S. 254 — A Division Bench decision which is directly contrary to a Larger Bench decision cannot be said to have any binding force.

ACIT v. MSS India (P.) Ltd.

A.Y. : 2003-04. Dated : 29-5-2009

S. 254 — A Division Bench decision which is directly
contrary to a Larger Bench decision cannot be said to have any binding force.

For the relevant assessment year, the Transfer Pricing
Officer made certain additions to the total income of the assessee. The CIT(A)
deleted the additions. Before the Tribunal, the Revenue relied upon the
decision of Five-Member Bench of the Tribunal in the case of Aztec Software
& Technology Services Ltd. v. Asstt. CIT, (2007) 107 ITD 141 (Bang.) (SB).
The assessee, however, relied upon the decision of a Division Bench in the
case of Philips Software Centre (P.) Ltd. v. Asstt. CIT, (2008) 26 SOT
226 (Bang.) submitting that the Bangalore Bench had duly considered the impact
of Aztec decision (supra) by the Five-Member Bench of the Tribunal.

The Tribunal held as under :

(1) The view of the Division Bench of the Bangalore
Tribunal was diametrically opposite to the decision of an earlier
Five-Member Special Bench of the Tribunal in the case of Aztec Software &
Technology Services Ltd. (supra).

(2) It is only elementary that a judicial forum’s
approach to disregard a binding precedent from a superior judicial forum,
including by Larger Benches of the same judicial institution, is contrary to
the first principle of the theory of judicial precedence.

(3) A Division Bench cannot even disregard decision of
another Division Bench of equal strength leave aside a Larger Bench.

(4) When the law mandates that a Division Bench cannot
disregard another Division Bench and there is a Division Bench decision
which is directly contrary to a Larger Bench decision, the order so
disregarding the Larger Bench cannot be said to have any binding force.