REPORTABLE
\nIN THE SUPREME COURT OF INDIA
\nCIVIL APPELLATE JURISDICTION
\nCIVIL APPEAL NO. 1106 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.30284 OF 2015]
\nDEPUTY COMMISSIONER OF INCOME TAX & ANR. ..APPELLANTS
\nVERSUS
\nM\/S. PEPSI FOODS LTD. ..RESPONDENT
\n(NOW PEPSICO INDIA HOLDINGS PVT. LTD.)
\nWITH
\nCIVIL APPEAL NO. 1127 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.32081 OF 2017]
\nCIVIL APPEAL NO. 1107 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.34987 OF 2015]
\nCIVIL APPEAL NO. 1108 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.31311 OF 2015]
\nCIVIL APPEAL NO. 1109 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.31295 OF 2015]
\nCIVIL APPEAL NO. 1110 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.30283 OF 2015]
\nCIVIL APPEAL NO. 1111 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.31297 OF 2015]
\nCIVIL APPEAL NO. 1112 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.34142 OF 2016]
\nCIVIL APPEAL NO. 1113 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.3138 OF 2017]
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\nCIVIL APPEAL NO. 1114 OF 2021
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\nCIVIL APPEAL NO. 1117 OF 2021
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\nDIARY NO.15229 OF 2017
\nCIVIL APPEAL NO. 1120 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.720 OF 2018]
\nCIVIL APPEAL NO. 1121 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.27498 OF 2017]
\nCIVIL APPEAL NO. 1122 OF 2021
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\nCIVIL APPEAL NO. 1123 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.722 OF 2018]
\nCIVIL APPEAL NO. 1124 OF 2021
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\nCIVIL APPEAL NO. 1126 OF 2021
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\nCIVIL APPEAL NO. 1125 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.32236 OF 2017]
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\nCIVIL APPEAL NO. 1128 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.33218 OF 2017]
\nCIVIL APPEAL NO. 1129 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.12200 OF 2018]
\nCIVIL APPEAL NO. 1130 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.4186 OF 2018]
\nCIVIL APPEAL NO. 1131 OF 2021
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\nCIVIL APPEAL NO. 1132 OF 2021
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\nCIVIL APPEAL NO. 1133 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO. OF 2021]
\nDIARY NO.4363 OF 2018
\nCIVIL APPEAL NO. 1134 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO. OF 2021]
\nDIARY NO.6113 OF 2018
\nCIVIL APPEAL NO. 1135 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.16889 OF 2018]
\nCIVIL APPEAL NO. 1136 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.16245 OF 2018]
\nCIVIL APPEAL NO. 1137 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.26053 OF 2018]
\nCIVIL APPEAL NO. 1138 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO. OF 2021]
\nDIARY NO.22819 OF 2018
\nCIVIL APPEAL NO. 1139 OF 2021
\n[ARISING OUT OF SLP (CIVIL) NO.10941 OF 2019]
\n3
\nJ U D G M E N T
\nR.F. Nariman, J
\n1. Delay condoned. Leave granted.
\n2. The appeals before us raise an important question as to the
\nconstitutional validity of the third proviso to Section 254(2A) of the
\nIncome Tax Act, 1961 (hereinafter referred to as \u201cIncome Tax Act\u201d).
\n3. The facts in Deputy Commissioner of Income Tax & Anr. v. M\/s
\nPepsi Foods Ltd. [now Pepsico India Holdings Pvt. Ltd] (Civil
\nAppeal arising out of Special Leave Petition (C) No.30284 of 2015)
\nmay be set out as being illustrative of the facts in all the appeals
\nbefore us. The Respondent-assessee is an Indian company
\nincorporated on 24.02.1989 and is engaged in the business of
\nmanufacture and sale of concentrates, fruit juices, processing of rice
\nand trading of goods for exports. The assessee is a group company of
\nthe multi-national Pepsico Inc., a company incorporated and registered
\nin the United States of America. The assessee-company merged with
\nPepsico India Holdings Pvt. Ltd. w.e.f. 01.04.2010, in terms of a
\nscheme of arrangement duly approved by the Hon\u2019ble Punjab and
\nHaryana High Court. On 30.09.2008, a return of income was filed for
\nthe assessment year 2008-2009 declaring a total income of INR
\n92,54,89,822. A final assessment order was passed on 19.10.2012
\n4
\nwhich was adverse to the assessee. Aggrieved by the aforesaid order,
\nthe assessee filed an appeal before the Income Tax Appellate Tribunal
\n(hereinafter referred to as \u201cTribunal\u201d) on 29.04.2013. On 31.05.2013,
\na stay of the operation of the order of the assessing officer was
\ngranted by the Tribunal for a period of six months. This stay was
\nextended till 08.01.2014 and continued being extended until
\n28.05.2014. Since the period of 365 days as provided in Section
\n254(2A) of the Income Tax Act was to end on 30.05.2014 beyond
\nwhich no further extension could be granted, the assessee,
\napprehending coercive action from the Revenue, filed a writ petition
\nbefore the Delhi High Court on 21.05.2014 challenging the
\nconstitutional validity of the third proviso to Section 254(2A) of the
\nIncome Tax Act. By a judgment dated 19.05.2015, the Delhi High Court
\nstruck down that part of the third proviso to Section 254(2A) of the
\nIncome Tax Act which did not permit the extension of a stay order
\nbeyond 365 days even if the assessee was not responsible for delay in
\nhearing the appeal. It is this judgment and several other judgments
\nfrom various High Courts that have been challenged by the revenue in
\nthese appeals.
\n4. Shri Vikramjit Banerjee, learned ASG, assailed the impugned judgment
\nof the Delhi High Court and other judgments following it, arguing that
\n5
\nthere is no right to stay of a judgment in an appellate proceeding as
\nsuch stay is dependent upon the discretion of the Appellate Court. The
\ndiscretion having been exercised once would not mean that automatic
\nextensions of the same could be granted despite a reasonable period
\nhaving gone-by. He also argued that the discretionary remedy of a stay
\nis part and parcel of the right to appeal which itself is a statutory right,
\nand can be taken away by the legislature. He then argued that Article
\n14 of the Constitution of India is not to be applied mechanically as a far
\ngreater freedom in the joints is given qua tax legislation and so long as
\nthe State has laid down a valid policy which it has followed without
\nsingling out anybody, no discrimination can possibly ensue. He also
\nargued that equitable considerations and arguments based on
\nhardship are out of place when it comes to tax statutes, which must be
\nread literally. For all these propositions, he cited case law which will be
\ndealt with later in this judgment.
\n5. Shri Ajay Vohra, learned Senior Advocate, Shri Himanshu S. Sinha,
\nShri Deepak Chopra and Shri Sachit Jolly, learned Advocates,
\nappearing for the assessees, countered each of the submissions of
\nShri Banerjee, learned ASG. They relied strongly upon the reasoning
\nof the impugned judgment of the Delhi High Court and argued that
\nonce discretionary relief has been granted based upon a strong prima
\n6
\nfacie case, balance of convenience, etc. it would be wholly arbitrary
\nand discriminatory that such relief be vacated automatically without
\nreference to whether it is the assessee who is prolonging the appellate
\nproceedings. Once there is a vested right of appeal, there is a right to
\nobtain a stay which, once obtained, cannot be vacated without dilatory
\ntactics on the part of the Appellant being found against the Appellant.
\nThey cited judgments of this Court to show that discriminatory taxation
\nhas been struck down under Article 14 of the Constitution of India.
