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HDFCBankLtd.Mumbai

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WRITPETITIONNO.1753OF2016

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INTHEHIGHCOURTOFJUDICATUREATBOMBAY
CIVILAPPELLATEJURISDICTION

..Petitioner

v/s.

..Respondents

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TheDeputyCommissionerofIncome
Tax2(3),Mumbai&Ors.

Mr. J.D. Mistry, Senior Counsel a/w Madhur Agarwal a/w Atul
Jasaniforthepetitioner
Mr.SureshKumara/wMs.SamikshaKananifortherespondent

CORAM:M.S.SANKLECHA&
B.P.COLABAWALLA,J.J.

DATED:25thFEBRUARY,2016.

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PERCOURT:

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1.

Heard.Rule.Respondentswaveservice.Byconsentofthe

parties,Ruleismadereturnableforthwith.

2.

ThispetitionunderArticles226and227oftheConstitution

ofIndiachallengestheorderdated23rd September,2015passed
by the Income Tax Appellate Tribunal (Tribunal) under Section
254(1)oftheIncomeTaxAct,1961(theAct).Bytheimpugned

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order dated 23rd September, 2015, the Tribunal dismissed the

petitioner'sappealrelatingtotheAssessmentYear200809onthe

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issue of applicability of Section 14A of the Act to disallow a

portion of the interest paid on borrowed funds in respect of

investments made in tax free securities. This when it has own
fundsinexcessofinvestmentsmadeinthesecuritiesandfurther

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thesesecuritiesareheldasstockintrade. Thisdismissalofthe
appeal,submitthepetitioner,inspiteoftheissuebeingconcluded

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Court.

onboththegroundsinitsfavourbythebindingdecisionsofthis

3.

However, Mr. Suresh Kumar the learned Counsel for the

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Revenue urged that as there is an alternative remedy of an

statutory appealavailableunderSection260AoftheAct from
impugnedorderoftheTribunalthiscourtshouldnotexerciseits
extraordinaryjurisdictionunderArticle226oftheConstitutionof
India. It is submittedthat issue raisedin thispetition couldbe
examinedinappeal.ItistruethatanorderpassedunderSection
254(1)oftheActbytheTribunal,suchastheimpugnedorderis
amenabletoanappealtothisCourtunderSection260Aofthe

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Act.Normallywewouldhavedirectedthepetitionertoadoptits
statutory alternative remedy. However, the grievance of the

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petitionerhereisnotsomuchtothemeritsordemeritsofthe

impugned order, but the refusal of the Tribunal to follow the

bindingdecisionofthisCourtinthecaseofthepetitioneritself
being CIT Vs. HDFC Bank Ltd. 366 ITR 505 for an earlier

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Assessment Year 200102 on identical issue of applicability of

Section14AoftheActtopartiallydisallowinterestexpenditure

wheninterestfreefundsavailablewiththePetitionerareinexcess
ofinvestmentsmadeintaxfreesecurities.Thus,theendeavorof

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the petitioner is to bring to our notice that in passing the

impugned order dated 23 September 2015 the Tribunal has

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exceededtheboundsofitsauthority,bydisregardingthebinding
decisions of this Court, which if not corrected, may sound the
deathknelloftwoestablishedpracticesofourjudicialsystemviz.
doctrine of Precedent i.e. treating like cases alike and the
hierarchicalstructureofourjudicialsystem/jurisprudencewhere
eachlowerforum/tierisboundbytheordersofthehighertier
onlikeissuestillsuchtimeasitis setasidebyafurtherhigher
forum.Itisintheaforesaidcircumstances,thatwearecompelled

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toexaminethegrievanceofthepetitionerinthecontextofour
supervisoryjurisdictionunderArticle227oftheConstitutionof

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India.

4.FactualMatrix:
(a)

For the Assessment Year 200809, the petitioner filed its

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return of income declaring an income of Rs.241.72crores. The

petitionerhadinitsreturnofincomealsodeclaredanincomeof

Rs.5.81crores from the investments in securities which were

exempt from tax. These investments were treated by the

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petitionerasstockintrade.Thepetitionerhadduringthesubject
Assessmentyearpaidinterestonborrowedfundsandhadclaimed

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the same as an expenditure. However the petitioner did not

disallowanyexpenditureontheincomeearnedonthetaxfree
securitiesonthegroundthattheinvestmentsintaxfreesecurities
wasmadeoutofitsowntaxfreefundsasisevidencedbythefact
thatithadamplefundsofitsowntomakeinvestments.Thusno
disallowancewasmadeontheexpenditureclaimedastheinterest
paidonborrowedfunds.
(b) By an order dated 22nd December, 2010 passed under

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Section 143(3) of the Act, the Assessing Officer assessed the

petitioner'sincomeatRs.1067.93crores. Thisafter disregarding

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thepetitioner'scontentionthatSection14AoftheActwouldnot
applyinrespectofitstaxfreesecuritiesasithadampleinterest
freefundsavailableandthesamewas utilized fromacommon
poolconsistingofinterestbearingfundsandinterestfreefundsto

