THE PRINCIPAL COMMISSIONER OF INCOME TAX-8 versus M/S YES BANK LTD. on 15 March 2019

Issues

6

SUPREME COURT REPORTS

[2019] 5 S.C.R.

ATHE PRINCIPAL COMMISSIONER OF INCOME TAX-8

v.

M/S YES BANK LTD.

(Civil Appeal No. 3148 of 2019)

B

MARCH 15, 2019

[ABHAY MANOHAR SAPRE AND

DINESH MAHESHWARI, JJ.]

Income Tax Act, 1961 – ss.35-D, 260-A and 263 – Issue wasCas to whether the respondent-Bank (assessee) is an industrialundertaking so as to entitle them to claim deduction u/s.35-D of the1961 Act – After the Assessing Officer passed order, adverse orderwas passed by the Commissioner – Income Tax Appellate Tribunal(ITAT) allowed the appeal filed by the respondent – Appeal by theDappellant-Revenue in the High Court u/s.260-A of the 1961 Act –Dismissed – On appeal, held: High Court did not frame anysubstantial question of law as is required to be framed u/s.260-A ofthe 1961 Act – High Court dismissed the appeal without decidingany issue arising in the case saying that it is not necessary – Mainissue involved in this appeal, as rightly taken note of by the HighECourt, was with regard to the applicability of s.35-D of the 1961Act to the respondent, it was however, not decided – Impugnedorder set aside – Issue with regard to applicability of s.35-D of the1961 Act to the respondent is already pending consideration beforethe High Court at the instance of the respondent in another appealF– Accordingly, appeal remanded to the High Court for its decisionon merits in accordance with law along with another appeal, ifpending – No opinion expressed on the merits of the case.

Allowing the appeal, the Court

GHELD: 1.1 The High Court did not frame any substantialquestion of law as is required to be framed under Section 260-Aof the Income Tax Act, 1961 though heard the appeal bipartite.In other words, the High Court did not dismiss the appeal inlimine on the ground that the appeal does not involve any H

substantial question of law. The High Court dismissed the appealwithout deciding any issue arising in the case saying that it is notnecessary. The main issue involved in this appeal, as rightlytaken note of by the High Court in para 6, was with regard to theapplicability of Section 35-D of the 1961 Act to therespondent-assessee (Bank). It was, however, not decided.[Paras 12, 13] [9-C-E]

1.2 The High Court should have framed the substantialquestion of law on the applicability of Section 35-D of the 1961Act in addition to other questions and then should have answeredthem in accordance with law rather than to leave the question(s)undecided. [Para 14] [9-E-F]

1.3 The impugned order is set aside. It was brought toCourt’s notice that the issue with regard to applicability of Section35-D of the 1961 Act to the respondent-Bank is already pendingconsideration before the High Court at the instance of therespondent in one appeal. The appeal is accordingly remandedto the High Court for its decision on merits in accordance withlaw along with another appeal, if pending, after framing propersubstantial question(s) of law arising in the case. No opinion isexpressed on the merits of the case having formed an opinion toremand the appeal to the High Court for its disposal on the meritsafresh. The High Court will accordingly decide the appealuninfluenced by any observations made in the impugned orderand this order. [Paras 15, 17, 18] [9-F-H; 10-A-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3148of 2019

From the Judgment and Order dated 01.08.2017 of the HighCourt of Judicature at Bombay in ITA No. 599 of 2015.

Vikramjit Banerjee, ASG, S. S. Roy, Ms. Seema Bengani, AnasZaidi, Mrs. Anil Katiyar, Advs. for the Appellant.

Kunal Cheema, Ajit Wagh, Advs. for the Respondent.

A

B

C

D

E

F

G

H

AThe Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. Leave granted.

2. This appeal is filed against the final judgment and order dated01.08.2017 passed by the High Court of Judicature at Bombay in ITABNo.599/2015 whereby the High Court dismissed the appeal filed by theappellant herein.

3. This appeal involves a short point as would be clear from thefacts stated infra.

4. The appellant is the Union of India (Income Tax Department)Cand the respondent-Bank is the assessee.

5. In the course of assessment proceedings of the respondent-assessee(Bank) for the Assessment Year 2007-2008, the question aroseas to whether the respondent-assessee(Bank) was entitled to claimdeduction under Section 35-D of the Income Tax Act, 1961 (for short,D“the Act”) for the Assessment Year in question. In other words, thequestion arose as to whether the respondent-Bank is an industrialundertaking so as to entitle them to claim deduction under Section 35-Dof the Act.

E6. The case of the respondent was that they, being an industrialundertaking, are entitled to claim the deduction under Section 35-D ofthe Act. The Assessing Officer passed an order dated 31.10.2009 whichgave rise to the proceedings before the Commissioner under Section263 of the Act which resulted in passing of an adverse order dated14.11.2011 by the Commissioner.F

E

7. This gave rise to filing of the appeal by the respondent beforethe ITAT against the order of the Commissioner. By order dated05.12.2014, the ITAT allowed the appeal which gave rise to filing of theappeal by the Revenue (Income Tax Department) in the High Courtunder Section 260-A of the Act.G

8. By impugned order, the High Court dismissed the appeal afterhearing both the parties giving rise to filing of this appeal by way ofspecial leave in this Court.

PRINCIPAL COMMISSIONER OF INCOME TAX-8 v.M/S YES BANK LTD. [ABHAY MANOHAR SAPRE, J.]

9. So, the short question that arises for consideration in this appeal,is whether the High Court was justified in dismissing the appellant’sappeal.

10. Having heard the learned counsel for the parties and on perusalof the record of the case, we are constrained to allow the appeal, setaside the impugned order and remand the case to the High Court fordeciding the appeal afresh on merits in accordance with law.

11. In our view, the need to remand the case to the High Court iscalled for due to the following reasons.

12. First, the High Court did not frame any substantial question oflaw as is required to be framed under Section 260-A of the Act thoughheard the appeal bipartite. In other words, the High Court did not dismissthe appeal in limine on the ground that the appeal does not involve anysubstantial question of law; Second, the High Court dismissed the appealwithout 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 takennote of by the High Court in para 6, was with regard to the applicabilityof Section 35-D of the Act to the respondent-assessee(Bank). It was,however, not decided.

14. In our view, the High Court should have framed the substantialquestion of law on the applicability of Section 35-D of the Act in additionto other questions and then should have answered them in accordancewith law rather than to leave the question(s) undecided.

15. It was brought to our notice that the issue with regard toapplicability of Section 35-D of the Act to the respondent-Bank is alreadypending consideration before the High Court at the instance of therespondent 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 impugnedorder is not legally sustainable.

AB

CD

E

F

G

A17. In view of the foregoing discussion, the appeal succeeds andis accordingly allowed. The impugned order is set aside. The appeal isaccordingly remanded to the High Court for its decision on merits inaccordance with law along with another appeal, if pending, after framingproper substantial question(s) of law arising in the case.

B

18. We have not expressed any opinion on the merits of the casehaving formed an opinion to remand the appeal to the High Court for itsdisposal on the merits afresh. The High Court will accordingly decidethe appeal uninfluenced by any observations made in the impugned orderand this order.

C

Divya Pandey

Appeal allowed.

D

E

F

G

H