\nThey also argued that the State cannot take shelter under a \u201cpolicy\u201d, if
\nthe policy or object laid down in the statutory provision is itself arbitrary
\nor discriminatory. They also cited judgments to show that even in
\ninterpreting a tax statute, though equitable considerations are not to be
\ngiven effect, yet they are not wholly irrelevant when the constitutional
\nvalidity of the provision is itself challenged.
\n6. The genesis of the stay provision contained in Section 254 of the
\nIncome Tax Act is in the celebrated judgment of this Court in Income
\nTax Officer v. M.K. Mohammed Kunhi (1969) 2 SCR 65. In this
\njudgment, Section 254 of the Income Tax Act, as originally enacted,
\ncame up for consideration before this Court. After setting out Section
\n254(1), this Court referred to Sutherland, Statutory Construction (3rd
\nEdn., Arts. 5401 and 5402), and then held that the power which has
\n7
\nbeen conferred by the said Section on the Appellate Tribunal with the
\nwidest possible amplitude must carry with it, by necessary implication,
\nall powers incidental and necessary to make the exercise of such
\npower fully effective. The Court held:
\n\u201cSection 255(5) of the Act does empower the Appellate
\nTribunal to regulate its own procedure, but it is very
\ndoubtful if the power of stay can be spelt out from that
\nprovision. In our opinion the Appellate Tribunal must be
\nheld to have the power to grant stay as incidental or
\nancillary to its appellate jurisdiction. This is particularly
\nso when Section 220(6) deals expressly with a
\nsituation when an appeal is pending before the
\nAppellate Assistant Commissioner, but the Act is silent
\nin that behalf when an appeal is pending before the
\nAppellate Tribunal. It could well be said that when
\nSection 254 confers appellate jurisdiction, it impliedly
\ngrants the power of doing all such acts, or employing
\nsuch means, as are essentially necessary to its
\nexecution and that the statutory power carries with it
\nthe duty in proper cases to make such orders for
\nstaying proceedings as will prevent the appeal if
\nsuccessful from being rendered nugatory.
\nA certain apprehension may legitimately arise in the
\nminds of the authorities administering the Act that if the
\nAppellate Tribunals proceed to stay recovery of taxes
\nor penalties payable by or imposed on the assessees
\nas a matter of course the revenue will be put to great
\nloss because of the inordinate delay in the disposal of
\nappeals by the Appellate Tribunals. It is needless to
\npoint out that the power of stay by the Tribunal is not
\nlikely to be exercised in a routine way or as a matter of
\ncourse in view of the special nature of taxation and
\nrevenue laws. It wilt only be when a strong prima facie
\ncase is made out that the Tribunal will consider
\nwhether to stay the recovery proceedings and on what
\nconditions and the stay will be granted in most
\ndeserving and appropriate cases where the Tribunal is
\n8
\nsatisfied that the entire purpose of the appeal will be
\nfrustrated or rendered nugatory by allowing the
\nrecovery proceedings to continue during the pendency
\nof the appeal.\u201d
\n[at page 72]
\nImportantly, this Court recognised that orders of stay prevent the
\nappeal, if ultimately successful, from being rendered nugatory or futile,
\nand are granted only in deserving and appropriate cases.
\n7. The judgment of this Court was followed for many decades, the
\nAppellate Tribunal granting stay without being constrained by any time
\nlimit. However, by Finance Act, 2001 (w.e.f. 01\/06\/2001), two provisos
\nwere introduced to Section 254(2A) as follows:
\n\u201c254. Orders of Appellate Tribunal.
\nxxx xxx xxx
\n(2A) In every appeal, the Appellate Tribunal, where it is
\npossible, may hear and decide such appeal within a
\nperiod of four years from the end of the financial year
\nin which such appeal is filed under sub-section (1) or
\nsub-section (2) of section 253:
\nProvided that where an order of stay is made in any
\nproceedings relating to an appeal filed under subsection
\n(1) of section 253, the Appellant Tribunal shall
\ndispose of the appeal within a period of one hundred
\nand eighty days from the date of such order:
\nProvided further that if such appeal is not so disposed
\nof within the period specified in the first proviso, the
\nstay order shall stand vacated after the expiry of the
\nsaid period.\u201d
\n8. Realising that a hard and fast provision which is directory so far as the
\ndisposal of appeal is concerned, but mandatory so far as vacation of
\n9
\nthe stay order is concerned, would lead to great hardship, the
\nlegislature stepped in again and amended Section 254(2A) vide
\nFinance Act, 2007 (w.e.f. 01\/06\/2007) as follows:
\n\u201c254. Orders of Appellate Tribunal.
\nxxx xxx xxx
\n(2A) In every appeal, the Appellate Tribunal, where it is
\npossible, may hear and decide such appeal within a
\nperiod of four years from the end of the financial year
\nin which such appeal is filed under sub-section (1) or
\nsub-section (2) of section 253:
\nProvided that the Appellate Tribunal may, after
\nconsidering the merits of the application made by the
\nassessee, pass an order of stay in any proceedings
\nrelating to an appeal filed under sub-section (1) of
\nsection 253, for a period not exceeding one hundred
\nand eighty days from the date of such order and the
\nAppellate Tribunal shall dispose of the appeal within
\nthe said period of stay specified in that order:
\nProvided further that where such appeal is not so
\ndisposed of within the said period of stay as specified
\nin the order of stay, the Appellate Tribunal may, on an
\napplication made in this behalf by the assessee and on
\nbeing satisfied that the delay in disposing of the appeal
\nis not attributable to the assessee, extend the period of
\nstay, or pass an order of stay for a further period or
\nperiods as it thinks fit; so, however, that the aggregate
\nof the period originally allowed and the period or
\nperiods so extended or allowed shall not, in any case,
\nexceed three hundred and sixty-five days and the
\nAppellate Tribunal shall dispose of the appeal within
\nthe period or periods of stay so extended or allowed:
\nProvided also that if such appeal is not so disposed of
\nwithin the period allowed under the first proviso or the
\nperiod or periods extended or allowed under the
\nsecond proviso, the order of stay shall stand vacated
\nafter the expiry of such period or periods.\u201d
\n10
\n9. The aforementioned provision (as amended by Finance Act, 2007)
\nbecame the subject matter of challenge before the Bombay High Court
\nin Narang Overseas Pvt. Ltd. v. ITAT (2007) 295 ITR 22. The
\nBombay High Court, after referring to the judgment in Mohammed
\nKunhi (supra), then held:
\n\u201c Did the section as it stood before the Finance Act of
\n2007, and after the Finance Act of 2007, exclude the
\npower of the Tribunal to grant interim relief after the
\nperiod provided in the proviso. Was it the intendement
\nof Parliament that the Tribunal even in a case where
\nthe assessee was not at fault should be denuded of its
\nincidental power to continue the interim relief granted
\nand if so what mischief was it seeking to avoid. The
\nmischief if and at all was the long delay in disposing of
\nproceedings where interim relief had been obtained by
\nthe Assessee. The second proviso as it earlier stood, in
\na case when in an appeal interim relief was granted, if
\nthe appeal was not disposed off within 180 days
\nprovided that the stay shall stand vacated. The proviso
\nas it stood could really have not have stood the test of
\nnon-arbitrariness as it would result in an appeal being
\ndefeated even if the assessee was not at fault, as in
\nthe meantime the revenue could proceed against the
\nassets of the assessee. The proviso as introduced by
\nthe Finance Act, 2007 was to an extent to avoid the
\nmischief of it being rendered unconstitutional. Once an
\nappeal is provided, it cannot be rendered nugatory in
\ncases were the assessee was not at fault.