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purchasethetaxfreesecurities.Thisonlyonthegroundthatthe
petitioner was not able to indicate / lead evidence that the

investmentsmadeintaxfreesecuritiescameoutofitsinterestfree
funds.InthecircumstancestheAssessingofficerinvokedSection

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14AoftheActr/wRule8DoftheIncomeTaxRules(Rules)to
disallowanamountofRs.3.39croresonaccountofinterestand

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Rs.0.27croreasotherexpensesaggregatingtoRs.3.66croresunder
Section 14A of the Act as being an expenditure incurred for
earningtaxexemptincomeofRs.5.81crores.
(c)Beingaggrievedwiththeorderdated22ndDecember,2010
oftheAssessingOfficer,thepetitionerpreferredanAppealtothe
CommissionerofIncomeTax(Appeals)[CIT(A)]. Byanorder
dated21st November,2011,theCIT(A)dismissedthepetitioner's
appealupholdingtheorderoftheAssessingOfficer.

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(d)Beingaggrieved,thepetitionerinteraliacarriedtheissueof
disallowance of interest to the extent of Rs.3.39crores under

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Section14Ar/wRule8DoftheRulesinappealtotheTribunal.
BeforetheTribunal,thepetitionerraisedtwogroundswithregard
totheaboveissueasunder:

(i)Itpossessedinterestfreefundswhichweremorethanthe

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taxfreeinvestments.Thusnodisallowanceofexpenditure
onaccountofinterestpaidcouldbemadeinviewofthe

bindingdecisionofthisCourtinthepetitioner'sowncasein
HDFCBankLtd.(supra);and
Thetaxfreesecuritieswereheldbyitasitsstockin

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(ii)

trade. Thus no disallowance of any expenditure under

Section14AoftheActcouldbemadeinviewofbinding

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decision of this Court in CIT Vs. India Advantages

SecuritiesLtd.ITA1131/13decidedon30thApril,2014.

However, the Tribunal by the impugned order did not

accept the petitioner's submission on both the grounds. It

disregardedthebindingdecisionofthisCourtbyholdingthatan
earlierdecisionofthisCourtinGodrejandBoyceManufacturing

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Co.Ltd.Vs.DeputyCommissionerofIncomeTax,328ITR81,
whichwasnotbroughttothenoticeofthisCourtinHDFCBank

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Ltd.(supra)wouldholdthefield.Furtheronthesecondissueof
stockintradetheimpugnedorderafterholdingthatitwasraised
forthefirsttimebeforetheTribunal,yetonmeritsholdsthatthe
decisionofthisCourtinIndiaAdvantageSecuritiesLtd.(supra)

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cannot apply. This for the reason that this Court in India
AdvantageSecuritiesLtd.(supra)dismissedtheRevenuesappeal

atthestageofadmissiononthegroundthatnoquestionoflaw

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arisesforconsiderationfromtheorderoftheTribunal.

Submissions:

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5.Mr.Mistry,learnedSeniorCounselinsupportofthepetition
submitsasunder:

(a)

TheissuewhicharoseforconsiderationbeforetheTribunal

withregardtoapplicabilityofSection14AoftheActinrespectof
the tax free income earned on investments in case of a party
possessedofinterestfreefundsinexcessoftheinvestmentsmade
intaxfreesecuritiesstoodconcludedinfavourofthepetitionerby
thebindingdecisionofthisCourtasrenderedinthepetitioner's

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own case viz. HDFC Bank Ltd (supra) on identical facts.

Nevertheless the binding decision is disregarded by seeking to

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holdthattheissueiscoveredbyanearlierdecisionofthisCourtin
GodrejandBoyceManufacturingCo.Ltd(supra),wheninfactit
hasnotdecidedtheissue;

(b) ThereisnoconflictbetweenthedecisionsofthisCourtin

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GodrejandBoyceManufacturingCo.Ltd.(supra)andHDFCBank
Ltd(supra).ThisisforthereasonthatthisCourthasinGodrejand

BoyceManufacturingCo.Ltd.(supra)hasnotruledontheissueof
disallowance of interest under Section 14A of the Act on the

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ground of presumption where sufficient interest free funds are

availabletomakeinvestmentintaxfreeinstruments.Thisissue

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was only decided later by this Court for the first time in the
petitionersowncaseinHDFCBankLtd.(supra).
(c)Inviewofthefactthatthereisonlyonedecisionviz.HDFC
BankLtd(supra)ofthiscourtreigning, itwasnotopentothe
Tribunalto disregardadecisionofthiscourtbymerelyholding
thedecisioninHDFCBankLtd.(supra)wasperincuriam.Thison
the ground that in HDFC Bank Ltd. (supra) attention was not
invited to the decision of this Court in Godrej and Boyce

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ManufacturingCo.Ltd.(supra).Thisismoreparticularlysowhen

applicationtothepresentfacts;

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Godrej and Boyce Manufacturing Co. Ltd. (supra) has no

(d)InfacttheTribunalhasbeenconsistentlyfollowingtheratioof
thedecisionofthisCourt inHDFCBank(supra)inothercases
beforeit,butHDFCBankitselfi.e.thepetitionerdoesnotgetits

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benefit.

