the rule of per incuriam is of limited application, and if the provision of the Act was noticed and considered, then the judgment cannot be ignored as being per incuriam merely on the ground that it has erroneously reached the conclusion; and (vii) when it is an erroneous decision, ie, a decision conflicting with the fundamental principles of law. Ld. Principal CIT(DR) further relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. 206 ITR 727 wherein Hon'ble court while summarizing the general principles with regard to precedents, inter-alia, observed as under:- (iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. Ld. Principal CIT(DR) has also relied on following decisions :- - CIT vs. Pamwi Tissues Limited, 313 ITR 137 - Indian Oil Corporation Ltd. vs. State of Bihar, 167 ITR 897 - Kunhayammed & Ors. vs. State of Kerala & Anr. 245 ITR 360 Ld. Principal CIT(DR) has submitted following written submissions in this regard:- ITA No. 3051/Del/2007 Modi Entertainment Ltd. 15 "The assessee had filed a compilation of case laws on 20/04/2017 and the Deptt. had to reply to the above. The reply of the Deptt. is as follows :- 1. The decision of the Hon'ble Supreme Court in the case of Sundeep Kumar Bafna V/s State of Maharashtra and another AIR 2014 SC 1745 has held as follows in para 12 of the judgement:- "if the third sentence of para 48 is discordant to Niranjan Singh, the view of the co-ordinate bench of earlier vintage must prevail, and this discipline demands and constrains as also to adhere to Niranjan Singh, ergo, we reiterate.................." Again in para 15 of the judgment it has been stated as follows:- 15. "It cannot be over - emphasized that the discipline demanded by a precedent or the disqualification or dimunition of a decision on the application of the per incuriam rule of great importance, Since without it, certainty of law, consistency of rulings and comity of courts would become a costly casualty. A decision or judgement can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgement can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgement of a co-equal or larger Bench, or if the decision of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the 'ratio decidendi' and not to 'obiter dicta'. It is often encountered in High Courts that two are more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of 'per incuriam'. ITA No. 3051/Del/2007 Modi Entertainment Ltd. 16 Thus, both paras 12 and para 15 cited above, in the Supreme Court judgement in Sandeep Kumar Bafna's case (supra) hold very clearly that the earlier decision is to be followed and not the later one of co- qual bench - when given in ignorance of the earlier decision - which in the present case - makes it very clear that the decision rendered in the case of Goetze should be followed and not the later decision given in the case of Bhushan Steel. Further, the Hon'ble Supreme Court in the case of Mamaleshwar Prasad Vs. Kanhaiya Lal (Dead) AIR 1975 SC 907 observed as follows:- "Certainity of the law, consistency of rulings and comity of Courts all flowering from the same principle converge to the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule that, in exceptional instances where by obvious inadvertence or over sight a judgement fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the sway of binding precedents. It should be a glaring case, an obtrusive omission." Although the above observations are not 'ratio' but then as held in the case of (1) Kharawala Vs. ITO 147 ITR pages 67, 85:- The observation of the Supreme Court on the true interpretation of sub-s. (1) cannot, therefore, be regarded as mere passing observations. At the highest, they may be treated as an obiter dictum, that is to say the expression of opinion on a point which it was not necessary for the decision of the case. Even if they are conceivably regarded as obiter dictum it is settled that if an opinion is expressed by the supreme court on the interpretation of a section after careful consideration and such opinion is deliberately and ITA No. 3051/Del/2007 Modi Entertainment Ltd. 17 advisedly given, the opinion would be binding on the High Court See Mohandas Issardas V. A.N. Sattanathan (1955) 56 BLR 1156; AIR 1955 Bom 113. Under these circumstances, were are unable to accede to this submission made on behalf of the Revenue. (2) CIT Vs. AP Riding Club 168 ITR pages 393, 404 It is now-settled that even the obiter dictum of their Lordships of the Supreme Court is binding on the High Courts under article 141 of Constitution of India. The 'obiter dicta' of Supreme Court has to be followed. Hence, both the cases of Sandeep Kumar Bafna and Mamaleshwar Prasad Vs. Kanhaiya Lal - make it very clear that the earlier decision constitutes the 'binding precedent' and should be followed in preference to the later decision given in ignorance of the earlier decision of co-equal strength. Hence, it is requested that the Hon'ble Special Bench may kindly follow the earlier decision of Goetze in preference to the later decision of Bhushan Steel." Per contra, Ld. Senior Counsel, without prejudice to his submission that the decision in the case of Goetze (India) Ltd. on this issue was by of concession, submitted that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the decision being later in point of time is binding on the lower courts. In support of this proposition of law he has relied on following decisions:- 1. Bhika Ram v. UOI : 238 ITR 113 (Del.). 