\nThe amendment of 2007 conferred the power to
\nextend the period of interim relief to 360 days.
\nParliament clearly intended that such appeals should
\nbe disposed of at the earliest. If that be the object the
\nmischief which was sought to be avoided was the nondisposal
\nof the appeal during the period the interim
\nrelief was in operation. By extending the period
\nParliament took note of laws delay. The object was not
\n11
\nto defeat the vested right of Appeal in an assessee,
\nwhose appeal could not be disposed off not on account
\nof any omission or failure on his part, but either the
\nfailure of the Tribunal or acts of revenue resulting in
\nnon-disposal of the appeal within the extended period
\nas provided.
\nCan it then be said that the intention of Parliament by
\nrestricting the period of stay or interim relief upto 360
\ndays had the effect of excluding by necessary
\nintendment the power of the Tribunal to continue the
\ninterim relief. Would not reading the power not to
\ncontinue the power to continue interim relief in cases
\nnot attributable to the acts of the assessee result in
\nholding that such a provision would be unreasonable.
\nCould Parliament have intended to confer the remedy
\nof an Appeal by denying the incidental power of the
\nTribunal to do justice. In our opinion for reasons
\nalready discussed it would not be possible to so read it.
\nIt would not be possible on the one hand to hold that
\nthere is a vested right of an appeal and on the other
\nhand to hold that there is no power to continue the
\ngrant of interim relief for no fault of the assessee by
\ndivesting the incidental power of the Tribunal to
\ncontinue the interim relief. Such a reading would result
\nin such an exercise being rendered unreasonable and
\nviolative of Article 14 of the Constitution. Courts must,
\ntherefore, construe and\/or give a construction
\nconsistent with the constitutional mandate and principle
\nto avoid a provision being rendered unconstitutional.\u201d
\n[at page 30-31]
\nThe High Court then referred to the judgment of this Court in
\nCommissioner of Customs & Central Excise v. Kumar Cotton Mills
\n(2005) 13 SCC 296, which dealt with a similar provision contained in
\nthe Central Excise Act, 1944, namely, Section 35C(2A), and then held:
\n\u201c We are of the respectful view that the law as
\nenunciated in Kumar Cotton Mills Pvt. Ltd. (supra)
\nshould also apply to the construction of the third
\nproviso as introduced in section 254(2A) by the
\n12
\nFinance Act, 2007. The power to grant stay or interim
\nrelief being inherent or incidental is not defeated by the
\nprovisos to the sub-section. The third proviso has to be
\nread as a limitation on the power of the Tribunal to
\ncontinue interim relief in case where the hearing of the
\nAppeal has been delayed for acts attributable to the
\nassessee. It cannot mean that a construction be given
\nthat the power to grant interim relief is denuded even if
\nthe acts attributable are not of the assessee but of the
\nrevenue or of the Tribunal itself. The power of the
\nTribunal, therefore, to continue interim relief is not
\noverridden by the language of the third proviso to
\nsection 254(2A). This would be in consonance with the
\nview taken in Kumar Cotton Mills Pvt. Ltd. (supra).
\nThere would be power in the Tribunal to extend the
\nperiod of stay on good cause being shown and on the
\nTribunal being satisfied that the matter could not be
\nheard and disposed of for reasons not attributable to
\nthe assessee.\u201d
\n[at page 32]
\n10.Close on the heels of this judgment, Section 254(2A) of the Income
\nTax Act was again amended, this time by the Finance Act, 2008 (w.e.f.
\n01\/10\/2008). This amendment reads as follows:
\n\u201c254. Orders of Appellate Tribunal.
\nxxx xxx xxx
\n(2A) In every appeal, the Appellate Tribunal, where it is
\npossible, may hear and decide such appeal within a
\nperiod of four years from the end of the financial year
\nin which such appeal is filed under sub-section (1) or
\nsub-section (2) of section 253:
\nProvided that the Appellate Tribunal may, after
\nconsidering the merits of the application made by the
\nassessee, pass an order of stay in any proceedings
\nrelating to an appeal filed under sub-section (1) of
\nsection 253, for a period not exceeding one hundred
\nand eighty days from the date of such order and the
\n13
\nAppellate Tribunal shall dispose of the appeal within
\nthe said period of stay specified in that order:
\nProvided further that where such appeal is not so
\ndisposed of within the said period of stay as specified
\nin the order of stay, the Appellate Tribunal may, on an
\napplication made in this behalf by the assessee and on
\nbeing satisfied that the delay in disposing of the appeal
\nis not attributable to the assessee, extend the period of
\nstay, or pass an order of stay for a further period or
\nperiods as it thinks fit; so, however, that the aggregate
\nof the period originally allowed and the period or
\nperiods so extended or allowed shall not, in any case,
\nexceed three hundred and sixty-five days and the
\nAppellate Tribunal shall dispose of the appeal within
\nthe period or periods of stay so extended or allowed:
\nProvided also that if such appeal is not so disposed of
\nwithin the period allowed under the first proviso or the
\nperiod or periods extended or allowed under the
\nsecond proviso, which shall not, in any case, exceed
\nthree hundred and sixty-five days, the order of stay
\nshall stand vacated after the expiry of such period or
\nperiods, even if the delay in disposing of the appeal is
\nnot attributable to the assessee.\u201d
\n11.The amended provision came to be considered by a Division Bench of
\nthe Delhi High Court in Commissioner of Income Tax v. M\/s Maruti
\nSuzuki (India) Ltd. (2014) 362 ITR 215.The constitutional validity of
\nthe said provision had not been challenged, as a result of which the
\nDelhi High Court interpreted the third proviso to Section 254(2A) as
\nfollows:
\n\u201cIn view of the aforesaid discussion, we have reached
\nthe following conclusion:-
\n(i) In view of the third proviso to Section 254(2A) of
\nthe Act substituted by Finance Act, 2008 with effect
\n14
\nfrom 1st October, 2008, tribunal cannot extend stay
\nbeyond the period of 365 days from the date of first
\norder of stay.
\n(ii) In case default and delay is due to lapse on the
\npart of the Revenue, the tribunal is at liberty to
\nconclude hearing and decide the appeal, if there is
\nlikelihood that the third proviso to Section 254(2A)
\nwould come into operation.
\n(iii) Third proviso to Section 254(2A) does not bar or
\nprohibit the Revenue or departmental representative
\nfrom making a statement that they would not take
\ncoercive steps to recover the impugned demand and
\non such statement being made, it will be open to the
\ntribunal to adjourn the matter at the request of the
\nRevenue.
\n(iv) An assessee can file a writ petition in the High
\nCourt pleading and asking for stay and the High
\nCourt has power and jurisdiction to grant stay and
\nissue directions to the tribunal as may be required.
\nSection 254(2A) does not prohibit\/bar the High Court
\nfrom issuing appropriate directions, including
\ngranting stay of recovery.
\nWe have not examined the constitutional validity of
\nthe provisos to Section 254(2A) of the Act and the
\nissue is left open.\u201d
\n[at page 231]
\n12.Close upon the heels of the judgment in Maruti Suzuki (supra), the
\nGujarat High Court in DCIT v. Vodafone Essar Gujarat Ltd. (2015)
\n376 ITR 23, while disagreeing with the view taken in Maruti Suzuki
\n(supra), interpreted the third proviso to Section 254(2A) of the Income
\nTax Act as follows:
\n\u201c Applying the decision of the Division Bench of this
\ncourt in the case of Small Industries Development
\nBank of India (supra) to the facts of the case on hand,
\nmore particularly while considering the powers of the
\n15
\nTribunal under section 254(2A) of the Act, it is
\nobserved and held that by section 254(2A) of the Act, it
\ncannot be inferred a legislative intent to
\ncurtail\/withdraw the powers of the Appellate Tribunal to
\nextend stay of demand beyond the period of 365 days.
