Per Incuriam Cases – II

A judgment of the court is not a binding precedent if given per incuriam, i.e., it is either:

  1. A judgment that is passed in ignorance of a relevant statutory provision; or
  2. A judgment that is passed without considering binding precedent of a coordinate or larger bench.

As discussed in the earlier article, the significance of a judgment having been decided per incuriam is that it does not then have to be followed as precedent by a lower court.

Let’s look at a few more per incuriam cases along with the cases which have held them to be per incuriam.

Per Incuriam Case:

Vazir Sultan Tobacco Co. Ltd. vs Commissioner Of Income Tax | Andhra Pradesh High Court

“Whether on the facts and in the circumstances of this case, the assessee was entitled to a deduction of the expenditure incurred for raising additional capital by issue of bonus shares to the existing shareholders of the company?”  

Court’s Answer: No. The court decided that the expenditure incurred on raising the additional capital by issuing bonus shares is attributable to enlarging of the capital base of the company and thus, is capital in nature.

Held Per Incuriam in:

Commissioner Of Income Tax, Mumbai vs M-s. General Insurance Corporation of India | Supreme Court

“Whether on the facts and in circumstances of the case and in law the Tribunal was right in holding that the expenditure incurred on account of share issue is an allowable expenditure?”  

Court’s Answer: The Court held that the issue of bonus shares by capitalization of reserves is merely a relocation of company’s funds. There is no inflow of fresh funds or increase in the capital employed.

“In our considered opinion, the view taken by the Bombay and Calcutta High Courts is correct to the effect that the expenditure on issuance of bonus shares is revenue expenditure. The contrary judgments of Gujarat and Andhra Pradesh High Courts are erroneous and do not lay down the correct law.”

Per Incuriam Case:

Commissioner Of Income Tax vs Wolkem Pvt. Ltd | HC Rajasthan

“Whether, on the facts and in the circumstances, the Tribunal was right in law in holding that refund of excise duty  was not in the nature of income under s. 28(iv) or under s. 41(1) of the IT Act, 1961”

Court’s Answer: The High Court decided that refund of excise duty is not the income of the assessee and since it is not an income, it is neither covered by Section 28(iv) nor Section 41 of the Income Tax Act. Thus, it will not be considered as a revenue receipt. On account of this, it was held that there was no liability for payment of income tax as it amounted to only a financial transaction and nothing beyond.

Held Per Incuriam in:

Wolkem (P) Ltd. vs Commissioner Of Income Tax | HC Rajasthan

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the excise duty collection was a trading receipt in the year of receipt and hence excise duty refund of Rs. 1,45,752 was liable to tax in the hands of the assessee under s. 41(1) of the IT Act, 1961?”

Court’s Answer: The High Court considered the amount of refund as the income of the assessee as the amount refunded to the assessee was neither refunded to the customers nor paid to the Government. Thus, this was a case of unlawful enrichment. If such refund if not considered as income, the assessee will be benefitted twice.

“As far as the decision of this Court in the case of CIT vs. Wolkem (P) Ltd. In previous assessment years is concerned, it is essentially an authority on the power of the High Court in the matter of calling for a supplementary statement of the case. The three Supreme Court decisions, referred in this present case, directly on the point appear to have not been brought to the notice of the learned Judges constituting the Division Bench. Though some cases have been referred to in the judgment, none of them have been discussed”

 

Per Incuriam Case:

ITO vs Everest Home Construction (I) P. Ltd | ITAT Mumbai

“Whether on the facts and in the circumstances of the case, the CIT(A) erred in directing the Assessing Officer to allow deduction under section 80IB(10) even though condition laid down in the section 80IB(10)(d) is not satisfied which is applicable from A.Y. 2005-06 onwards”

Court’s Answer: The Tribunal denied the benefit of section 80IB(10)

Held Per Incuriam in:

ACIT vs Poonam Gruh Nirman | ITAT Mumbai

“Whether on the facts and in the circumstances of the case in law, the CIT(A) has erred in holding that the assessee is entitled to deduction under section 80IB(10)?”

Court’s Answer: It is pertinent to not that there is a plethora of judgments of the co-ordinate Benches of the Tribunal wherein it has been decided that law under the substituted provisions of section 80IB(10) of the Act, will not be applicable for the projects which have already been approved by the local authority prior to the amendment.

“Section 6 of the General Clauses Act will come in and stand for the rescue of the assessee. Moreover, as observed above by the co ordinate Bench of the Tribunal in the case of Saroj sales Organization (supra), any different interpretation of the section 80 IB(10) will lead to absurdity. In view of the above discussion of the matter, most humbly and with utmost regard, we are not in agreement with the view taken by the co-ordinate Bench of the Tribunal in the case of M/s Everest Home Construction (India) Pvt. Ltd. (supra). Moreover, the issue now stands settled by the decision of the Bombay High Court in the case of CIT vs. Brahma Associates (supra), wherein the Hon ble High Court has answered the question as to whether deduction under Section 80IB(10) as it stood prior to 1/4/2005 is allowable to a housing project approved by a local authority with commercial user to the extent permitted under the development under the Development Control Rules framed by the local authority, in favour of the assessee.

The decision of the Tribunal in the case of M/s Everest Home Construction (India) Pvt. Ltd. (supra) under such circumstances can be said to be rendered per incuriam”

 

Written by Saili Kulkarni, Product Manager @ Riverus

 

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