Samir N. Bhojwani Vs PCIT (Bombay High Court)
Revision u/s 264: PCIT Bound to Follow ITAT Special Bench; Deemed STCG u/s 50 Taxable at LTCG Rate u/s 112
The Bombay High Court held that while exercising revisionary jurisdiction under Section 264 of the Income-tax Act, the Principal Commissioner of Income Tax (PCIT) is bound to follow a jurisdictional ITAT Special Bench decision and cannot deny relief merely because the department has not accepted the ruling or has filed an appeal against it. The case arose from the PCIT’s refusal to apply the ITAT Special Bench ruling in SKF India Ltd. on taxing capital gains computed under Section 50 at the rate prescribed under Section 112, contending that Section 50 deems both computation and character as short-term and that the Special Bench decision lacked finality. The Court emphatically reiterated the doctrine of judicial discipline, holding that pendency of an appeal does not dilute the binding nature of a precedent unless it is stayed or set aside. The impugned order was quashed and remanded with directions to pass a fresh order strictly following the Special Bench decision, without examining its substantive correctness.
Core Issue:-Whether, while exercising revisionary jurisdiction under Section 264, the PCIT can refuse to follow a binding decision of the ITAT Special Bench and deny levy of tax at LTCG rate under Section 112 on capital gains computed under Section 50 in respect of long-term depreciable assets, merely because:
• the department has not accepted the ITAT decision, and
• an appeal against the Special Bench decision is pending before the High Court.
Facts in Brief:-The assessee transferred a long-term depreciable capital asset.
• Capital gains were computed under Section 50 (deeming fiction for STCG).
• The assessee sought tax rate under Section 112 (LTCG rate) relying on:
• ITAT Special Bench, Mumbai in SKF India Ltd. v. DCIT 2024 168 taxmann.com 328 (SB).
• The PCIT rejected the Section 264 application, holding that:
• the Special Bench decision is not final,
• the department has challenged it, and
• Section 50 deems not only computation but also nature of asset as short-term.
Findings of the Bombay High Court
