Law of jurisdictional High Court is not binding if there is a later contrary judgement of non-jurisdictional High Court. S. 22: Property used by firm in which assessee-owner is partner is not used for assessee’s business & not entitled for exemption

Prakash Vasantbhai Golwala vs. ACIT (ITAT Ahmedabad)

 

The assessee, a partner in a firm, was the owner of a house property. He claimed that the house property was used by the employees of a firm in which he was a partner and that it should be considered to have been used for a business carried on by him. The assessee relied on CIT v/s. Rasiklal Balabhai 119 ITR 303 (Guj) where it was held that the annual letting value (ALV) of a godown owned by the assessee and used for the business carried on by him in partnership was not liable to be included in his total income u/s 22. However, the AO & CIT(A) relied on the contrary judgement in Prodip Kumar Bothra 244 CTR 366 (Cal) where it was held that house property income is not taxable only if the property is used for the assessee’s one’s own business and is not exempt if used for the business of the firm in which the assessee is a partner. On appeal by the assessee to the Tribunal HELD dismissing the appeal:

(i) Though the jurisdictional High Court in Rasiklal Balabhai 119 ITR 303 held that the annual letting value of house property owned by the assessee and used for the business carried on by him in partnership was not liable to be included in his total income u/s 22, the Calcutta High Court has dissented from this view in Prodip Kumar Bothra 244 CTR 366 and held that the exemption in respect of house property cannot be allowed to assessee if the property is used by the partnership firm because the owner of the house property and the occupier of the property must be the same person. The Karnataka High Court in K.N. Guruswamy 146 ITR 34 (Kar) and the Allahabad High Court in Shiv Mohan Lal 202 ITR 60 (All) & Mustafa Khan 276 ITR 602 (All) has taken the same view as the Calcutta High Court that user by a partnership firm/ HUF is not user by the assessee-owner for business purposes. In view of the divergent views expressed by the High Courts, the thumb rule that the latest decision of the High Court is required to be followed to maintain judicial discipline. As the judgement of the (jurisdictional) Gujarat High Court is earlier in point of time and the judgement of the (non-jurisdictional) Calcutta and other High Courts is later in point of time, the view expressed by the Revenue Authorities has to be affirmed and the assessee’s ground dismissed;

(ii) Also, a litigant, especially the learned counsel, who is an expert, is expected to place before the Court all decisions either in favour or against him. We are constrained to note that this fair approach was not adopted in this case.

Note: In Garware Polyester vs. State (Bombay High Court) it was held that failure to follow the law of the jurisdictional High Court amounts to contempt of Court. See also The Law of Judicial Precedents & Contempt of Court by Kaji. On the point of duty of Counsel to cite contrary judgements see Duties And Accountability Of Lawyers by S. E. Dastur, Sr. Advocate