\nHowever, the aforesaid extension of stay beyond the
\nperiod of total 365 days from the date of grant of initial
\nstay would always be subject to the subjective
\nsatisfaction by the learned Appellate Tribunal and on
\nan application made by the assessee-appellant to
\nextend stay and on being satisfied that the delay in
\ndisposing of the appeal within a period of 365 days
\nfrom the date of grant of initial stay is not attributable to
\nthe appellant-assessee. For that purpose, on expiry of
\nevery 180 days, the appellant-assessee is required to
\nmake an application to extend stay granted earlier and
\nsatisfy the learned Appellate Tribunal that the delay in
\nnot disposing of the appeal is not attributable to him\/it
\nand the learned Appellate Tribunal is required to review
\nthe matter after every 180 days and while disposing of
\nsuch application of extension of stay, the learned
\nAppellate Tribunal is required to pass a speaking order
\nafter having satisfied that the assessee-appellant has
\nnot indulged into any delay tactics and that the delay in
\ndisposing of the appeal within stipulated time is not
\nattributable to the assessee-appellant. However, at the
\nsame time, it may not be construed that widest powers
\nare given to the Appellate Tribunal to extend the stay
\nindefinitely and that the Appellate Tribunal is not
\nrequired to dispose of the appeals at the earliest. The
\nobject and purpose of section 35C(2A) of the Act
\nparticularly one of the object and purpose is to see that
\nin a case where stay has been granted by the learned
\nAppellate Tribunal, the learned Appellate Tribunal is
\nrequired to dispose of the appeal within total period of
\n365 days, as ultimately revenue has not to suffer and
\nall efforts should be made by the learned Appellate
\nTribunal to dispose of such appeals in which stay has
\nbeen granted as far as possible within total period of
\n365 days from the date of grant of initial stay and the
\nAppellate Tribunal shall grant priority to such appeals
\nover appeals in which no stay is granted. For that even
\nthe Appellate Tribunal and\/or registrar of the Appellate
\n16
\nTribunal is required to maintain separate register of the
\nappeals in which stay has been granted fully and\/or
\npartially and the appeals in which no stay has been
\ngranted.
\n[at page 42-43]
\nxxx xxx xxx
\nWith greatest respect to the Delhi High Court, if the
\naforesaid procedure is adopted, either it would lead to
\nmultiplicity of proceedings before the High Court and\/or
\neven granting the stay of demand by the Department
\nitself. We are of the opinion that instead if the aforesaid
\nprocedure is followed, it would meet the ends of justice
\nand it may not increase the litigation either before the
\nHigh Court and\/or appropriate forum and the purpose
\nand object of section 254(2A) of the Act is achieved.\u201d
\n[at page 45-46]
\n13.The impugned judgment in M\/s Pepsi Foods Ltd. v. ACIT (2015) 376
\nITR 87 dealt with the challenge to the constitutional validity of the third
\nproviso to Section 254(2A) of the Income Tax Act, as amended by the
\nFinance Act, 2008. A Division Bench of the Delhi High Court, after
\nsetting out the Bombay High Court judgment in Narang Overseas
\n(supra), then referred to the previous judgment of the Delhi High Court
\nin Maruti Suzuki (supra) and held:
\n\u201c12. From the above extract, it is evident that the
\nDivision Bench was not called upon and did not
\nexamine the constitutional validity of the provisos to
\nSection 254(2A) of the said Act and left the issue open.
\nIt is only on a plain reading of the provisos, as they
\nexisted, that the Division Bench came to the conclusion
\nthat the Tribunal had no power to extend stay beyond a
\nperiod of 365 days from the date of the first order of
\nstay but that an assessee could file a writ petition in the
\nHigh Court asking for stay even beyond the said period
\nof 365 days and the High Court had the power and
\njurisdiction to grant stay and issue directions to the
\n17
\nTribunal and that Section 254(2A) did not prohibit\/bar
\nthe High Court from issuing appropriate directions,
\nincluding grant of stay of recovery. A similar view was
\ntaken by the Bombay High Court in Jethmal Faujimal
\nSoni (supra). But that decision was also rendered on a
\nplain meaning of the provisos, as they stood. There
\nwas no challenge to the constitutional validity of the
\nthird proviso to Section 254(2A) of the said Act after
\nthe amendment introduced by the Finance Act, 2008.
\nNo decision of any High Court has been brought to our
\nnotice by the learned counsel for the parties, wherein
\nthe constitutional validity of the third proviso to Section
\n254(2A) of the said Act has been examined.\u201d
\n[at page 96-97]
\nAfter referring to this Court\u2019s judgment in Mardia Chemicals Ltd. v.
\nUnion of India (2004) 4 SCC 311 and the judgment of a Division
\nBench of the Punjab and Haryana High Court in PML Industries Ltd.
\nv. CCE (2013) SCC OnLine P&H 4440, which dealt with a similar
\nprovision contained in Section 35C (2A) of the Central Excise
\nAct,1944, the Court held:
\n\u201c23. Keeping in mind the principles set out by the
\nSupreme Court in Dr Subramanian Swamy (supra), we
\nneed to examine whether the present challenge to the
\nvalidity of the third proviso to Section 254(2A) can be
\nsustained. This is not a case of excessive delegation of
\npowers and, therefore, we need not bother about the
\nsecond dimension of Article 14 in its application to
\nlegislation. We are here concerned with the question of
\ndiscrimination, based on an impermissible or invalid
\nclassification. It is abundantly clear that the power
\ngranted to the Tribunal to hear and entertain an appeal
\nand to pass orders would include the ancillary power of
\nthe Tribunal to grant a stay. Of course, the exercise of
\nthat power can be subjected to certain conditions. In
\n18
\nthe present case, we find that there are several
\nconditions which have been stipulated. First of all, as
\nper the first proviso to Section 254(2A), a stay order
\ncould be passed for a period not exceeding 180 days
\nand the Tribunal should dispose of the appeal within
\nthat period. The second proviso stipulates that in case
\nthe appeal is not disposed of within the period of 180
\ndays, if the delay in disposing of the appeal is not
\nattributable to the assessee, the Tribunal has the
\npower to extend the stay for a period not exceeding
\n365 days in aggregate. Once again, the Tribunal is
\ndirected to dispose of the appeal within the said period
\nof stay. The third proviso, as it stands today, stipulates
\nthat if the appeal is not disposed of within the period of
\n365 days, then the order of stay shall stand vacated,
\neven if the delay in disposing of the appeal is not
\nattributable to the assessee. While it could be argued
\nthat the condition that the stay order could be extended
\nbeyond a period of 180 days only if the delay in
\ndisposing of the appeal was not attributable to the
\nassessee was a reasonable condition on the power of
\nthe Tribunal to the grant an order of stay, it can, by no
\nstretch of imagination, be argued that where the
\nassessee is not responsible for the delay in the
\ndisposal of the appeal, yet the Tribunal has no power
\nto extend the stay beyond the period of 365 days. The
\nintention of the legislature, which has been made
\nexplicit by insertion of the words – \u2018even if the delay in
\ndisposing of the appeal is not attributable to the
\nassessee\u2019- renders the right of appeal granted to the
\nassessee by the statute to be illusory for no fault on the
\npart of the assessee. The stay, which was available to
\nhim prior to the 365 days having passed, is snatched
\naway simply because the Tribunal has, for whatever
\nreason, not attributable to the assessee, been unable
\nto dispose of the appeal. Take the case of delay being
\ncaused in the disposal of the appeal on the part of the
\nrevenue. Even in that case, the stay would stand
\nvacated on the expiry of 365 days. This is despite the
\nfact that the stay was granted by the Tribunal, in the
\nfirst instance, upon considering the prima facie merits
\nof the case through a reasoned order.
\n19
\n24. Furthermore, the petitioners are correct in their
\nsubmission that unequals have been treated equally.
\nAssessees who, after having obtained stay orders and
\nby their conduct delay the appeal proceedings, have
\nbeen treated in the same manner in which assessees,
\nwho have not, in any way, delayed the proceedings in
\nthe appeal. The two classes of assessees are distinct
\nand cannot be clubbed together. This clubbing together
\nhas led to hostile discrimination against the assessees
\nto whom the delay is not attributable. It is for this
\nreason that we find that the insertion of the expression
\n– \u2018even if the delay in disposing of the appeal is not
\nattributable to the assessee\u2019- by virtue of the Finance
\nAct, 2008, violates the non-discrimination clause of
\nArticle 14 of the Constitution of India. The object that
\nappeals should be heard expeditiously and that
\nassesses should not misuse the stay orders granted in
\ntheir favour by adopting delaying tactics is not at all
\nachieved by the provision as it stands. On the contrary,
\nthe clubbing together of \u2018well behaved\u2019 assesses and
\nthose who cause delay in the appeal proceedings is
\nitself violative of Article 14 of the Constitution and has
\nno nexus or connection with the object sought to be
\nachieved. The said expression introduced by the
\nFinance Act, 2008 is, therefore, struck down as being
\nviolative of Article 14 of the Constitution of India. This
\nwould revert us to the position of law as interpreted by
\nthe Bombay High Court in Narang Overseas (supra),
\nwith which we are in full agreement. Consequently, we
\nhold that, where the delay in disposing of the appeal is
\nnot attributable to the assessee, the Tribunal has the
\npower to grant extension of stay beyond 365 days in
\ndeserving cases. The writ petitions are allowed as
\nabove.\u201d
\n[at page 107-109]
\n14. It is settled law that challenges to tax statutes made under Article 14 of
\nthe Constitution of India can be on grounds relatable to discrimination
\nas well as grounds relatable to manifest arbitrariness. These grounds
\nmay be procedural or substantive in nature. Thus, in Suraj Mall Mohta
\n20
\nand Co. v. A.V. Visvanatha Sastri (1955) 1 SCR 448, this Court
\nstruck down Section 5(4) of the Taxation on Income (Investigation
\nCommission) Act, 1947 on the ground that the procedure prescribed
\nwas substantially more prejudicial and more drastic to the assessee
\nthan the procedure contained in the Indian Income Tax Act, 1922.
\nSection 5(4) of the aforesaid Act was thus struck down as a piece of
\ndiscriminatory legislation offending against the provisions of Article 14
\nof the Constitution of India.
\n15. Instances of taxation statutes being struck down on substantive
\ngrounds which had alleged discrimination can be found in the 5-Judge
\ndecision of this Court in Kunnathat Thatehunni Moopil Nair v. State
\nof Kerala (1961) 3 SCR 77, in which a uniform tax called \u201cbasic tax\u201d
\nlevied under the provisions of the Travancore Cochin Land Tax Act,
\n1955 was held to be discriminatory as it treated unequals equally. The
\nCourt held:
\n\u201cOrdinarily, a tax on land or land revenue is assessed
\non the actual or the potential productivity of the land
\nsought to be taxed. In other words, the tax has
\nreference to the income actually made, or which could
\nhave been made, with due diligence, and, therefore, is
\nlevied with due regard to the incidence of the taxation.
\nUnder the Act in question we shall take a hypothetical
\ncase of a number of persons owning and possessing
\nthe same area of land. One makes nothing out of the
\nland, because it is arid desert. The second one does
\nnot make any income, but could raise some crop after
\na disproportionately large investment of labour and
\n21
\ncapital. A third one, in due course of husbandry, is
\nmaking the land yield just enough to pay for the
\nincidental expenses and labour charges besides land
\ntax or revenue. The fourth is making large profits,
\nbecause the land is very fertile and capable of yielding
\ngood crops. Under the Act, it is manifest that the fourth
\ncategory, in our illustration, would easily be able to
\nbear the burden of the tax. The third one may be able
\nto bear the tax. The first and the second one will have
\nto pay from their own pockets, if they could afford the
\ntax. If they cannot afford the tax, the property is liable
\nto be sold, in due process of law, for realisation of the
\npublic demand. It is clear, therefore, that inequality is
\nwrit large on the Act and is inherent in the very
\nprovisions of the taxing section. It is also clear that
\nthere is no attempt at classification in the provisions of
\nthe Act. Hence, no more need be said as to what could
\nhave been the basis for a valid classification. It is one
\nof those cases where the lack of classification creates
\ninequality. It is, therefore, clearly hit by the prohibition
\nto deny equality before the law contained in Article 14
\nof the Constitution.\u201d
\n[at page 91-92]
\nLikewise, in Union of India v. A. Sanyasi Rao (1996) 3 SCC 465, this
\nCourt struck down Section 44-AC of the Income Tax Act as being
\ndiscriminatory when only particular trades were singled out for
\ndiscriminatory treatment, reliefs under Sections 28 to 43-C of the
\nIncome Tax Act being denied only to such trades. This was done as
\nthe denial of such relief had no nexus to the object sought to be
\nachieved by the legislation and resulted in unfairness, arbitrariness
\nand denial of equality of treatment (see paragraph 22).