(e) Similarly, the alternative submissions urged before the

Tribunalthattheseinvestmentsinsecuritiesareitsstockintrade
andconsequentlySection14AoftheActisnotapplicableisalso

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concluded in favour of the petitioner as held by this Court in

IndiaAdvantagesSecuritiesLtd.(supra).Howevertheimpugned

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orderignoresthesameonthegroundthatthisCourtintheabove
caseonlydismissedtheRevenuesappealbeforeitandtherefore
notbinding.Furthertheimpugnedorderalsoplacesrelianceupon
thedecisionofthisCourtinGodrejandBoyceManufacturingCo.
Ltd.(supra)evenwhenithasnoapplicationtothefactsbeforeit.

6. Per contra Mr. Suresh Kumar, learned Counsel for the

Revenueinsupportoftheimpugnedordersubmitsasunder:

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This petition should not be entertained as there is an

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(a)

alternativeremedyavailabletothepetitionerunderSection260A

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oftheActbywayofanappealtothisCourtfromtheimpugned
orderoftheTribunal.
(b)

TheappealfiledbythepetitionerbeforetheTribunalarose

fromordersoftheAssessingOfficerandtheCIT(A)holdingthat

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thepetitionerwasunabletoestablishthatitsinterestfreefunds
were utilized for the purposes of investment in securities.

Consequently, it is submitted that the decision of this Court in

HDFC Bank Ltd. (supra) would not have anyapplication to the

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factsofthepresentcase.
(c)

InthefactsofthepresentcasethedecisionofthisCourtin

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GodrejandBoyceManufacturingLtd.(supra)wasapplicableand
notthedecisionrenderedbythisCourtinHDFCBankLtd.(supra).
In support reliance is placed upon the impugned order of the
Tribunal.
(d)

Thealternativecontentionthattheinvestmentinsecurities

arepetitionersinstockintrade,wasraisedforthefirsttimeonly
beforetheTribunalandthuscouldnotbeentertained.Inanycase
the decision of this Court in India Advantage Securities Ltd

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dismissedbythiscourtatthestageofadmission.

Itis,therefore,submittedthattheimpugnedorderpassedby

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(supra) would havenoapplication asthe revenuesappealwas

the Tribunal calls for no interference by this Court in its

extraordinary jurisdiction under Articles 226 and 227 of the

Consideration:

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ConstitutionofIndia.

7. InoursystemofJurisprudencethetheoryofPrecedentsand
the hierarchical structure are an inherent part of our dispute

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resolution/justiceobtainingapparatusi.e.Courts/Tribunal.The
theory of precedent ensures that what has been done earlier

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wouldbedonesubsequentlyonidenticalfacts.Towit,likecases
aretobetreatedalike.Thus,thedoctrineofprecedentensures
certaintyoflaw,uniformityoflawandfairnessmeetingsomeof
the essentials ingredients of Rule of Law. In fact, the Supreme
Courtin UnionofIndiavs.RaghuvirSingh1989(2)SCC754
while setting out the objectives of the doctrine of Precedent
observesatpara7,8and9thereofasunder:

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"7. Indiaisgovernedbyajudicialsystemidentifiedbya
hierarchyofcourts,wherethedoctrineofbindingprecedent
isacardinalfeatureofitsjurisprudence.....
Taking note of the hierarchical character of the
judicialsysteminIndia,itisofparamountimportancethat
thelawdeclaredbythisCourtshouldbecertain,clearand
consistent.Itiscommonlyknownthatmostdecisionsofthe
courtsareofsignificancenotmerelybecausetheyconstitute
anadjudicationontherightsofthepartiesandresolvethe
dispute between them, but alsobecause in doing sothey
embody a declaration of law operating as a binding
principle in future cases. In this latter aspect lies their
particularvalueindevelopingthejurisprudenceofthelaw.

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8.

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9.
The doctrine of binding precedent has the merit of
promotingacertaintyandconsistencyinjudicialdecisions,
and enables an organic development of the law, besides
providingassurancetotheindividualastotheconsequence
of transactions forming part of his daily affairs. And,
therefore,theneedforaclearandconsistentenunciationof
legalprincipleinthedecisionsofaCourt.