2. Govindanaik G. Kalaghtigi v. West Patent Press Co. Ltd.: AIR 1980 Kar 92 (FB). ITA No. 3051/Del/2007 Modi Entertainment Ltd. 18 3. Vasant Tatoba Hargude v. Dikkaya Muttaya Pujari : AIR 1980 Bombay 341. 4. Peedikkakumbhi Joseph v. Special Tahsildar : 2001 (1) KLT 747 (FB). 5. Datamatics Financial Services Ltd. v. JCIT : 95 ITD 23 (Mum. Trib.) The second proposition advanced by Ld. Senior Counsel is that in case of conflict/divergent view expressed in two separate pronouncements of a Court by a Bench of co-equal strength, the lower Court shall follow the judgment which appears to it to state the law more elaborately and accurately. In this regard he has relied on following decisions:- 1. Indo Swiss Time Limited v. Umrao : AIR 1981 P&H 213 2. Amar Singh Yadav v. Shanti Devi : AIR 1987 Pat 191 3. T.P. Naik v. UOI : AIR 1998 MP 83 Third proposition advanced by Ld. Senior Counsel is that a lower authority/Court cannot declare a judgment of a higher Court as per incurium. In this regard he has relied on following decisions:- 1. Cassel & Co. Ltd. vs. Broome [1972] 1 All ER 801 (House of Lords) - quoted in ITO v. Modern International : ITA No.1253/Kol/2011. 2. CIT v. B.R. Construction : 202 ITR 222 (AP)(FB). Thus, we are pitted against two decisions of Hon'ble jurisdictional high court taking divergent views and, under such circumstances we have to decide which decision to follow. We find from the decisions relied upon by Ld. Senior Counsel more particularly in the case of Bhika Ram (supra) that later pronouncement by a bench of co-equal strength should be followed even if earlier decision was not ITA No. 3051/Del/2007 Modi Entertainment Ltd. 19 considered. We are not convinced with the submission of ld. Senior Counsel that Tribunal can decide which decision state the law more elaborately and accurately. We are of the view that decision in the case of Cassel & Co. Ltd. v. Broome (supra) should guide the course of action wherein it has been observed as under:- "Though a judgment rendered per incuriam can be ignored even by a lower court, yet it appears that such a course of action was not approved by the House of Lords in Cassell & Co. Ltd. v. Broome [1972] 1 AII ER 801, wherein the House of Lords disapproved the judgment of the Court of Appeal treating an earlier judgment of the House of Lords as per incurium. Lord Hailsham observed (at page 809): 'It is not open to the Court of appeal to give gratuitous advice to judges of first instance to ignore decisions of the House of Lords in this way'. It is recognized that the rule of per incuriam is of limited application and will be applicable only in the rarest of rare cases. Therefore, when a learned single judge or a Division Bench doubts the correctness of an otherwise binding precedent, the appropriate course would be to refer the case to a Division Bench of Full Bench, as the case may be, for an authoritative pronouncement on the question involved as indicated above. The above-said two questions are answered as indicated above." In such a scenario, in our humble opinion, proper course would be to follow the decision of Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (S.C.) 88 ITR 192. In this case the facts were like this. The relevant assessment year was 1960-61. In that regard the Income-tax Officer issued a notice under section 22(2) of the Indian Income-tax Act, 1922 on June 1 1960, served on assessee on June 13, 1960, requiring the assessee to submit its return on or before July18, 1960. Assessee sought extension of time for ITA No. 3051/Del/2007 Modi Entertainment Ltd. 20 submitting its return which was extended by ITO for two months with rider for no further extension. The assessee failed to furnish the Return of Income within the extended time. Thereafter, a notice under section 28(3) of the 1922 Act was served on the assessee on January 16, 1961. On the very next day, viz., January 17, 1961, the assessee filed its return for the assessment year in question. The assessment was completed by ITO on October 31, 1962. Meanwhile, on April 1, 1962, the Income- tax Act, 1962 (came into force. As under the provisions of section 297(2)(g) of the Act, the proceedings for the imposition of the penalty had to be initiated and completed under the Act, a fresh notice was served on the assessee. The ITO determined the tax due from the assessee for the assessment year at Rs.1,25,512.10 and on that basis, the penalty payable by the assessee was fixed at Rs.12,734.10. It may be pointed out that on February 2, 1961, a provisional assessment was made by the ITO under section 23B