DCIT vs. Summit Securities Limited (ITAT Mumbai Special Bench)

DATE: (Date of pronouncement)
DATE: August 12, 2011 (Date of publication)

Click here to download the judgement (summit_securities_sub_judice_matters.pdf)

Even issues “sub-judice” before High Court can be heard by Tribunal

The assessee transferred its power transmission business by a slump sale for a consideration of Rs.143 crores and offered that amount as capital gains u/s 50B. The AO took the view that as the net worth of the business was a negative figure of Rs.157.19 crores representing the liabilities, the said amount had to be added to the consideration. Before the Tribunal, the assessee relied on Zuari Industries vs. ACIT 105 ITD 569 (Mum) and Paperbase Co vs. CIT 19 SOT 163 (Del) and claimed that the negative net worth had to be treated as zero. As the Bench had reservations on the correctness of the said judgements, the matter was, at the request of the assessee, referred to the Special Bench. Before the Special Bench, the assessee pointed out that as the Bombay High Court had admitted the appeal in the case of Zuari Industries Ltd, the reference made to the Special Bench be withdrawn. The assessee relied on the orders in Tivoli Investments & Harsha Bhogle 114 TTJ (Mum) 266 where it was held that if a matter is sub-judice before the High Court, the Tribunal cannot consider the issue. HELD rejecting the contention of the assessee:

The objection to the Special Bench hearing the issue only on the ground that the High Court has admitted the appeal is not acceptable for two reasons. Firstly, the mere fact that a superior authority is seized of an issue identical to the one before the lower authority does not create any impediment on the powers of the lower authority in disposing off the matters involving such issue as per prevailing law. If the suggestion is accepted, there would be chaos and the entire working of the Tribunal will come to standstill. Secondly, the Special Bench was constituted at the assessee’s request because it then wanted an “escape route” from a potential adverse view. The assessee cannot now argue that the Special Bench be deconstituted. Such “vacillating stand” cannot be approved.

Note: See the contra view in Tata Communications 121 ITD 384 (Mum) (SB) where it was held that even a s. 254(2) application for rectification of apparent mistakes is not maintainable if the High Court has admitted the appeal. See also Tivoli Investments where on similar facts, the reference to the Special Bench was withdrawn. For the merits, see S. 50B & Capital Gains On Slump Transactions: A Comprehensive Analysis

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