(emphasissupplied)

8. Further the ApexCourt inthecaseof CollectorofCentral

Excise Vs. Dunlop India Ltd. 154 ITR 172 has observed as
under:
WedesiretoaddandaswassaidinCassellandCo.Ltd.
V.Broome(1972)AC1027(HL),wehopeitwillneverbe
necessaryforustosaysoagainthatinthehierarchical
system of courts which exists in our country, it is

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necessaryforeachlowertier, includingtheHighCourt,

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to accept loyally the decisions of higher tiers. It is

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inevitableinahierarchicalsystemofcourtsthatthereare

decisionsofthesupremeappellatetribunalwhichdonot
attract the unanimous approval of all members of the
judiciary .... But the judicial system only works if
someone is allowed to have the last word and that last

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word,oncespoken,isloyallyaccepted (Seeobservations
ofLordHailshamandLordDiplockinBroomeV.Cassell).
The better wisdom of the court below must yield to the
higherwisdomofthecourtabove.Thatisthestrengthof

the hierarchical judicial system. In Cassell V. Broome

(1972) AC 1027, commenting on the Court of Appeal's

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comment that Rookes V. Barnard (1964) AC 1129, was

renderedperincuriam,LordDiplockobserved(p.1131).
TheCourtofAppealfoundthemselvesabletodisregard

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thedecisionofthisHouseinRookesV.Barnardbyapplying
toitthelabelperincuriam.Thatlabelisrelevantonlyto
therightofanappellatecourttodeclinetofollowoneofits
own previous decisions, not to its right to disregard a
decision of ahigher appellatecourtor totheright ofa
judgeoftheHighCourttodisregardadecisionoftheCourt
ofAppeal.
ItisneedlestoaddthatinIndiaunderarticle141ofthe
Constitution,thelawdeclaredbytheSupremeCourtshall
bebindingonallCourtswithintheterritoryofIndiaand

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under art. 144 all authorities, civil and judicial, in the

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territoryofIndiashallactinaidoftheSupremeCourt.

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(emphasissupplied)

9. Although both the above decisions are rendered in the

contextofthedecisionoftheSupremeCourt,thesameprinciple
withequalforcewouldapplytothedecisionsoftheHighCourt

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withintheStateoverwhichitexercisesjurisdiction.Thisissueis
longsettledbytheApexCourtinEastIndiaCommercialCo.Ltd.

CalcuttaandAnr. vs.CollectorofCustoms,Calcutta1962SC

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SC1893whereinithasbeenheldasunder:

29. ... This raises the question whether an

administrativetribunalcanignorethelawdeclaredbythe
highestcourtintheStateandinitiateproceedingsindirect
violationofthelawsodeclared. UnderArt.215,every
HighCourtshallbeacourtofrecordandshallhaveallthe
powersofsuchacourtincludingthepowertopunishfor
contemptofitself.UnderArt.226,ithasaplenarypower
to issue orders or writs for the enforcement of the
fundamental rights and for any other purpose to any
person or authority, including in appropriate cases any
Government, within its territorial jurisdiction. Under
Art.227,ithasjurisdictionoverallcourtsandtribunals
throughouttheterritoriesinrelationtowhichitexercises
jurisdiction. Itwouldbeanomaloustosuggestthata
tribunal over which the HighCourt hassuperintendence
can ignore the law declared by that court and start
proceedingsindirectviolationofit. Ifatribunalcando

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so,allthesubordinatecourtscanequallydoso,forthereis
nospecificprovision,justlikeinthecaseofSupremeCourt,
making the law declared by the High Court binding on
subordinate courts. It is implicit in the power of
supervision conferredonasuperiortribunalthatallthe
tribunalssubjecttoitssupervisionshouldconformtothe
law laid down by it. Such obedience would also be
conducivetotheirsmoothworking:otherwise,therewould
beconfusionintheadministrationoflawandrespectfor
lawwouldirretrievablysuffer. We,therefore,holdthat
the law declared by the highest court in the State is
binding on authorities or tribunals under its
superintendence,andthattheycannotignoreiteitherin
initiatingaproceedingordecidingontherightsinvolvedin
suchaproceeding. Ifthatbeso,thenoticeissuedbythe
authoritysignifyingthelaunchingofproceedingscontrary
tothelawlaiddownbytheHighCourtwouldbeinvalid
and the proceedings themselves would be without
jurisdiction.

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(emphasis supplied)

Thus,the lawdeclaredbythedecisionsoftheHighCourt

will be binding upon all authorities and Tribunals functioning

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withintheState.Consequently,thedecisionsofthisCourtwould
bebindinguponallAuthorities,TribunalsandCourtssubordinate
totheHighCourtwithintheStateofMaharashtra.

10. Onemoreaspectwhichneedstobeadvertedtoandthatis
that a decision would be considered to be a binding precedent
onlyifitdealswith/decidesanissuewhichissubjectmatterof

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consideration/decisionbeforeacoordinateorsubordinatecourt.It
isaxiomaticthatadecisioncannotberelieduponinsupportofthe

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proposition that it did not decide.(see Mittal Engineering v.

Coll,ofCentralExcise1997(1)SCC203).Thereforeitisonlythe
ratiodecidendi i.e.theprincipleoflawthatdecidesthedispute
whichcanberelieduponasprecedentandnotanyobiterdictum

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orcasualobservations.(SeeGirnarTeavs.StateofMaharashtra
2007(7) SCC 555 and Shin Estu Chemical Co. Ltd v. Aksh

opticfibreLtd2005(7)SCC234).