\n22
\n16.The other facet of Article 14 has been recently resurrected by a 5-
\nJudge Bench judgment in Shayara Bano v. Union of India (2017) 9
\nSCC 1 as follows:
\n\u201c101. It will be noticed that a Constitution Bench of this
\nCourt in Indian Express Newspapers (Bombay) (P)
\nLtd. v. Union of India [Indian Express Newspapers
\n(Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC
\n641 : 1985 SCC (Tax) 121] stated that it was settled
\nlaw that subordinate legislation can be challenged on
\nany of the grounds available for challenge against
\nplenary legislation. This being the case, there is no
\nrational distinction between the two types of legislation
\nwhen it comes to this ground of challenge under Article
\n14. The test of manifest arbitrariness, therefore, as laid
\ndown in the aforesaid judgments would apply to
\ninvalidate legislation as well as subordinate legislation
\nunder Article 14. Manifest arbitrariness, therefore, must
\nbe something done by the legislature capriciously,
\nirrationally and\/or without adequate determining
\nprinciple. Also, when something is done which is
\nexcessive and disproportionate, such legislation would
\nbe manifestly arbitrary. We are, therefore, of the view
\nthat arbitrariness in the sense of manifest arbitrariness
\nas pointed out by us above would apply to negate
\nlegislation as well under Article 14.\u201d
\n17. Judged by both these parameters, there can be no doubt that the third
\nproviso to Section 254(2A) of the Income Tax Act, introduced by the
\nFinance Act, 2008, would be both arbitrary and discriminatory and,
\ntherefore, liable to be struck down as offending Article 14 of the
\nConstitution of India. First and foremost, as has correctly been held in
\nthe impugned judgment, unequals are treated equally in that no
\ndifferentiation is made by the third proviso between the assessees who
\n23
\nare responsible for delaying the proceedings and assessees who are
\nnot so responsible. This is a little peculiar in that the legislature itself
\nhas made the aforesaid differentiation in the second proviso to Section
\n254(2A) of the Income Tax Act, making it clear that a stay order may
\nbe extended upto a period of 365 days upon satisfaction that the delay
\nin disposing of the appeal is not attributable to the assessee. We have
\nalready seen as to how, as correctly held by Narang Overseas
\n(supra), the second proviso was introduced by the Finance Act, 2007
\nto mitigate the rigour of the first proviso to Section 254(2A) of the
\nIncome Tax Act in its previous avatar. Ordinarily, the Appellate
\nTribunal, where possible, is to hear and decide appeals within a period
\nof four years from the end of the financial year in which such appeal is
\nfiled. It is only when a stay of the impugned order before the Appellate
\nTribunal is granted, that the appeal is required to be disposed of within
\n365 days. So far as the disposal of an appeal by the Appellate Tribunal
\nis concerned, this is a directory provision. However, so far as vacation
\nof stay on expiry of the said period is concerned, this condition
\nbecomes mandatory so far as the assessee is concerned. The object
\nsought to be achieved by the third proviso to Section 254(2A) of the
\nIncome Tax Act is without doubt the speedy disposal of appeals before
\nthe Appellate Tribunal in cases in which a stay has been granted in
\nfavour of the assessee. But such object cannot itself be discriminatory
\n24
\nor arbitrary, as has been felicitously held in Nagpur Improvement
\nTrust v. Vithal Rao (1973) 3 SCR 39 as follows:
\n\u201cIt is now well-settled that the State can make a
\nreasonable classification for the purpose of legislation.
\nIt is equally well-settled that the classification in order
\nto be reasonable must satisfy two tests: (i) the
\nclassification must be founded on intelligible differentia
\nand (ii) the differentia must have a rational relation with
\nthe object sought to be achieved by the legislation in
\nquestion. In this connection it must be borne in mind
\nthat the object itself should be lawful. The object itself
\ncannot be discriminatory, for otherwise, for instance, if
\nthe object is to discriminate against one section of the
\nminority the discrimination cannot be justified on the
\nground that there is a reasonable classification
\nbecause it has rational relation to the object sought to
\nbe achieved.\u201d
\n[at page 47]
\nSince the object of the third proviso to Section 254(2A) of the Income
\nTax Act is the automatic vacation of a stay that has been granted on
\nthe completion of 365 days, whether or not the assessee is
\nresponsible for the delay caused in hearing the appeal, such object
\nbeing itself discriminatory, in the sense pointed out above, is liable to
\nbe struck down as violating Article 14 of the Constitution of India. Also,
\nthe said proviso would result in the automatic vacation of a stay upon
\nthe expiry of 365 days even if the Appellate Tribunal could not take up
\nthe appeal in time for no fault of the assessee. Further, vacation of
\nstay in favour of the revenue would ensue even if the revenue is itself
\nresponsible for the delay in hearing the appeal. In this sense, the said
\n25
\nproviso is also manifestly arbitrary being a provision which is
\ncapricious, irrational and disproportionate so far as the assessee is
\nconcerned.
\n18. In fact, in a recent judgment of this Court in Essar Steel India Ltd.
\nCommittee of Creditors v. Satish Kumar Gupta (2020) 8 SCC 531,
\nthe word \u201cmandatorily\u201d in the 2nd proviso inserted through an
\namendment made to Section 12(3) of the Insolvency and Bankruptcy
\nCode, 2016 was struck down. This Court held:
\n\u201c124. Given the fact that timely resolution of stressed
\nassets is a key factor in the successful working of the
\nCode, the only real argument against the amendment
\nis that the time taken in legal proceedings cannot ever
\nbe put against the parties before NCLT
\nand NCLAT based upon a Latin maxim which subserves
\nthe cause of justice, namely, actus curiae neminem
\ngravabit.
\n125. In Atma Ram Mittal v. Ishwar Singh Punia [Atma
\nRam Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284] ,
\nthis Court applied the maxim to time taken in legal
\nproceedings under the Haryana Urban (Control of Rent
\nand Eviction) Act, 1973, holding: (SCC pp. 288-89,
\npara 8)
\n\u201c8. It is well settled that no man should suffer
\nbecause of the fault of the court or delay in the
\nprocedure. Broom has stated the maxim actus
\ncuriae neminem gravabit \u2014 an act of court shall
\nprejudice no man. Therefore, having regard to the
\ntime normally consumed for adjudication, the ten
\nyears’ exemption or holiday from the application of
\nthe Rent Act would become illusory, if the suit has to
\nbe filed within that time and be disposed of finally. It
\nis common knowledge that unless a suit is instituted
\nsoon after the date of letting it would never be
\ndisposed of within ten years and even then within
\n26
\nthat time it may not be disposed of. That will make
\nthe ten years holiday from the Rent Act illusory and
\nprovide no incentive to the landlords to build new
\nhouses to solve problem of shortages of houses.
\nThe purpose of legislation would thus be defeated.
\nPurposive interpretation in a social amelioration
\nlegislation is an imperative irrespective of anything
\nelse.\u201d
\n126. Likewise, in Sarah Mathew v. Institute of Cardio
\nVascular Diseases [Sarah Mathew v. Institute of Cardio
\nVascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC
\n(Cri) 721] , this Court held that for the purpose of
\ncomputing limitation under Section 468 of the Code of
\nCriminal Procedure, 1973 the relevant date is the date
\nof filing of the complaint and not the date on which the
\nMagistrate takes cognizance, applying the aforesaid
\nmaxim as follows: (SCC pp. 96-97, para 39)
\n\u201c39. As we have already noted in reaching this
\nconclusion, light can be drawn from legal maxims.
\nLegal maxims are referred to in Bharat Kale [Bharat
\nDamodar Kale v. State of A.P., (2003) 8 SCC 559 :
\n2004 SCC (Cri) 39] , Japani Sahoo [Japani
\nSahoo v. Chandra Sekhar Mohanty, (2007) 7 SCC
\n394 : (2007) 3 SCC (Cri) 388] and Vanka
\nRadhamanohari [Vanka Radhamanohari v. Vanka
\nVenkata Reddy, (1993) 3 SCC 4 : 1993 SCC (Cri)
\n571] . The object of the criminal law is to punish
\nperpetrators of crime. This is in tune with the wellknown
\nlegal maxim nullum tempus aut locus occurrit
\nregi, which means that a crime never dies. At the
\nsame time, it is also the policy of law to assist the
\nvigilant and not the sleepy. This is expressed in the
\nLatin maxim vigilantibus et non dormientibus, jura
\nsubveniunt. Chapter XXXVI CrPC which provides
\nlimitation period for certain types of offences for
\nwhich lesser sentence is provided draws support
\nfrom this maxim. But, even certain offences such as
\nSection 384 or 465 IPC, which have lesser
\npunishment may have serious social consequences.
\nThe provision is, therefore, made for condonation of
\ndelay. Treating date of filing of complaint or date of
\ninitiation of proceedings as the relevant date for
\ncomputing limitation under Section 468 of the Code
\n27
\nis supported by the legal maxim actus curiae
\nneminem gravabit which means that the act of court
\nshall prejudice no man. It bears repetition to state
\nthat the court’s inaction in taking cognizance i.e.
