[Opinion] Doctrine of Binding Precedent

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  • Last Updated on 15 January, 2025

Doctrine of precedent

CA Kaushik D. Shah – [2025] 170 taxmann.com 282 (Article)

1. As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court within whose territorial jurisdiction these Courts, Tribunals & authorities functions. CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom).

Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT [1995] 79 Taxman 458/[1994] 209 ITR 277 (Bom).

In the case of Dr. Shah Faesal v. Union of India [2020] 4 SCC 1 (5-Judge Bench) the Hon Court held that the doctrine of precedents and stare decisis are the core values of our legal system. They form the tools which further the goal of certainty, stability and continuity in our legal system. Arguably, Judges owe a duty to the concept of certainty of law, therefore they justify their holdings by relying upon the established tenets of law. Court also held that the decision rendered by a coordinate Bench is binding on the subsequent Benches of equal or lesser strength. Followed National Insurance Co. Ltd v. Pranay Sethi [2017] 16 SSC 680.

2. Binding Nature of Order of One Bench of Tribunal on Another Bench

A decision of a Division Bench and Third Member Bench is binding on the Single Member Bench. A decision of a Special Bench is binding on all the Benches of the Tribunal. A decision of the Special Bench can be distinguished or disregarded if there is any contrary view of the jurisdictional High Court or of the Supreme Court. A co-ordinate Bench should follow the view of another co-ordinate Bench or else refer the matter to a larger Bench through the President.

For the sake of uniformity, one Bench of the Tribunal is bound to follow the view expressed by another Bench of the Tribunal unless the earlier view is per incurious – CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Mad); CIT v. S. Devaraj [1969] 73 ITR 1 (Mad.).

Tribunal should not come to a conclusion totally contradictory to the conclusion reached by the earlier Bench of the Tribunal. Where a Bench differs from an earlier Bench, the matter should be referred to a larger Bench – CIT v. Goodlas Nerolac Paints Ltd. [1991] 55 Taxman 484/188 ITR 1 (Bom). Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 (SC); Pradip Chandra Parija v. Pramod Chandra Patniak [2002] 122 Taxman 101/254 ITR 99 (SC)

One bench cannot differ from the view of another Co-ordinate Bench. Mercedes Benz India (P.) Ltd. v. Union of India [2010] 252 E.L.T. 168 (Bom)

ITO v. Baker Technical Services (P.) Ltd. [2010] 125 ITD 1 (Mum) (TM)

In case of Hatkesh Co-op Housing Society Ltd. v. Asstt. CIT [2016] 75 taxmann.com 3/243 Taxman 213 (Bombay) the court observed that that when an identical issue, which had earlier arisen before the Coordinate Bench of the Tribunal on identical facts and a view has been taken on the issue then judicial discipline would demand that a subsequent bench of the Tribunal hearing the same issue should follow the view taken by its earlier Coordinate Bench. No doubt this discipline is subject to the well settled exceptions of the earlier order being passed per incurim or sub silentio or in the meantime, there has been any change in law, either statutory or by virtue of judicial pronouncement. If the earlier order does not fall within the exception which affects its binding character before a coordinate bench of the Tribunal, then it has to follow it. However, if the Tribunal has a view different then the view taken by its Coordinate Bench on an identical issue, then the order taking such a different view must record its reasons as to why it does not follow the earlier order of the Tribunal on an identical issue, which could only be on one of the well settled exceptions which affect the binding nature of the earlier order. It could also depart from the earlier view of the Tribunal if there is difference in facts from the earlier order of Coordinate Bench but the same must be recorded in the order. The impugned order is blissfully silent about the reason why it chooses to ignore the earlier decision of the Tribunal rendered after consideration of Sind Co. Op. Hsg. Society (Bom High court), and take a view contrary to that taken by its earlier Coordinate Bench. It is made clear that in case a subsequent bench of the Tribunal does not agree with the reasons indicated in a binding decision of a coordinate bench, then for reason to be recorded, it must request the President of the Tribunal to constitute a larger bench to decide the difference of view on the issue.

Non Consideration of decision citied of the Co-ordinate Bench amounts to mistake apparent on record as held in Honda Siel Power Products Ltd. v. CIT [2007] 165 Taxman 307/295 ITR 466 (SC)

Special Bench decision of three members should have precedence over Third Member decision.

Dy. CIT v. Oman International Bank SAOG [2006] 100 ITD 2185 (Mum.) (SB). Third Member decision is like the decision of Special Bench should be followed in same manner.

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