Business expenditure- Disallowance u/s. 40(a) (ia)- Despite stay by High Court, Special Bench verdict In Merilyn Shipping is binding on the ITAT due to judicial discipline

The
Tribunal had to consider whether in view of the Special Bench verdict
in Merilyn Shipping & Transport 146 TTJ 1 (Vizag), a disallowance
u/s 40(a)(ia) could be made in respect of the amounts that have already
been paid during the year and are not “payable” as of 31st March. The
Tribunal held that as the department’s appeal against the said verdict
was pending in the High Court and as the High Court had granted an
interim suspension, the AO should decide the issue after the disposal of
the appeal in the case of Merilyn Shipping by the High Court.

On appeal by the Revenue, the Telangana and Andhra Pradesh High Court held as under:

“We
are of the view that until and unless the decision of the Special Bench
is upset by this Court, it binds smaller Bench and coordinate Bench of
the Tribunal. Under the circumstances, it is not open to the Tribunal to
remand on the ground of pendency on the same issue before this Court,
overlooking and overruling, by necessary implication, the decision of
the Special Bench. We simply say that it is not permissible under quasi
judicial discipline. Under the circumstances, we set aside the impugned
judgment and order, and restore the matter to the file of the Tribunal
which will decide the issue in accordance with law and it would be open
to the Tribunal either to follow the Special Bench decision or not to
follow. If the Special Bench decision is not followed, obviously remedy
lies elsewhere.”