\ncourt’s inaction in applying mind to the suspected
\noffence should not be allowed to cause prejudice to
\na diligent complainant. Chapter XXXVI thus presents
\nthe interplay of these three legal maxims. The
\nprovisions of this Chapter, however, are not
\ninterpreted solely on the basis of these maxims.
\nThey only serve as guiding principles.\u201d
\n127. Both these judgments in Atma Ram Mittal [Atma
\nRam Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284]
\nand Sarah Mathew [Sarah Mathew v. Institute of
\nCardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1
\nSCC (Cri) 721] have been followed in Neeraj Kumar
\nSainy v. State of U.P. [Neeraj Kumar Sainy v. State of
\nU.P., (2017) 14 SCC 136 : 8 SCEC 454] , SCC paras
\n29 and 32. Given the fact that the time taken in legal
\nproceedings cannot possibly harm a litigant if the
\nTribunal itself cannot take up the litigant’s case within
\nthe requisite period for no fault of the litigant, a
\nprovision which mandatorily requires the CIRP to end
\nby a certain date \u2014 without any exception thereto \u2014
\nmay well be an excessive interference with a litigant’s
\nfundamental right to non-arbitrary treatment under
\nArticle 14 and an excessive, arbitrary and therefore
\nunreasonable restriction on a litigant’s fundamental
\nright to carry on business under Article 19(1)(g) of the
\nConstitution of India. This being the case, we would
\nordinarily have struck down the provision in its entirety.
\nHowever, that would then throw the baby out with the
\nbath water, inasmuch as the time taken in legal
\nproceedings is certainly an important factor which
\ncauses delay, and which has made previous statutory
\nexperiments fail as we have seen from Madras
\nPetrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4
\nSCC 1 : (2016) 2 SCC (Civ) 478] . Thus, while leaving
\nthe provision otherwise intact, we strike down the word
\n\u201cmandatorily\u201d as being manifestly arbitrary under Article
\n14 of the Constitution of India and as being an
\nexcessive and unreasonable restriction on the litigant’s
\n28
\nright to carry on business under Article 19(1)(g) of the
\nConstitution. The effect of this declaration is
\nthat ordinarily the time taken in relation to the corporate
\nresolution process of the corporate debtor must be
\ncompleted within the outer limit of 330 days from the
\ninsolvency commencement date, including extensions
\nand the time taken in legal proceedings. However, on
\nthe facts of a given case, if it can be shown to the
\nAdjudicating Authority and\/or Appellate Tribunal under
\nthe Code that only a short period is left for completion
\nof the insolvency resolution process beyond 330 days,
\nand that it would be in the interest of all stakeholders
\nthat the corporate debtor be put back on its feet
\ninstead of being sent into liquidation and that the time
\ntaken in legal proceedings is largely due to factors
\nowing to which the fault cannot be ascribed to the
\nlitigants before the Adjudicating Authority and\/or
\nAppellate Tribunal, the delay or a large part thereof
\nbeing attributable to the tardy process of the
\nAdjudicating Authority and\/or the Appellate Tribunal
\nitself, it may be open in such cases for the Adjudicating
\nAuthority and\/or Appellate Tribunal to extend time
\nbeyond 330 days. Likewise, even under the newly
\nadded proviso to Section 12, if by reason of all the
\naforesaid factors the grace period of 90 days from the
\ndate of commencement of the Amending Act of 2019 is
\nexceeded, there again a discretion can be exercised by
\nthe Adjudicating Authority and\/or Appellate Tribunal to
\nfurther extend time keeping the aforesaid parameters
\nin mind. It is only in such exceptional cases that time
\ncan be extended, the general rule being that 330 days
\nis the outer limit within which resolution of the stressed
\nassets of the corporate debtor must take place beyond
\nwhich the corporate debtor is to be driven into
\nliquidation.\u201d
\n19.Coming to the arguments of the learned ASG, his reliance upon
\npassages contained in M\/s M. Ramnarain (P) Ltd. v. State Trading
\nCorpn. of India Ltd. (1983) 3 SCC 75 (paragraph 16) and M.
\n29
\nJanardhana Rao v. CIT (2005) 2 SCC 324 (paragraph 14) do not
\ncarry the matter any further. In M\/s M. Ramnarain (supra) what was
\nheld in paragraph 16 was that the statutory right of appeal conferred
\non a party may be lost by application of the provisions of some law or
\nby the conduct of the party. This was held in the context of the
\nprovisions of Order XX Rule 11 of the Code of Civil Procedure, 1908,
\nwhich was held by the High Court in that case to deprive the Appellant
\nof his right to prefer an appeal against the main decree. The High
\nCourt judgment was set aside, this Court holding:
\n\u201c21. Though by virtue of the provisions of the Original
\nSide Rules of the Bombay High Court the earlier
\nappeal could be permitted to be filed without a certified
\ncopy of the decree or order, the appeal would not be
\nvalid and competent unless the further requirement of
\nfiling the certified copy had been complied with. At the
\ntime when the earlier Appeal No. 36 of 1981 had been
\nwithdrawn, the certified copy of the decree had not
\nbeen filed. The said appeal without the certified copy of
\nthe decree remained an incompetent appeal. The
\nwithdrawal of an incompetent appeal which will indeed
\nbe no appeal in the eye of law cannot in any way
\nprejudice the right of any appellant to file a proper
\nappeal, if the right of appeal is not otherwise lost by
\nlapse of time or for any other valid reason. We are,
\ntherefore, of the opinion that the provisions contained
\nin Order 20 Rule 11 of the Code do not in the facts and
\ncircumstances of the present case deprive the
\nappellant of his right to file an appeal against the
\ndecree.\u201d
\nThis judgment is distinguishable as it does not deal with the
\nconstitutional validity of an appeal provision.
\n30
\n20. Likewise, the judgment in Janardhana Rao (supra), which held that a
\nright of appeal is neither a natural nor inherent right but has to be
\nregulated in accordance with the law in force at the relevant time, the
\nconditions of the appellate provision having to be strictly fulfilled, is
\nalso a judgment which has no reference to the constitutional validity of
\nan appeal provision being assailed. In point of fact, this Court\u2019s
\njudgment in Mardia Chemicals (supra) comes nearer home when the
\nconstitutional validity of a condition for the exercise of the right of
\nappeal is assailed. This was felicitously put by this Court as follows:
\n\u201c60. The requirement of pre-deposit of any amount at
\nthe first instance of proceedings is not to be found in
\nany of the decisions cited on behalf of the respondent.
\nAll these cases relate to appeals. The amount of
\ndeposit of 75% of the demand, at the initial proceeding
\nitself sounds unreasonable and oppressive, more
\nparticularly when the secured assets\/the management
\nthereof along with the right to transfer such interest has
\nbeen taken over by the secured creditor or in some
\ncases property is also sold. Requirement of deposit of
\nsuch a heavy amount on the basis of a one-sided claim
\nalone, cannot be said to be a reasonable condition at
\nthe first instance itself before start of adjudication of the
\ndispute. Merely giving power to the Tribunal to waive or
\nreduce the amount, does not cure the inherent infirmity
\nleaning one-sidedly in favour of the party, who, so far
\nhas alone been the party to decide the amount and the
\nfact of default and classifying the dues as NPAs
\nwithout participation\/association of the borrower in the
\nprocess. Such an onerous and oppressive condition
\nshould not be left operative in expectation of
\nreasonable exercise of discretion by the authority
\nconcerned. Placed in a situation as indicated above,
\nwhere it may not be possible for the borrower to raise
\n31
\nany amount to make the deposit, his secured assets
\nhaving already been taken possession of or sold, such
\na rider to approach the Tribunal at the first instance of
\nproceedings, captioned as appeal, renders the remedy
\nillusory and nugatory.