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11.Keepingtheaforesaidpositionoflawinmind,weshallnow
examinetheimpugnedorderoftheTribunal. Theissuebefore

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theTribunalasraisedbythepetitionerwasthatSection14Aof
theActwouldhavenoapplicationtodisallowinterestexpenditure
on fund borrowed in respect of the tax free returns on the
securities,forthefollowingtworeasons:

(a) Thepetitionerwaspossessedofsufficientinterestfreefunds
ofRs.2153croresasagainsttheinvestmentintaxfreesecuritiesof
Rs.52.02 crores. Consequently,there isa presumption that the
investment which has been made in the tax free securities has

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comeoutoftheinterestfreefundsavailablewiththepetitioner.
ThisissoasithasbeenheldbythisCourtinthepetitioner'sown

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caseforanearlierAssessmentyearbeingHDFCBankLtd.(supra).

This decision on the above issue has been accepted by the

Revenue. This is evidenced by the fact although an appeal has
been filed to the Supreme Court with regard to another issue

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arisingfromtheorderin HDFCBankLtd.(supra) namelybroken

period interest, no appeal on this issue as raised before the

TribunalhasbeenchallengedbeforetheSupremeCourt;and
(b)Inanyevent,thetaxfreeinvestmentinsecuritieswerethe

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petitioner's stock in trade. Consequently, there would be no

occasiontoinvokeSection14AoftheActasheldbythisCourtin

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India Advantage Securities Ltd. (supra) wherein the Revenues

appealfromtheorderoftheTribunalwasdismissed,tocontend
thatnodisallowancecanbemadeunderSection14AoftheActin
respectofexemptedIncomearisingfromstockintrade.

12. TheimpugnedorderoftheTribunalinsofarascontention
(a)aboveisconcerned,chosetodisregardthebindingdecisionof
thiscourtinpetitionersowncasebeingHDFCBankLtd.(supra).

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The impugned order of the Tribunal after recording that it is

conscious that the decision of this Court are binding upon it

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proceeds on the basis that it had to decide which of the two

decisionsrenderedin GodrejandBoyce(supra) and HDFCBank
Ltd.(supra) istobefollowed.Therebyimplyingandproceeding
on the basis that there is a conflict between the two decisions

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rendered by this Court in GodrejandBoyce ManufacturingCo.

Ltd. (supra) and HDFC Bank Ltd. (supra). We are unable to

understandonwhatbasistheimpugnedorderhasproceededon
thebasisthatthereisaconflictbetweenthetwodecisions.Thisis

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soaswiththeassistanceoftheCounselwecloselyexaminedthe
decisionofthiscourtin GodrejandBoyceManufacturingCo.Ltd.

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(supra). Onexamination wefindthattheissuearisinginthis

case before the Tribunal viz. where interest free funds are
availablewithanAssesseewhicharemorethantheinvestments
madeinthetaxfreesecurities,thenapresumptionarisesthatthe
investments were made from its interest free funds, was not
decidedtherein.Infact,noviewevenasanobiterdictumonthe
issuewasexpressedbythiscourtintheabovecase. Thisissue

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alongwithotherissueswererestoredbythisCourtinGodrejand
BoyceManufacturingCo.Ltd.(supra)totheAssessingofficerfor

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passing an order afresh, after the Court upheld the

ConstitutionalityofSection14AoftheAct.

13. One more fact which must be emphasized is that merely

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becauseadecisionhasbeencitedbeforetheCourtandareference
tothathasbeenmadeintheorderoftheCourtsuchasinthecase

ofGodrejandBoyceManufacturingCo.Ltd.(supra)referencewas
madetoCITVs.RelianceUtilitiesandPowerLtd.313ITR340

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byitselfwouldnotleadtotheconclusionthatRelianceUtilities
andPowerLtd.(supra)hasbeenconsideredandtheopinionon

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the same has been rendered in the case of Godrej and Boyce
ManufacturingCo.Ltd.(supra).Thetesttodecidewhetherornot
twodecisionsareinconflictwitheachotheristofirstdetermine
theratioofboththecasesandiftheratioinboththecasesare
inconflictwitheachother,thenalone,canitbesaidthatthetwo
decisionsareinconflict.Wefindthatnosuchexercisehasbeen
done. If it was done,the Tribunal would have notedthat this
CourtinGodrejandBoyceManufacturingCo.Ltd.(supra)hasnot

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decidedtheissueofapplicabilityofRelianceUtilitiesandPower
Ltd. (supra) inasmuchasit hasrestoredthe entireissue tothe

Section14AoftheAct.

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Assessing officer after upholding the constitutional validity of

14. Theonlybasisforproceedingonthebasisthatthereisa

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conflict between the two decisions of this court which emerges

fromtheimpugnedorderisthatinpetitioner'sowncaseinHDFC

BankLtd.(supra),reliance wasplaceduponthedecisionofthis
CourtinRelianceUtilitiesandPowerLtd.(supra)toconcludethat

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where both interest free funds and interest bearing funds are
available and the interest free funds are more than the

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investmentsmade,thepresumptionisthattheinvestmentinthe
taxfreesecuritieswouldhavebeenmadeoutoftheinterestfree
fundsavailablewiththeassessee. Though,thedecisionofthis
CourtinRelianceUtilitiesandPowerLtd.(supra)wasrenderedin
the context of Section 36(1)(iii) of the Act, it was consciously
appliedbythisCourtwhileinterpretingSection14AoftheActin
HDFCBankLtd.(supra). TheimpugnedorderoftheTribunal
proceedsonthebasisthatGodrejandBoyceManufacturingCo.

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Ltd.(supra)hadconsideredthedecisionofthisCourtinReliance
UtilitiesandPowerLtd.(supra),whichisfactuallynotso.The

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decisionofthisCourtinGodrejandBoyceManufacturingCo.Ltd.

(supra)onlymakesareferencetothedecision ofthisCourt in
RelianceUtilitiesandPowerLtd.(supra)andgivesnofindingson
the issue which arose in that case and its applicability while

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interpretingSection14AoftheAct. ThisCourtinGodrejand
BoyceManufacturingCo.Ltd.(supra)hasinfactrestoredallthe

issuestotheAssessingOfficerforfreshconsideration.Thiscourt
in Godrej and Boyce Manufacturing Co. Ltd. (supra) did not

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decide whether or not the principles laid down in Reliance

Utilities and Power Ltd. (supra) can be invoked while applying

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Section14AoftheAct.Thusbynostretchofreasoningcanitbe
countenancedthatthereisconflictinthedecisionsofthisCourtin
GodrejandBoyceManufacturingCo.Ltd.(supra)andHDFCBank
Ltd.(supra).ThedecisioninGodrejandBoyceManufacturingCo.
Ltd.(supra) is not a precedent for the issue arising before the
Tribunalandcouldnotberelieduponintheimpugnedorderof
theTribunaltodisregardthebindingdecisioninHDFCBankLtd.
(supra).

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15.Itisclearthatforthefirsttimeinthecaseof HDFCBank

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Ltd. (supra) that this Court took a view that the presumption
which has been laid down in Reliance Utilities and Power Ltd.
(supra)withregardtoinvestmentintaxfreesecuritiescomingout
of assessee's own funds in case the same are in excess of the

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investmentsmadeinthesecurities(notwithstandingthefactthat
the assessee concerned may also have taken some funds on

interest)applies,whenapplyingSection14AoftheAct.Thus,the
decisionofthisCourtinHDFCBankLtd.(supra)forthefirsttime

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on23rdJuly,2014hassettledtheissuebyholdingthatthetestof
presumptionasheldbythisCourtinRelianceUtilitiesandPower

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Ltd.(supra)whileconsideringSection36(1)(iii)oftheActwould
applywhileconsideringtheapplicationofSection14AoftheAct.
TheaforesaiddecisionofthisCourtinHDFCBankLtd.(supra)on
theaboveissuehasalsobeenacceptedbytheRevenueinasmuch
aseventhoughtheyhavefiledanappealtotheSupremeCourt
againstthatorderontheotherissuethereinviz.brokenperiod
interest,noappealhasbeenpreferredbytheRevenueontheissue

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of invoking the principles laid down in Reliance Utilities and

PowerLtd.(supra)initsapplicationtoSection14AoftheAct.

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Therefore, the issue which arose for consideration before the

TribunalhadnotbeendecidedbythisCourtinGodrejandBoyce
ManufacturingCo.Ltd.(supra). Itaroseandwassodecidedfor
thefirsttimebythisCourtin HDFCBankLtd.(supra). Thus,

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thereisnoconflictassoughttobemadeoutbytheimpugned
order. Thus, the impugned order has proceeded on a

fundamentallyerroneousbasisastheratiodecindioftheorderin
GodrejandBoyceManufacturingCo.Ltd.(supra)hadnothingto

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dowiththetestofpresumptioncanvassedbythepetitionerbefore
theTribunalonthebasisoftheratioofthedecisionofthisCourt

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inHDFCBankLtd.(supra).

16. AtthehearingMr.SureshKumar,learnedCounselforthe
Revenueurgedthatonthefactsofthiscasenofaultcanbefound
withtheorderoftheTribunal.Itissubmittedthat,thepetitioner
was not able to establish before the Assessing Officer and the
CIT(A) that the amounts invested in the interest free securities
cameoutofinterestfreefundsavailablewiththepetitioner. In

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thatviewofthematter,itissubmittedbyhimthattheorderof
thisCourtinHDFCBankLtd.(supra)wouldnotapplytothefacts

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of the present case. We are unable to understand the above

submission. TheAssessingOfficerpassedtheAssessmentorder
on 22nd December,2010underSection143(3)oftheAct. The
CIT(A)passedanorderon21 st November,2011dismissingthe

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petitioners appeal. On both the dates, when the orders were

passedbytheAssessingOfficerandCIT(A),theauthoritiesdid

nothavethebenefitoftheorderofthisCourtinHDFCBankLtd.
(supra) renderedon23rdJuly,2014.Oncetheissueissettledby

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thedecisionofthisCourtinHDFCBankLtd.(supra),thereisnow
no need for the assessee to establish with evidence that the

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amountswhichhasbeeninvestedinthetaxfreesecuritieshave
comeoutofinterestfreefundsavailablewithit.Thisisbecause
oncetheassesseeispossessedofinterestfreefundssufficientto
maketheinvestmentintaxfreesecurities,itispresumedthatit
hasbeenpaidforoutoftheinterestfreefunds. Consequently,
wedonotfindanymeritintheabovesubmissionmadeatthe
hearingonbehalfoftheRevenue.

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17. AtthehearingbeforeusthePetitionerdrewourattentionto

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variousordersoftheTribunalwhereaconsistentviewhasbeen
takenbythecoordinatebenchesoftheTribunalinapplyingthe
presumptionlaiddownbythisCourtinRelianceUtilitiesandLtd.
(supra)aswellasthe decisionofthisCourtin HDFCBankLtd.

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(supra)whiledecidingonapplicationofSection14AoftheActto
disallowinterestclaimedasexpenditure.Besidesrelianceisalso

placeduponadecisionofthisCourtinthecaseofthepetitioner
itself before this Court in Income Tax Appeal No.860 of 2012

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rendered on 24th September, 2014 wherein question (b) as

formulated by the Revenue raised the same issue namely

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applicability of the Godrej and Boyce Manufacturing Co. Ltd.

(supra)whileinterpretingSection14AoftheActinthecontextof
the test of presumption as arising in the appeal before the
Tribunal.Forthepurposesofthisorder,wearenottakinginto
accounttheabovedecisionsastheywerenotcitedatthehearing
before the Tribunal. Thus we are only examining whether the
actionoftheTribunaliswithintheboundsofitsauthorityonthe
basis ofthe materialsplacedbeforeitleadingtotheimpugned

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order and we unfortunatelyfind itisnot so. Thisisforthe

reasonthatitfailedtofollowthebindingprecedentinHDFCBank

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Ltd.(supra).

18. Thealternativesubmission(b)whichwasputforthbythe
petitionerbeforetheTribunalthattheinvestmentinsecuritiesare

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itsstockintrade.Consequently,Section14AoftheActwouldbe
inapplicablebyplacingrelianceuponthedecisionofthisCourtin

India Advantage Securities Ltd. (supra). However this was also

disregardedbytheimpugnedorderonthegroundthatthisCourt

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didnotentertainanappealoftheRevenuefromtheorderofthe
TribunalholdingthatSection14AoftheActisinapplicablewhere

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the investment has been made in stock in trade. This non

entertainmentofanappealbeingonthegroundthatthisCourt
foundno substantialquestionoflaw. Therefore,theimpugned
order holds that the decision relied upon in India Advantage
SecuritiesLtd.(supra)doesnotlaydownanybindingproposition
oflaw.

19.Weareunabletocomprehendhowandwhytheimpugned

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order of the Tribunal is of the view that if an appeal is not

admittedfromanorderoftheTribunal,then itisopentothe

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Tribunalinanothercasetodecidedirectlycontrarytotheview
takenbytheearlierorderoftheTribunal,whichisnotentertained
bythiscourtinappeal.Thiswithoutevenasmuchasawhisperof
anyexplanationwithregardtohowandwhythefactsofthetwo

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casesaredifferentwarrantingaviewdifferentfromthattakenby
theTribunal earlier. Infact whenanappealisnotentertained

thentheorderoftheTribunalholdsthefieldandthecoordinate
benches of the Tribunal are obliged to follow the same unless

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there is some difference in the facts or law applicable and the

difference in fact and/orlaw shouldbe reflectedin itsorder

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taking a different view. Moreover the impugned order of the

TribunalplacesrelianceuponthedecisionofthisCourtinGodrej
andBoyceManufacturingCo.Ltd.(supra)todenytheclaim.On
thisissuenodecisionwasrenderedbythiscourtinGodrejand
BoyceManufacturingCo.Ltd.(supra)andthereforehowcouldit
be relied upon to deny the claim of the petitioner is beyond
comprehension. This again shows that the Tribunal has acted
beyondthelimitsofitsauthority.

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20.Mr.SureshKumaronbehalfoftheRevenuestatesthatthis

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groundwasraisedforthefirsttimebeforetheTribunalandnot

urgedbeforethelowerauthoritiesandthereforenofaultcanbe
found with the order of the Tribunal. Once Tribunal has
consideredtheissueonmeritsanddealtwithitindetail,itisnot

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opentotheRevenuetourgeanobjectionwhentheTribunalhas

itselfdecidedtheissueonmerits.

