PCIT vs. Yes Bank Ltd (Supreme Court)

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.3148 OF 2019
(Arising out of S.L.P.(C) No.7118 of 2018)
The Principal Commissioner of
Income Tax8
….Appellant(s)
VERSUS
M/s Yes Bank Ltd. ….Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. This appeal is filed against the final judgment
and order dated 01.08.2017 passed by the High
Court of Judicature at Bombay in ITA No.599/2015
whereby the High Court dismissed the appeal filed
by the appellant herein.

3. This appeal involves a short point as would be
clear from the facts stated infra.
4. The appellant is the Union of India (Income
Tax Department) and the respondentBank
is the
assessee.
5. In the course of assessment proceedings of the
respondentassessee(
Bank) for the Assessment Year
20072008,
the question arose as to whether the
respondentassessee(
Bank) was entitled to claim
deduction under Section 35D
of the Income Tax
Act, 1961 (for short, “the Act”) for the Assessment
Year in question. In other words, the question arose
as to whether the respondentBank
is an industrial
undertaking so as to entitle them to claim deduction
under Section 35D
of the Act.
6. The case of the respondent was that they,
being an industrial undertaking, are entitled to
claim the deduction under Section 35D
of the Act.

The Assessing Officer passed an order dated
31.10.2009 which gave rise to the proceedings
before the Commissioner under Section 263 of the
Act which resulted in passing of an adverse order
dated 14.11.2011 by the Commissioner.
7. This gave rise to filing of the appeal by the
respondent before the ITAT against the order of the
Commissioner. By order dated 05.12.2014, the ITAT
allowed the appeal which gave rise to filing of the
appeal by the Revenue (Income Tax Department) in
the High Court under Section 260A
of the Act.
8. By impugned order, the High Court dismissed
the appeal after hearing both the parties giving rise
to filing of this appeal by way of special leave in this
Court.
9. So, the short question that arises for
consideration in this appeal, is whether the High
Court was justified in dismissing the appellant’s
appeal.
10. Having heard the learned counsel for the
parties and on perusal of the record of the case, we
are constrained to allow the appeal, set aside the
impugned order and remand the case to the High
Court for deciding the appeal afresh on merits in
accordance with law.
11. In our view, the need to remand the case to
the High Court is called for due to the following
reasons.
12. First, the High Court did not frame any
substantial question of law as is required to be
framed under Section 260A
of the Act though
heard the appeal bipartite. In other words, the High
Court did not dismiss the appeal in limine on the
ground that the appeal does not involve any
substantial question of law; Second, the High Court
dismissed the appeal without deciding any issue
arising in the case saying that it is not necessary.
(see para 6).
13. Third, the main issue involved in this appeal,
as rightly taken note of by the High Court in para 6,
was with regard to the applicability of Section 35D
of the Act to the respondentassessee(
Bank). It was,
however, not decided.
14. In our view, the High Court should have
framed the substantial question of law on the
applicability of Section 35D
of the Act in addition to
other questions and then should have answered
them in accordance with law rather than to leave
the question(s) undecided.
15. It was brought to our notice that the issue with
regard to applicability of Section 35D
of the Act to
the respondentBank
is already pending
consideration before the High Court at the instance
of the respondent in one appeal. If that be so, both
the appeals, in our view, should be decided
together.
16. It is for all these reasons, we are of the view
that the impugned order is not legally sustainable.
17. In view of the foregoing discussion, the appeal
succeeds and is accordingly allowed. The impugned
order is set aside. The appeal is accordingly
remanded to the High Court for its decision on
merits in accordance with law along with another
appeal, if pending, after framing proper substantial
question(s) of law arising in the case.
18. We have not expressed any opinion on the
merits of the case having formed an opinion to
remand the appeal to the High Court for its disposal
on the merits afresh. The High Court will
accordingly decide the appeal uninfluenced by any
observations made in the impugned order and this
order.
……………………………………..J.
[ABHAY MANOHAR SAPRE]
……………………………………….J.
[DINESH MAHESHWARI]
New Delhi;
March 15, 2019