of the 1922 Act. Immediately thereafter, the assessee deposited Rs. 92,294.55. In determining the penalty due from the assessee, the ITO took into consideration not the amount demanded under section 156 of the Act but the amount assessed under section 143 of the Act. In the back drop of these facts the controversy before Hon'ble Supreme Court was whether the penalty was to be levied on the tax assessed under section 143 or as demanded under section 156 being tax assessed minus the amount paid under the provisional assessment order. Hon'ble Supreme Court before resorting to the interpretation of term in addition to the amount of the tax, if any, payable by him as appearing in section 271(1)(a)(i) observed as under:- "On the other hand, it two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognized by this court in several of its decisions." ITA No. 3051/Del/2007 Modi Entertainment Ltd. 21 Hon'ble Supreme Court held as under:- We must first determine what is the meaning of the expression "the amount of the tax, if any, payable by him" in section 271(1)(a)(i). Does it mean the amount of tax assessed under section 143 or the amount of tax payable under section 156. The word "assessed" is a term often used in taxation law. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax "assessed". A tax payable is not the same thing as tax assessed. The tax payable is that amount for which is a demand notice is issued under section 156. In determining the tax payable, the tax already paid has to be deducted. Hence, there can be no doubt that the expression "the amount of the tax, if any, payable by him" referred to in the first part of section 271(1)(a)(i) refers to the tax payable under a demand notice." We have therefore, to follow the later decision of Hon'ble Delhi High Court in the case of Bhushan Steel (supra). 6.22. In view of above discussion, we answer the question referred to us in favour of asssessee by holding that the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.” 7. In view of the above judgment, the appeal of the assessee on this ground is allowed. Disallowing Rs.12,06,000/-: 8. The relevant part of the order of the Assessing Officer and adjudication of the ld. CIT(A) is as under: ITA No. 3051/Del/2007 Modi Entertainment Ltd. 22 “The appellant argued before the AO that it was a trading loss and allowable u/s 28. This was rejected by the AO saying,  Admittedly, the assessee had an investment in Asia Television Network (ATN) at cost of Rs.12.06 lacs,  Admittedly, this has been held by the assessee as an investment in its balance sheet.  Admittedly, this has never been held in the balance sheet as business asset under the heading current asset as stock in trade of the assessee.  Any loss from the investments of the assessee constitute capital loss of the assessee.  Under the I. T. Act, capital loss is not a deductible item for determining the business income of the assessee.  This capital loss cannot be claimed u/s 28 as by no stretch of imagination can this loss from investment be camouflaged a business loss to the assessee." 5.1 On the other hand the case of the AR before me is, "The appellant had debited an amount of Rs. 12,06,000/- to the profit and loss account towards cost of investment written off. The note in respect of the above was duly provided by the appellant in point No.5 of Schedule 5 of Notes to Accounts, along with the balance sheet. The note reads as under: "The company had an investment in Asia Television Network (ATN) at cost of Rs. 12.06 lacs (refer schedule 5). The said Company become a sick company and ultimately went into liquidation as per information available with the Company. Accordingly, Company has written off such investments. However, the company has acquired the satellite and cable television rights in respect of certain Hindi Feature films from ITA No. 3051/Del/2007 Modi Entertainment Ltd. 23 ATN and assigned the same rights to another party for a total consideration of Rs.115 lacs, which has been included sales." From the above, it is to be appreciated that the amount of Rs.12,06,000/- debited to profit and loss account towards cost of investment is related to the sale proceeds of satellite and cable television rights amounting to Rs.115 lacs which is credited to the profit and loss account. Instead of reducing the amount of cost of investment from the sale proceeds of satellite and cable television rights, the appellant debited the said amount to the profit and loss account." 