21.TheimpugnedorderoftheTribunalseemstoquestionthe

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decisionofthisCourtinHDFCBankLtd.(supra)totheextentit
relied upon the decision of this Court in Reliance Utilities and

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Power Ltd. (supra). This is by observing that the decision in

Reliance Utilities and Power Ltd.(supra) it must be appreciated
wasrenderedinthecontextofSection36(1)(iii)oftheActandits
parametersaredifferentfromthatofSection14AoftheAct.This
Courtinitsorderin HDFCBankLtd.(supra) consciouslyapplied
theprincipleofpresumptionaslaiddowninRelianceUtilitiesand
PowerLtd.(supra)andinfactquotedtherelevantparagraphto
emphasize that the sameprinciple /testofpresumption would

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apply to decide whether or not interest expenditure could be

disallowedunderSection14AoftheActinrespectoftheincome

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arisingoutoftaxfreesecurities.ItisnottheofficeofTribunalto
disregardabindingdecisionofthiscourt.Thisisparticularlyso
whenthe decisionin RelianceUtilitiesandPowerLtd.(supra)
has been consciously applied by this Court while rendering a

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decisioninthecontextofSection14AoftheAct.

22.WealsonotethattheimpugnedorderoftheTribunalhasan
observationthereinthatthereisnosuchthingasestoppelinlaw

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and by virtue of that gives itself a licence to decide the issue

beforeitignoringthebindingprecedentinthepetitionersown

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caseinHDFCBankLtd(supra).Oncethereisabindingdecision
ofthisCourt,thesamecontinuestobebindingonallauthorities
withintheStatetillsuchtimeasitstayedand/orsetasidebythe
Apex Court or this very Court takes a different view on an
identicalfactualmatrixorlargerbenchofthisCourttakesaview
differentfromtheonealreadytaken.

23. We are conscious of the fact that we are fallible and,

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therefore,anorderpassedbyusmaynotmeettheapprovalofall
and some may justifiably consider our order to be incorrect.

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However the same has to be corrected/rectified in a manner

knowntolawandnotbydisregardingbindingdecisionsofthis

Court. In fact our court in Panjumal Hassomal Advani Vs.

HarpalSinghAbnashiSinghSawhney&Ors. AIR1975(Bom)

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120hasobservedthatacoordinatebenchcannotrefusetofollow
an earlier decision on the ground that it is incorrect and / or

rendered on misinterpretation. This for the reason that the

decisionofacoordinatebenchwouldcontinuetobebindingtillit

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iscorrectedbyahigherCourt.Thisprinciplelaiddowninrespect
of a coordinate Court would apply with greater force on

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subordinateCourtsandTribunals. Wearealsoconsciousofthe
factthatwearenotfinalandourordersaresubjecttoappealsto
the Supreme Court. However, for the purposes of certainty,
fairnessanduniformityoflaw,allauthoritieswithintheStateare
boundtofollowtheorderspassedbyusinalllikematters,which
byitselfimpliesthatiftherearesomedistinguishingfeaturesin
the matter before the Tribunal and, therefore, unlike, then the
Tribunalisfreetodecideonthebasisofthefactsputbeforeit.

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Howevertillsuchtimeasthedecisionofthiscourtstandsitisnot
open to the Tribunal or any other Authority in the State of

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Maharashtratodisregarditwhileconsideringalikeissue.Incase
wearewrong,theaggrievedpartycancertainlytakeituptothe
SupremeCourtandhaveitsetasideand/orcorrectedorwhere
thesameissuearisesinasubsequentcasetheissuemaybere

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urged before the Court to impress upon it that the decision

renderedearlier,requiresreconsideration. Itisnotopentothe

Tribunalto sit in appealfromtheordersofthisCourt andnot

followit.Incasethedoctrineofprecedentisnotstrictlyfollowed

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there would complete confusion and uncertainty. The victim of

sucharbitraryactionwouldbe the Ruleoflawofwhichweas

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theIndianStatearesojustifiablyproud.

24.

Itisintheabovecircumstancesthatweareoftheviewthat

we have to exercise our powers under Article 227 of the

ConstitutionofIndia.Thisisinviewofthemannerinwhichthe
impugnedorderoftheTribunalhaschosentodisregardand/or
circumvent the binding decision of this Court in respect of the
sameassesseeforanearlierassessmentyear.Thisisaclearcase

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25.

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whichstandsettledbythedecisionofthisCourt.

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ofjudicialindisciplineandcreatingconfusioninrespectofissues

Itisintheaboveview,thatwesetasidetheimpugnedorder

of the Tribunal dated 23rd September, 2015 in its entirety and

restore the issue tothe Tribunal todecide it afreshon itsown

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meritsandinaccordancewithlaw.HowevertheTribunalwould
scrupulouslyfollowthedecisionsrenderedbythisCourtwhereina

viewahasbeentakenon identicalissuesarising beforeit.Itis

notopentotheTribunaltodisregardthebindingdecisionsofthis

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Court,thegroundsindicatedintheimpugnedorderwhicharenot
atallsustainable. UnlesstheTribunalfollowsthisdiscipline,it

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wouldresultinuncertaintyofthelawandconfusionamongthe
taxpayingpublicastowhataretheirobligationsundertheAct.
Besides opening the gates for arbitrary action in the
administration of law, as each authority would then decide
disregarding the binding precedents leading to complete chaos
andanarchyintheadministrationoflaw.

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Accordingly,theRuleismadeabsoluteinaboveterms.No

orderastocosts.

(M.S.SANKLECHA,J.)

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(B.P.COLABAWALLA,J.)

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26.

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