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The Principal Commissioner of Income Tax-8 v. M/s Yes Bank Ltd.

Civil Appeal · 2019 INSC 392Decided 15 Mar 2019
Civil Appeal No. 3148 of 2019
Justice Abhay Manohar Sapre · Justice Dinesh Maheshwari

Background

During assessment proceedings for Assessment Year 2007-2008, a dispute arose over whether the respondent bank was entitled to a tax deduction under Section 35-D of the Income Tax Act as an "industrial undertaking." After conflicting rulings by the Assessing Officer, the Commissioner, and the Income Tax Appellate Tribunal, the Revenue's appeal to the Bombay High Court under Section 260-A was dismissed without the High Court ever framing or deciding the actual substantial question of law involved.

Decision Breakdown

The Supreme Court allowed the Revenue's appeal and set aside the High Court's order, but did not decide the underlying tax question itself. It held that the High Court had erred procedurally by dismissing the appeal without first framing a substantial question of law as mandatorily required under Section 260-A, and without deciding the core issue of Section 35-D's applicability to the bank. Noting that a related appeal on the same Section 35-D issue was already pending before the High Court at the respondent's instance, the Supreme Court remanded the matter to the High Court to decide both appeals together on merits, after properly framing the substantial questions of law, expressly refraining from expressing any opinion on the merits itself.

Lesson Learnt

An appellate court hearing a tax appeal under Section 260-A must formally frame the substantial question(s) of law before deciding the case; skipping this step can result in the appeal being sent all the way back for a fresh decision, even after years of litigation.

Official source (sci.gov.in)View Judgment (PDF)

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