Case Note & Summary
The Supreme Court allowed the appeal filed by the Principal Commissioner of Income Tax-8 against the judgment of the Bombay High Court dated 01.08.2017 in ITA No.599/2015. The dispute arose during assessment proceedings for the Assessment Year 2007-2008 concerning whether the respondent, Yes Bank Ltd., was entitled to claim deduction under Section 35D of the Income Tax Act, 1961 as an industrial undertaking. The Assessing Officer passed an order on 31.10.2009, which led to proceedings before the Commissioner under Section 263, resulting in an adverse order on 14.11.2011. The respondent appealed to the ITAT, which allowed the appeal on 05.12.2014. The Revenue then appealed to the High Court under Section 260A. The High Court dismissed the appeal without framing any substantial question of law and without deciding the issue of applicability of Section 35D, merely stating that it was not necessary to decide the issue. The Supreme Court found that the High Court failed to comply with the mandatory requirement under Section 260A to frame substantial question(s) of law before deciding the appeal. The Court noted that the main issue regarding the applicability of Section 35D to the respondent-bank was left undecided, and that another appeal on the same issue was pending before the High Court. Consequently, the Supreme Court set aside the impugned order and remanded the case to the High Court for fresh decision on merits after framing proper substantial question(s) of law, directing that both appeals be decided together if pending. The Court expressly refrained from expressing any opinion on the merits of the case.
Headnote
A) Income Tax - Appeal to High Court - Substantial Question of Law - Section 260A, Income Tax Act, 1961 - High Court dismissed Revenue's appeal without framing any substantial question of law, though it heard the appeal bipartite - Held that High Court must frame substantial question(s) of law and decide them, failing which the order is not legally sustainable (Paras 12-14). B) Income Tax - Deduction under Section 35D - Applicability to Banks - Section 35D, Income Tax Act, 1961 - The main issue was whether the respondent-bank, being an industrial undertaking, is entitled to claim deduction under Section 35D - High Court left the issue undecided - Held that the High Court should have framed the substantial question of law on this issue and answered it (Paras 13-14). C) Income Tax - Remand - Failure to Decide - Section 260A, Income Tax Act, 1961 - Supreme Court set aside the High Court's order and remanded the case for fresh decision after framing proper substantial question(s) of law, and directed that if another appeal on the same issue is pending, both should be decided together (Paras 15-17).
Issue of Consideration
Whether the High Court was justified in dismissing the Revenue's appeal under Section 260A of the Income Tax Act, 1961 without framing any substantial question of law and without deciding the issue of applicability of Section 35D to the respondent-bank.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned order of the High Court, and remanded the case to the High Court for fresh decision on merits in accordance with law after framing proper substantial question(s) of law. The Court directed that if another appeal on the same issue is pending, both should be decided together. No opinion was expressed on the merits of the case.
Law Points
- Section 260A of the Income Tax Act
- 1961 requires High Court to frame substantial question of law before deciding appeal
- Remand for non-compliance with Section 260A
- Section 35D deduction applicability to banks as industrial undertaking
