1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.794 OF 2010 M/s.Inventure Growth & Securities Limited, 5, Anand Kunj, Daftary Road, Malad (East), Mumbai – 400 097 ..Petitioner Versus 1. The Income tax Appellate Tribunal Mumbai Bench - ‘J’, through the Assistant Registrar having his office at Pratyakshkar Bhavan, Mumbai, 4th Floor, Old CGO Building, M.K. Road, Mumbai – 400 020. 2. The Deputy Commissioner of Income Tax, (Inv), Circle 3(1), Aayakar Bhavan, M.K. Road, Mumbai – 400 020. 3. The Assistant Commissioner of Income Tax, (Inv), Circle 3(1), Aayakar Bhavan, M.K. Road, Mumbai – 400 020. 4. Union of India, through Ministry of Finance, Aayakar Bhavan, 2nd Floor, M.K. Road, Mumbai – 400 020 ..Respondents. 2 Mr.J.D. Mistry, Senior Advocate with Ms.Asifa Khan for the petitioner. Mr.Vimal Gupta for the respondents. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 5 May 2010. ORAL JUDGMENT (Per Dr.D.Y. Chandrachud, J.) 1. Rule. With the consent of the learned counsel appearing on behalf of the petitioner and the learned counsel appearing on behalf of the Revenue, the petition is taken up for hearing and final disposal. Counsel for the respondents waives service. 2. The petition under Article 226 of the Constitution has been instituted in order to challenge an order passed by the Income Tax Appellate Tribunal on 20 November 2009, by which a Miscellaneous Application filed by the petitioner under Section 254 was dismissed. The dispute in the present case arises out of the proceedings for assessment year 1997-1998. 3. The petitioner acquired a membership card of the Bombay Stock Exchange for a consideration of Rs.1.81 crores which was paid to an existing member of the Stock Exchange. The Assessing Officer did not accept the case of the assessee that it would be entitled to depreciation on the cost of the membership card. In Appeal, the Commissioner (Appeals) by an order dated 3 11 April 2001 allowed the claim of the assessee towards depreciation on the cost of the membership card “treating it as a plant” within the meaning of Section 32(1). The Revenue filed an appeal before the Tribunal against the order of the Commissioner (Appeals). The assessee had filed cross-objections on the ground that in the event that the assessee was held not to be entitled to depreciation, then in that case in the alternative the cost of acquiring the membership card should be allowable as revenue expenditure under Section 37(1). The Tribunal, by its order dated 30 May 2008, held that the membership card could not be considered as an asset for allowing depreciation. Hence, the order of the Commissioner (Appeals) on this issue was reversed. On the alternative contention of the assessee, the Tribunal, followed its own decision in the case of Deputy Commissioner of Income Tax V/s. Khandwala Finance Limited reported in (2008) 22 SOT 1 and held that the expenditure incurred to acquire the card would not be allowable under Section 37(1). 4. The assessee filed a Miscellaneous Application under Section 254(2). The ground on which the application was filed was that the Tribunal, while relying upon the decision of a coordinate bench in Khandwala Finance Limited, had not furnished an opportunity to the assessee to deal with the decision which had not been cited by either side when arguments were heard. The application has been dismissed by the impugned order dated 20 November 2009. 4 5. During the course of the hearing of these proceedings, Counsel appearing on behalf of the petitioner has stated that the hearing before the Tribunal took place on 27 May 2008. The decision of the coordinate bench of the Tribunal in Khandwala Finance Limited was published in a journal for the period between 20 and 26 May 2008 and as a matter of fact was not available when the appeal was argued before the Tribunal on 27 May 2008. Now, a perusal of the impugned order of the Tribunal on the Miscellaneous Application would show that the Tribunal considered it appropriate to rely upon the decision in Khandwala Finance Limited, which was a decision of a coordinate bench, to which one of the members of the Tribunal was a party. There appears to be no dispute about the factual position that the decision in Khandwala Finance Limited was not placed before the Tribunal either by the assessee or on behalf of the Revenue. The Tribunal however considered it necessary to follow the decision which was of a coordinate bench. The Tribunal proceeded on the basis that the decision in Khandwala Finance Limited would squarely apply to the facts of the case. 6. The submission which has been urged before this Court by Counsel appearing on behalf of the assessee is that there were distinguishing features in the case which came up before the Tribunal in Khandwala Finance Limited and if an opportunity was granted to the assessee, these distinguishing features would have been brought to the notice of the 5 Tribunal. Placing reliance on para 17 of the judgment of the Tribunal in Khandwala Finance Limited, Counsel submitted that in that case the concurrent finding of fact was that the deposits which were placed with the National Stock Exchange were refundable deposits. The Tribunal held that a deposit cannot be termed as an expenditure since in order to claim a deduction as expenditure, the amount should have been spent by the assessee as an amount paid out or paid away and should be something which has gone irretrievably. It was urged before this Court that in the present case, the amount which has been expended by the assessee is not a refundable deposit and that consequently the facts as they obtained in the case of Khandwala Finance Limited were materially different. 7. We have adverted to this submission since we had called upon the Counsel appearing on behalf of the assessee to at least prima facie indicate to this Court as to whether there were grounds for urging that the decision in Khandwala Finance Limited is distinguishable. We do not propose to render any conclusive finding or even an opinion of this Court on that aspect of the matter. However, it would be necessary to note that the distinguishing features in the case of Khandwala Finance Limited which have been pointed out during the course of submissions by Counsel for the assessee are sufficient for this Court to hold that an opportunity should be granted to the petitioner to place its case on the applicability or otherwise of the decision in Khandwala Finance Limited before the Tribunal. 6 8. It is in these circumstances that we are inclined to allow the Miscellaneous Application and to restore the appeal and the cross-objections for fresh consideration before the Tribunal. We clarify that it cannot be laid down as an inflexible proposition of law that an order of remand on a Miscellaneous Application under Section 254(2) would be warranted merely because the Tribunal has relied upon a judgment which was not cited by either party before it. In each case, it is for the Court to consider as to whether a prima facie or arguable distinction has been made and which should have been considered by the Tribunal. It is in this view of the matter that we had called upon Counsel appearing on behalf of the assessee to at least prima facie indicate before this Court the grounds on which the decision in Khandwala Finance Limited was sought to be distinguished. If we were to be of the view that the decision in Khandwala Finance Limited was squarely attracted to the facts of the present case, we may not have been inclined to remand the proceedings. An order of remand cannot be an exercise in futility. However, for the reasons which we have already indicated, we find prima facie that prejudice would be sustained by the petitioner by denying him an opportunity to deal with the distinguishing features in the case of Khandwala Finance Limited. 9. For all these reasons, we allow the petition by setting aside the impugned order of the Tribunal dated 20 November 2009. Miscellaneous 7 Application No.515/Mum/09 is accordingly allowed. The order of the Tribunal dated 30 May 2008 on this issue is accordingly recalled and both the appeal and the cross-objections shall stand restored to the file of the Tribunal for a fresh decision on merits. All the rights and contentions of the parties on merits are kept open to be urged in the appeal and the cross-objections. 10. Rule is made absolute in the aforesaid terms. There shall be no order as to costs. (J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)