5.2 Having considered the facts of the matter in its entire perspective and the rival contentions on the same, it is clear to me that the action of the AO-and the reasoning there for is based on disregarding the claim of assessee company for writing off an investment made with ATN. This is not denied by assessee but latter has linked it up with a receipt of Rs.115 lacs from another party shown as sales, for the reason that the film rights sold to such other party were also acquired from ATN. However, it has been shown by assesser co. - and it was necessary for them to show that in such circumstances - that the rights of films acquired by assessee from ATN were so inextricably linked with the earlier investment in ATN that the same could be said to be one and the same deal. The facts available before me do not show this as the note appendence to balance sheet shows that the amount of Rs.12.06 lacs was an investment in ATN and therefore, the same cannot be presumed to be a part of the deal for purchasing film rights from ATN and selling then off to another party. As such, the contention of the assessee company in this regard is considered to be unacceptable and, therefore, action of the AO is hereby confirmed.” ITA No. 3051/Del/2007 Modi Entertainment Ltd. 24 9. Before us, the ld. AR reiterated the submission filed before the revenue authorities. The ld. AR referred to para 5 of the submission at page no. 78 of the paper book which reads as under: “The company had an investment in Asia Television Network (ATN) at cost of Rs.12.06 lacs (refer schedule 5). The said Company become a sick company and ultimately went into liquidation as per information available with the Company. Accordingly, Company has written off such investments. However, the company has acquired the satellite and cable television rights in respect of certain Hindi Feature films from ATN and assigned the same rights to another party for a total consideration of Rs.115 lacs, which has been included sales. Consequently, the company has suffered no loss on the cost of investment written off.” 10. Further, the ld. AR has taken us through the details of purchase of “ATN library” pertaining to sale of 67 shares for value of Rs.1,15,00,000/-. The ld. AR has also taken us through loss on sale of asset of Rs.12,06,000/- at page no. 76 of the paper book. 11. On the other than, the ld. DR filed his arguments in writing which are as under: “In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition u/s 28(ii) of I.T Act: 1. Matheson Bosanquet Co. Ltd. Vs CIT [1988] 37 Taxman 234 (Madras)/[1988] 171 ITR 359 (Madras)/[1988] 68 CTR 129 (Madras) (Copy Enclosed) where Hon'ble Madras High Court held that where ITA No. 3051/Del/2007 Modi Entertainment Ltd. 25 agency was terminated and certain sum was paid by way of compensation to assessee, compensation amount was taxable in view of provisions of section 28(ii)(e). 2. Ansal Properties & Industries Ltd Vs DCIT [2008] 115 ITD 443 (Delhi)/[2008] 19 SOT 391 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that since assessee had entered into contract with DCM in its ordinary course of business, and, moreover compensation was awarded to assessee for loss of future profit and also for development already undertaken by assessee, such compensation amount was rightly considered as revenue receipt by Assessing Officer. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made as per Explanation to Section 73 of I.T. Act: 1. CIT Vs DLF Commercial Developers Ltd [2013] 35 taxmann.com 280 (Delhi)/[2013] 218 Taxman 45 (Delhi)/[2013] 261 CTR 127 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that in case of certain types or classes of companies, loss in trading of derivatives is speculative loss, ineligible to be carried forward. 2. CIT Vs Eureka Stock & Share Broking Services Ltd [2016] 74 taxmann.com 114 (Calcutta)/[2017] 291 CTR 313 (Calcutta) (Copy Enclosed) where Hon'ble Kolkata High Court held that where assessee incurred loss on account of sale and purchase of shares, which had no connection with its business as a share broker, said loss would be ITA No. 3051/Del/2007 Modi Entertainment Ltd. 26 treated as speculation loss which could not be set off against brokerage income earned as sharebroker. 3. ALFA Tie-up (P.) Ltd Vs CIT [2013] 31 taxmann.com 277 (Calcutta)/[2013] 214 Taxman 7 (Calcutta) (Copy Enclosed) where Hon'ble Kolkatta High Court held that Where less than 50 per cent funds of assessee were invested in granting loans and advances, it could not be treated as assessee's principal business, and therefore, share trading loss would be treated as speculative loss.” 12. Heard the arguments of both the parties and perused the material available on record. 13. It is clear from the above that the assessee has invested Rs.12.06 lacs in ATN and since the company went into liquidation, the investments are written off. The assessee has investments in ATN and the ld. CIT(A) has rightly held that the investments of Rs.12.06 lacs was indeed an investment in ATN and therefore, the same cannot be presumed to be a part of the deal for purchasing film rights from ATN and selling then off to another party. Hence, we decline to interfere with the order of the ld. CIT(A). 14. In the result, the appeal of the assessee on this ground is dismissed. ITA No. 3051/Del/2007 Modi Entertainment Ltd. 27 15. In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 12/04/2024. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 12/04/2024 *Subodh Kumar Sr. PS* Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR