ORDER
N.K. Karhail, J.M.
1. This is a miscellaneous application filed by the applicant assessee under Section 254(2) of the IT Act, 1961 stating that there is a mistake apparent on record in the order dt. 21st July, 2006 passed by the Tribunal in the aforesaid appeal of the Revenue, which needs to be rectified. In this connection, the learned Counsel for the assessee has referred to para 3 of the order dt. 21st July, 2006 which reads as under:
3. When the matter came up for hearing, nobody appeared on behalf of the assessee. However, the learned Counsel for the assessee Shri S.K. Goel sent a fax asking for exemption from personal appearance. However, he has referred to a fax dt. 5th May, 2006 wherein certain case law have been relied upon. One of the case law relied upon is of Lalson Enterprises v. Dy. CIT (2004) 82 TTJ (Del)(SB) 1048 : (2004) 89 ITD 25 (Del)(SB) wherein the Special Bench has held that for the purposes of applying Expln. (baa) below Section 80HHC(4B) while reducing 90 per cent of receipt by way of interest from profit of business it is only 90 per cent of net interest remaining after allowing a set off of interest paid which has a nexus with interest received that can be reduced and not 90 per cent of gross receipt. However, the learned Departmental Representative has pointed out that the present appeal pertains to a case for which the jurisdictional High Court is Punjab & Haryana High Court. He has further pointed out that Hon’ble Punjab & Haryana High Court in the case of Rant Paliwal v. CIT has held that the Tribunal was right in holding that 90 per cent of the interest that was deductible for claim under Section 80HHC of the IT Act, 1961 on the gross interest received by the assessee and that the amount of interest paid by the assessee would not be deducted therefrom. Therefore, he has submitted that in view of the decision of the jurisdictional High Court the order of the CIT(A) is liable to be set aside and that of the AO is to be restored.
2. The learned Counsel has submitted that in the aforesaid fax dt. 5th May, 2006 the assessee also placed reliance on the following case law:
(i) Special Bench decision in the case of Lalsons Enterprises v. Dy. CIT (2004) 82 TTJ (Del)(SB) 1048 : (2004) 89 ITD 25 (Del)(SB);
(ii) Misc. Appln. No. 533/Del/2005 arising out of ITA No. 4149/Del/1997 in the case of Liberty Footwear Co. (asst. yr. 1993-94, order dt. February,-2006);
(iii) Misc. Appln. No. 532/Del/2005 arising out of ITA No. 5317/Del/1994 in the case of Liberty Footwear Co. (asst. yr. 1992-93, order dt. 21st Oct., 2005);
(iv) Misc. Appln. No. 529/Del/2005 arising out of ITA No. 2028/Del/2000 in the case of Liberty Footwear Co. (asst. yr. 1996-97, order dt. 6th Jan., 2006).
3. Thus, he has argued that the learned Departmental Representative conveniently did not point out the facts that the case of Rani Paliwal v. CIT was fully discussed in the Misc. Appln. No. 533/Del/2005 in the case of Liberty Footwear Co. (supra). Similarly, the judgment of Punjab & Haryana High Court stands discussed in Misc. Appln. No. 532/Del/2005 in the case of Liberty Footwear Co. (supra). The learned Counsel has further submitted that the Hon’ble Bench, after due deliberation and discussion of the aforesaid judgment of the Hon’ble High Court had dismissed the Departmental miscellaneous application and held that the judgment of the Special Bench in the case of Lalsons Enterprises (supra) was applicable and netting of interest has to be considered after taking into account the nexus between the two. The learned Counsel has further submitted that in the said fax dt. 17th July, 2006 the assessee has also placed reliance upon the decision of Tribunal in the case of Paliwal Exports, Panipat, ITA No. 2374/Del/2002 for asst. yr. 1998-99 which has also not been considered by the Bench while disposing of the appeal of the Revenue in the present case. Thus, there is mistake apparent in the order passed in the aforesaid appeal based on the decision in the case of Rani Paliwal (supra) and without considering the decision of co-ordinate Bench, which needs to be rectified and keeping in view the rule of consistency the appeal of the Revenue is liable to be dismissed. The learned Counsel has also pointed out that the decision in the case of Rani Paliwal (supra) was referred before the High Court of Delhi in the case of CIT v. Shri Ram Honda Power Equipment . Their lordships of Delhi High Court did not subscribe the view expressed by the Punjab & Haryana High Court in the case of Rani Paliwal (supra) by observing as under:
In Rani Paliwal v. CIT , the High Court, without any detailed discussion simply held as follows (p. 222). ‘A plain reading of Clause (baa) of Explanation to Section 80HHC of the Act makes this aspect quite clear and we are of the view that the Tribunal was right in disallowing the claim of the assessee in this regard’. We are afraid that there is no reasoning expressed by the High Court for arriving at such a conclusion. For instance, there is no discussion of the CBDT circular and in particular para 32.11 thereof which indicates that netting is contemplated in Expln. (baa). Also, it does not notice the effect of the words ‘included in such profits’ following the words ‘receipts by way of interest’ in the said Explanation. We are therefore unable to subscribe to the view taken by the Punjab & Haryana High Court in Rant Paliwal v. CIT (supra).
4. On the other hand, the learned Departmental Representative has submitted that there is no apparent mistake in the order passed by the Tribunal inasmuch as same has been passed on the basis of the decision given by the jurisdictional High Court in the case of Rani Paliwal (supra). Thus, it has been urged that the miscellaneous application filed by the assessee be dismissed.
5. We have heard the parties and perused the record of the case. In the fax dt. 7th July, 2006 the learned Counsel for the assessee asks for exemption from personal appearance. However, he placed reliance upon the order of the CIT(A), the decision mentioned in fax dt. 5th May, 2006 and order of Tribunal in ITA No. 2374/Del/2001 in the case of Paliwal Exports, Panipat. In the fax dt. 5th May, 2006 the assessee placed reliance upon the decision in the case of Lalson Enterprises (supra), in Misc. Appln. No. 533/Del/2005, Misc. Appln. No. 532/Del/2005 and Misc. Appln. No. 529/Del/2005. In the Misc. Appln. No. 532/Del/2005 of the Revenue it was contended that while allowing the appeal of the assessee the Tribunal did not consider the decision of jurisdictional High Court of Punjab & Haryana in the case of Rani Paliwal v. CIT (supra) and, as such, by not following the decision of jurisdictional High Court there is a mistake apparent from record and, therefore, miscellaneous application of the Revenue be accepted and the AC) be directed to deduct gross interest received by the assessee while computing deduction allowable under Section 80HHC of the Act. The Tribunal vide its order dt. 21st Oct., 2005 dismissed the miscellaneous application filed by the Revenue by observing as under:
8. We have heard the rival submissions and perused the material available on record. We find that this Tribunal after following the decision of the Special Bench of the Tribunal in the case of Lalsons Enterprises v. Dy. CIT (2004) 82 TTJ (Del)(SB) 1048 : (2004) 89 ITD 25 (Del)(SB) remanded the issue back to the file of the AO and directed him to allow the benefit of netting off of the interest paid only when there is a nexus between the interest paid and interest received. The Special Bench of the Tribunal in the case of Lalsons Enterprises (supra) has held so on the basis of the computational provisions wherein as per Section 37 only expenditure incurred for earning of an income is to be allowed as deduction under Section 37 of the Act. The learned Departmental Representative could not submit what was the exact fact of the case which was before the Hon’ble Punjab & Haryana High Court in the case of Rani Paliwal (supra). We find that the Punjab & Haryana High Court in the abovecited case has not held that in the circumstances wherein the interest expenditure has been incurred for earning the interest income even then for computing the interest income the said expenditure is not to be allowed and irrespective of the real interest income 90 per cent of the gross receipt of interest is to be deducted in view of Expln. (baa) to Section 80HHC. Thus, in our considered view, there is no apparent mistake in the Misc. Appln. No. 165/Del/2000 of the Tribunal which alone can be rectified under Section 254(2) of the Act. Thus, the miscellaneous application of the Revenue is rejected.
6. Following the aforesaid decision given in Misc. Appln. No. 532/Del/2005 the Tribunal rejected the Misc. Appln. filed by the Revenue being Misc. Appln. No. 533/Del/2005 in ITA No. 4149/Del/1979 (asst. yr. 1993-94) in the case of Liberty Footwear Co. It is seen that in the case of the Paliwal Exports in ITA No. 2379/Del/2002 for asst. yr. 1998-99 the issuer of netting of interest for the purpose of deduction under Section 80HHC had been decided in favour the assessee.
7. In the recent decision dt. 26th Nov., 2007 the Hon’ble Supreme Court in the case of Honda Siel Power Products Ltd. v. CIT in Appeals (Civil) 5412/2007 [arising out of SLP (C) No. 5551 of 2007] [reported at (2007) 213 CTR (SC) 425- Ed.] has explained the scope of power of rectification under Section 254(2) of the Act in the following words:
Scope of the power of rectification
12. As stated above, in this case we are concerned with the application under Section 254(2) of the 1961 Act. As stated above, the expression ‘rectification of mistake from the record’ occurs in Section 154. It also finds place in Section 254(2). The purpose behind enactment of Section 254(2) is based on the fundamental principle that no party appearing before the Tribunal be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its order dt. 10th Sept., 2003 allowing the rectification application has given a finding that Samtel Colour Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under Section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record.
13. ‘Rule of precedent’ in an important aspect of legal certainty in rule of law. That principle is not obliterated by Section 254(2) of the IT Act, 1961. When prejudice results from an order attributable to the Tribunal’s mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the Court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case the Tribunal was justified in exercising its powers under Section 254(2) when it was pointed out to the Tribunal that the judgment of the co-ordinate Bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal’s mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.
8. It would appear that the aforesaid order of the co-ordinate Bench though cited by the assessee in the above fax message but the said decision could not be considered by oversight while passing the order dt. 21st July, 2006. Thus, a prejudice is caused to the assessee in not considering the said decisions of the co-ordinate Bench while passing the order dt. 21st July, 2006. This prejudice has resulted from an order attributable to the Tribunal’s mistake. Therefore, in view of the decision of apex Court in the case of Honda Siel Power Products Ltd. (supra), the Tribunal has committed a mistake apparent from record. Thus, the mistake being apparent on record in the order dt. 15th Nov., 2006 is required to be rectified under Section 254(2) of the Act. In the facts and circumstances of the case and keeping in view the consistent view of co-ordinate Benches, we hold that for the purpose of applying Expln. (baa) below Section 80HHC(4B) while reducing 90 per cent of receipts by way of interest from profit of business it is only 90 per cent net interest received that can be reduced and not 90 per cent of the gross receipt. We, therefore, set aside the impugned order dt. 4th Aug., 2003 passed by CIT(A), New Delhi and restore the same to the file of the AO with the direction to recompute the allowable deduction under Section 80HHC of the Act accordingly. To this extent the order dt. 21st July, 2006 is rectified.
9. this order will form part of the order dt. 21st July, 2006. In the result, the miscellaneous application filed by the assessee is allowed.