\n61. In the case of Seth Nand Lal [1980 Supp SCC 574]
\nwhile considering the question of validity of pre-deposit
\nbefore availing the right of appeal the Court held: (SCC
\np. 590, para 22)
\n[R]ight of appeal is a creature of the statute and
\nwhile granting the right the legislature can impose
\nconditions for the exercise of such right so long as
\nthe conditions are not so onerous as to amount to
\nunreasonable restrictions rendering the right almost
\nillusory.\u201d
\n[emphasis supplied]
\nThis Court ultimately struck down Section 17(2) of the Securitisation
\nand Reconstruction of Financial Assets and Enforcement of Security
\nInterest Act, 2002 (hereinafter referred to as \u201cSARFAESI Act\u201d) holding
\nthat in the circumstances mentioned, the deposit of 75% of the amount
\nclaimed as a pre-condition to the hearing of an \u201cappeal\u201d before the
\nDebt Recovery Tribunal under Section 17 of the SARFAESI Act was
\nonerous, oppressive, unreasonable, arbitrary and hence violative of
\nArticle 14 of the Constitution of India.
\n21.The learned ASG then relied upon judgments which indicate that when
\nArticle 14 of the Constitution of India is applied to tax legislation,
\ngreater freedom in the joints must be allowed by the Court in adjudging
\nthe constitutional validity of the same. For this purpose, he relied upon
\n32
\nState of M.P. v. Bhopal Sugar Industries Ltd. (1964) 6 SCR 846. In
\nthis case, the judgment of this Court held that if the statute discloses a
\npermissible policy of taxation, the Courts will uphold it. If, however, the
\ntax was imposed deliberately with the object of differentiating between
\npersons similarly circumstanced, such tax would be liable to be struck
\ndown.
\n22.We have already seen how unequals have been treated equally so far
\nas assessees who are responsible for delaying appellate proceedings
\nand those who are not so responsible, resulting in a violation of Article
\n14 of the Constitution of India. Also, the expression \u201cpermissible\u201d policy
\nof taxation would refer to a policy that is constitutionally permissible. If
\nthe policy is itself arbitrary and discriminatory, such policy will have to
\nbe struck down, as has been found in paragraph 17 above.
\n23.The other judgment relied upon by the learned ASG is the judgment in
\nN. Venugopala Ravi Varma Rajah v. Union of India (1969) 1 SCC
\n681 (paragraph 14). This judgment speaks of a larger play in the joints
\nto legislative discretion in the matter of classification being granted
\nwhen such legislation is a tax legislation. The caveat applied in this
\nparagraph is that a taxing statute may contravene Article 14 of the
\nConstitution of India if it seeks to impose upon the same class of
\nproperty, persons, etc., something which leads to obvious inequality. It
\n33
\nis this caveat that has been applied to the third proviso to Section
\n254(2A) of the Income Tax Act.
\n24.The learned ASG then relied upon Commr. of Customs v. Dilip
\nKumar & Co. (2018) 9 SCC 1 (paragraphs 32 to 34). This judgment
\nonly reiterates the well-settled principle that in the field of taxation
\nhardship or equity has no role to play in determining eligibility to tax.
\nThe present appeals have nothing to do with determining eligibility to
\ntax. They have only to do with a frontal challenge to the constitutional
\nvalidity of an appeal provision in the Income Tax Act. Also, it is
\nimportant to remember that the golden rule of interpretation is not
\ngiven a go-by when it comes to interpretation of tax statutes. This
\nCourt in CIT v. J.H. Gotla (1985) 4 SCC 343, put it well when it said:
\n\u201c46. Where the plain literal interpretation of a statutory
\nprovision produces a manifestly unjust result which
\ncould never have been intended by the Legislature, the
\nCourt might modify the language used by the
\nLegislature so as to achieve the intention of the
\nLegislature and produce a rational construction. The
\ntask of interpretation of a statutory provision is an
\nattempt to discover the intention of the Legislature from
\nthe language used. It is necessary to remember that
\nlanguage is at best an imperfect instrument for the
\nexpression of human intention. It is well to remember
\nthe warning administered by Judge Learned Hand that
\none should not make a fortress out of dictionary but
\nremember that statutes always have some purpose or
\nobject to accomplish and sympathetic and imaginative
\ndiscovery is the surest guide to their meaning.
\n47. We have noted the object of Section 16(3) of the
\nAct which has to be read in conjunction with Section
\n34
\n24(2) in this case for the present purpose. If the
\npurpose of a particular provision is easily discernible
\nfrom the whole scheme of the Act which in this case is,
\nto counteract the effect of the transfer of assets so far
\nas computation of income of the assessee is
\nconcerned then bearing that purpose in mind, we
\nshould find out the intention from the language used by
\nthe Legislature and if strict literal construction leads to
\nan absurd result i.e. result not intended to be
\nsubserved by the object of the legislation found in the
\nmanner indicated before, and if another construction is
\npossible apart from strict literal construction then that
\nconstruction should be preferred to the strict literal
\nconstruction. Though equity and taxation are often
\nstrangers, attempts should be made that these do not
\nremain always so and if a construction results in equity
\nrather than in injustice, then such construction should
\nbe preferred to the literal construction. Furthermore, in
\nthe instant case we are dealing with an artificial liability
\ncreated for counteracting the effect only of attempts by
\nthe assessee to reduce tax liability by transfer. It has
\nalso been noted how for various purposes the business
\nfrom which profit is included or loss is set off is treated
\nin various situations as assessee’s income. The
\nscheme of the Act as worked out has been noted
\nbefore.\u201d
\n25.The law laid down by the impugned judgment of the Delhi High Court
\nin M\/s Pepsi Foods Ltd. (supra) is correct. Resultantly, the judgments
\nof the various High Courts which follow the aforesaid declaration of law
\nare also correct. Consequently, the third proviso to Section 254(2A) of
\nthe Income Tax Act will now be read without the word \u201ceven\u201d and the
\nwords \u201cis not\u201d after the words \u201cdelay in disposing of the appeal\u201d. Any
\norder of stay shall stand vacated after the expiry of the period or
\nperiods mentioned in the Section only if the delay in disposing of the
\n35
\nappeal is attributable to the assessee. The appeals of the revenue are,
\ntherefore, dismissed.
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026…………………..J.
\n[ ROHINTON FALI NARIMAN ]
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026…………………..J.
\n[ B.R. GAVAI ]
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026…………………..J.
\n[ HRISHIKESH ROY ]
\nNew Delhi;
\nApril 06, 2021.
\n36<\/p>\n","protected":false},"excerpt":{"rendered":"
Judged by both these parameters, there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India. First and foremost, as has correctly been held in the impugned judgment, unequals are treated equally in that no differentiation is made by the third proviso between the assessees who 23 https:\/\/itatonline.org are responsible for delaying the proceedings and assessees who are not so responsible. This is a little peculiar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee. We have already seen as to how, as correctly held by Narang Overseas (supra), the second proviso was introduced by the Finance Act, 2007 to mitigate the rigour of the first proviso to Section 254(2A) of the Income Tax Act in its previous avatar. Ordinarily, the Appellate Tribunal, where possible, is to hear and decide appeals within a period of four years from the end of the financial year in which such appeal is filed. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee.<\/p>\n