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Commissioner of Income-tax Vs. Warner Hindustan Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberS.C.L. Petition No. 223 of 1985
Judge
Reported in[1987]165ITR692(AP)
ActsIncome Tax Act, 1961 - Sections 261
AppellantCommissioner of Income-tax
RespondentWarner Hindustan Ltd.
Appellant AdvocateM. Suryanarayana Murthy, Adv.
Respondent AdvocateV. Suryanarayana Murthy, Adv.
Excerpt:
.....of law still requires determination by supreme court - high court has to state reasons for grant of certificate but once certificate granted and appeal filed pursuant to it - there is no restriction either upon scope of appeal or jurisdiction of appellate court - held, it is a fit case as application for certificate has been made with in time prescribed and appeal by certificate is only remedy for party to get judgment of court. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has..........to the provisions of sections 109(c) and 110 of the code of civil procedure, which provide for grant of certificate for appeal in civil matters. value of the subject-matter was one of the criteria for grant of a certificate. in a judgment of affirmance by the high court in appeal, it was necessary that the proposed appeal must involve some substantial questions of law. a certificate could also be granted by the court if the case was (otherwise) fit for appeal. the privy council held that unless the order granting a certificate under section 66a(2) shows that a substantial question of law arose, the certificate itself would be invalid. 8. in radha krishna das v. rai krishna chand [1901] 28 ind app 182 the appeal was on a certificate under the code of civil procedure in a civil matter......
Judgment:

Upendra Lal Waghray, J.

1. After hearing counsel for the parties on June 14, 1985, on this application by the Revenue, we had come to a conclusion that this is a fit case on which a certificate shall issue under section 261 of the Income-tax Act for appeal to the Supreme Court of India. However, the submissions of counsel for the Revenue raised a doubt whether a certificate could be issued confining it to some of the questions only in the case. The matter was posted for being mentioned on July 5, 1985, and July 12, 1985.

2. We have heard counsel for the parties further on the question whether the certificate to be issued can be restricted to some questions only or it will relate to the judgment in the case referred

3. Nineteen questions relating to the assessment years 1970-71 and 1971-72 were referred by the Tribunal for the opinion of the High Court, questions Nos. 1 to 7 at the instance of the Revenue and questions Nos. 8 to 16 at the instance of the assessee. Four were answered in favour of the Revenue and thirteen in favour of the assessee. In view of the decisions on these, two questions were considered as academic. In its application, the Revenue has canvassed the correctness of answers in respect of only 14 questions, viz., 1 to 5, 7 to 11, 14, 16, 17 and 19 (thirteen answered against it and one considered academic) and requested for the issue of a certificate. The assessee has not applied for a certificate. Ten questions, viz., 2 to 5, 8, 9, 11, 16, 17 and 19 relate to relief under section 80J of the Act read with rule 19A. Following the earlier judgment of this court and also of other High Courts, we held that the retrospective effect given to the amended rule 19A was ultra vires. Some other points regarding interpretation and applicability of the provisions of section 80J and rule 19A were also decided. Relief under other provisions of section Act is involved in the remaining questions. After our decision, the Supreme Court, in its judgment in Lohia Machines v. Union of India : [1985]152ITR308(SC) , held that rule 19A as amended is not ultra vires. In view of this Supreme Court decision, our decision holding rule 19A as ultra vires cannot be said to be correct. Apart from an appeal on certificate under section 261, there is no statutory remedy for a party to have the effect of a judgment in reference rectified in such a situation. This itself is reason enough for the issued of a certificate under section 261.

4. Counsel for the Revenue has also urged that in respect of several questions involving interpretation of section 80J and rule 19A, there is no decision of the Supreme Court and they involve important questions of general application. He has, however, not disputed that the questions regarding depreciation for a well and computation of perquisites, viz., questions Nos. 1 and 7, do not raise substantial questions of law. The computation of capital employed for the purpose of grant of relief under section 80J read with rule 19A in this case involves questions of law which arises in a large number of cases and there is no decision of the Supreme Court on those aspects. In our opinion, this is a fit case in which a certificate for appeal under section 261 shall issue. Is it necessary, even after reaching a conclusion that this is a case for issue of a certificate to consider each question and record reasons as to whether a substantial question of law is involved in any case and restrict the certificate only to those questions

5. Counsel for the Revenue has urged that section 261 of the Act ought not to be read in isolation, but in the context of section 256. According to him, as only questions of law are referred under it and decided, a certificate of fitness for appeal should be in respect of those which involve substantial questions of law that fall for consideration by the Supreme Court. He has relied upon two cases of the Supreme Court in CIT v. Krishna & Sons : [1968]70ITR733(SC) and India Machinery Stores P. Ltd. v. CIT : [1970]78ITR50(SC) . In the earlier case, the Supreme Court held that in the absence of a question in the statement of case of reference by the Tribunal to the High Court, it was not open to any party to urge that matter before the Supreme Court. The ratio of this case does not help in resolving the controversy before us. The Supreme Court in India Machinery Stores P. Ltd. v. CIT : [1970]78ITR50(SC) has considered the scope of section 66A(2) of the Indian Income-tax Act, 1922, which is identical in language to section 261 of the present Act. That case was decided by the Supreme Court in 1970 when article 133 of the Constitution of India had not undergone any amendments and its provisions for grant of a certificate in civil matters were similar to those in sections 109 and 110 of the Code of Civil Procedure, 1908. It has referred to several decisions of the Privy Council and observed that a reference before the High Court is not questions of law, and, therefore, grant of a certificate in a case, merely because a question of law is involved, would make every case a fit one for appeal. It held that where in the proposed appeal, a question of great public or private importance arises, there is right to a certificate.

6. The various Privy Council cases referred to by the Supreme Court may be noticed.

7. In Delhi Cloth and General Mills Co. Ltd. v. CIT, , the Privy Council referred to the provisions of sections 109(c) and 110 of the Code of Civil Procedure, which provide for grant of certificate for appeal in civil matters. Value of the subject-matter was one of the criteria for grant of a certificate. In a judgment of affirmance by the High Court in appeal, it was necessary that the proposed appeal must involve some substantial questions of law. A certificate could also be granted by the court if the case was (otherwise) fit for appeal. The Privy Council held that unless the order granting a certificate under section 66A(2) shows that a substantial question of law arose, the certificate itself would be invalid.

8. In Radha Krishna Das v. Rai Krishna Chand [1901] 28 Ind App 182 the appeal was on a certificate under the Code of Civil Procedure in a civil matter. The Privy Council held that the certificate was defective as it could not be issued on the basis of valuation and order granting it did not disclose that the judges had exercised their discretion in deciding whether the case was otherwise fit for appeal.

9. In the case reported in Radhakrishna Aiyer v. Swaminatha Aiyer, AIR 1921 PC 25 though the value of the appeal was less than the requirement laid down in the Code of Civil Procedure, the High Court had granted a certificate without stating the question of law that was involved and the certificate was held to be defective.

10. The Privy Council in CIT v. S. M. Chitnavis observed that for the grant of a certificate under section 66A(2) of the Indian Income-tax Act, 1922, there must question affecting not only a particular assessee and depending upon the state of the evidence in a particular case, but a question of great public importance affecting assessee generally, and depending upon general principles.

11. In the case before the Supreme Court, the High Court had certified that it was a fit case for appeal to the Supreme Court without giving any reasons. The Supreme Court, after referring to the aforesaid Privy Council cases and article 133 of the Constitution of India, observed that, in certifying a case under the Income-tax Act as a fit one for appeal, the High Court shall set out the question of law which they regard as of great public or private importance which falls to be decided by the Supreme Court. The decision of the Supreme Court or any of the decisions of the Privy Council referred to, have not held that the certificate or the scope of the appeal should be restricted to the questions considered as important by the High Court. It has, however, been held that the order granting a certificate must give reasons. The fact that a mere question of law is involved is not sufficient for grant of a certificate, but a substantial question of law requiring the decision of the Supreme Court will be a reason for the grant of a certificate.

12. Section 261 of the Income-tax Act finds a place in Chapter XX with the general heading 'Appeals and revision'. The sections in that Chapter are grouped under separate sub-headings like, Appeals to the Appellate Assistant Commissioner, Appeals to the Appellate Tribunal, Reference to the High Court and Appeals to the Supreme Court, revision to the Commissioner and thereafter a sub-heading for general matters. Section 261, providing for appeal to the Supreme Court, is in a separate sub-heading. It has not been amended (uses the language of section 66A(2) of the previous Act) and reads as follows :

'261. An appeal shall lie to the Supreme Court from any judgment of the High Court delivered on a reference made under section 256 in any case which the High Court certifies to be a fit one for appeal to the Supreme Court.'

13. The language of the section shows that necessity of a substantial question of law requiring the decision of the Supreme Court is not the sole reason for the grant of a certificate. A certificate may be issued for other reasons, apart from substantial questions of law if the case is a fit one for appeal. Of course, a mere question of law cannot be a reason and this had already been held by the Supreme Court. In the present case, the question of law regarding the validity of the retrospective effect given to rule 19A is already decided by the Supreme Court, though after the judgment in this case. Hence, it cannot be said that the said question of law still requires a determination by the Supreme Court. But, it cannot be denied that this is a fit case as the application for certificate has been made within the time prescribed and the appeal by certificate is the only remedy for a party to get the judgment of this court corrected in the light of the subsequent decisions of the Supreme Court. This is one of the areas where a case may be otherwise fit for the grant of a certificate for appeal to the Supreme Court.

14. In addition to this question about the vires of the retrospective effect given to rule 19A, the questions about computation of capital for the purpose of grant of relief under section 80J read with rule 19A which have been answered in this case involve substantial questions of law which will be affecting a large number of assessee. There are divergent views of various High Courts on these questions and there is no decision of the Supreme Court. Hence, these questions also require consideration and decision by the Supreme Court.

15. Section 261 contemplates an appeal from a judgment delivered on a reference in any case and not an appeal against individual questions. The word 'case' contemplates the reference before the High Court itself. It has also been used in section 256 of the Income-tax Act where the Appellate Tribunal is required to draw up a statement of case if it considers that the opinion of the High Court is to be obtained on certain questions of law arising out of its order. This also makes it clear that there is no warrant for the submission of counsel for the Revenue that the certificate should mention each question in respect of which the appeal could be filed. The High Court has to state the reasons for the grant of a certificate but once the certificate is granted and appeal filed pursuant to it, there will be no restriction, either in the scope of the appeal or the jurisdiction of the appellate court to deal with it.

16. In view of the above reasons, we have arrived at a conclusion that this is a case for grant of a certificate under section 261 of the Income-tax Act for the purpose of filing an appeal in the Supreme Court. A certificate shall, accordingly, issue. We make no order as to costs.


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