Full Judgment Text
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3821 OF 2020
(Arising from S.L.P.(Civil) No.10613/2020)
M/s Tamil Nadu State Marketing
Corporation Ltd. …Appellant
Versus
Union of India and others …Respondents
J U D G M E N T
M.R. SHAH, J.
1. Leave granted.
2. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 11.03.2020 passed by the High Court
of Judicature at Madras in Writ Petition No. 6284 of 2020, by
which the High Court has not entertained the said writ petition at
Signature Not Verified
Digitally signed by
MEENAKSHI KOHLI
Date: 2020.11.25
16:40:03 IST
Reason:
this stage and consequently has dismissed the said writ petition
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without deciding the issue involved in the writ petition on merits,
the original writ petitioner has preferred the present appeal.
3. That the appellant herein – original writ petitioner filed the
aforesaid writ petition before the High Court challenging the
validity of Section 40(a)(iib) of the Income Tax Act, 1961. It was
the case on behalf of the original writ petitioner that the amount
which is deductible in computing the income chargeable in terms
of the Income Tax Act is not being allowed under the garb of the
aforesaid provision. According to the original writ petitioner, the
said provision is discriminatory and violative of Article 14 of the
Constitution of India, inasmuch as there are many Central
Government undertakings which have not been subjected to any
such computation of income tax and are enjoying exemption.
At this stage it is required to be noted that a show cause
notice was issued by the assessing officer for the Assessment
Year 201718 stating that the VAT expense levied on the
appellant is an exclusive levy by the State Government and
therefore squarely covered by Section 40(a)(iib) of the Income Tax
Act and therefore VAT expenditure is not allowable as deduction
in accordance with Section 40(a)(iib) of the Income Tax Act, while
computing the income of the appellant. That the assessing
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officer finalised the assessment and passed the assessment order
for the Assessment Year 201718 vide order dated 30.12.2019.
3.1 The High Court vide judgment and order dated 26.02.2020
in Writ Petition No. 538 of 2020 set aside the assessment order
dated 30.12.2019 insofar as disallowance in terms of Section
40(a)(iib), on the ground of violation of principles of natural
justice. Thus, the matter was pending before the assessing
officer. The appellant thereafter filed the present writ petition No.
6284 of 2020 before the High Court challenging the vires of
Section 40(a)(iib) of the Income Tax Act being ultra vires Articles
14, 19 and 265 of the Constitution of India. By the impugned
judgment and order, as observed hereinabove, the High Court
has dismissed the said writ petition without deciding the validity
of Section 40(a)(iib) of the Income Tax Act by observing that the
issue of raising a challenge to the vires of the provision at this
stage need not be entertained as the matter is still sub judice
before the Income Tax Authority, even though it is open to the
aggrieved party to question the same at the appropriate moment.
3.2 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court in dismissing the
said writ petition, without deciding the vires of Section 40(a)(iib)
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of the Income Tax Act on merits, the original writ petitioner – M/s
Tamil Nadu State Marketing Corporation Limited has preferred
the present appeal.
4. Having heard Shri Rakesh Dwivedi, learned Senior Advocate
appearing on behalf of the appellant and Shri K.M. Natraj,
learned Additional Solicitor General appearing on behalf of the
Union of India and others and considering the impugned
judgment and order passed by the High Court by which the High
Court has dismissed the said writ petition without deciding the
vires of Section 40(a)(iib) of the Income Tax Act on merits, we are
of the firm opinion that the impugned judgment and order passed
by the High Court is not sustainable at all.
5. When the vires of Section 40(a)(iib) of the Income Tax Act
were challenged, which can be decided by the High Court alone
in exercise of powers under Article 226 of the Constitution of
India, the High Court ought to have decided the issue with regard
to vires of Section 40(a)(iib) on merits, irrespective of the fact
whether the matter was sub judice before the Income Tax
Authority. Vires of a relevant provision goes to the root of the
matter. The High Court has observed that the issue of raising a
challenge to the vires of the provision at this stage need not be
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entertained, as the matter is still sub judice before the Income
Tax Authority, even though it is open to the aggrieved party to
question the same at the appropriate moment. Once the show
cause notice was issued by the assessing officer calling upon the
appellant – assessee to show cause why the VAT expenditure is
not allowable as deduction in accordance with Section 40(a)(iib)
of the Income Tax Act, while computing the income of the
appellant, it can be said that the cause of action has arisen for
the appellant to challenge the vires of Section 40(a)(iib) of the
Income Tax Act and the appellant may not have to wait till the
assessment proceedings before the Income Tax Authority are
finalised. The stage at which the appellant approached the High
Court and challenged the vires of Section 40(a)(iib) of the Income
Tax Act can be said to be an appropriate moment. Therefore, the
High Court ought to have decided the issue with respect to the
challenge to the vires of Section 40(a)(iib) of the Income Tax Act
on merits. The High Court has failed to exercise the powers
vested in it under Article 226 of the Constitution of India by not
deciding the writ petition on merits and not deciding the
challenge to the vires of Section 40(a)(iib) of the Income Tax Act
on merits.
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6. In view of the above and as the High Court has not decided
the issue with respect to vires of Section 40(a)(iib) of the Income
Tax Act on merits, the matter is required to be remanded to the
High Court to decide the writ petition on merits and decide the
question with respect to challenge to the vires of Section 40(a)(iib)
of the Income Tax Act on merits.
7. In view of the above and for the reasons stated above, the
present appeal succeeds. The impugned judgment and order
passed by the High Court is hereby quashed and set aside and
the matter is remitted to the High Court to decide the writ
petition on merits with respect to challenge to the vires of Section
40(a)(iib) of the Income Tax Act. However, it is made clear that
we have not expressed any opinion on merits with respect to
legality and validity of Section 40(a)(iib) of the Income Tax Act
and we have remanded the matter on the aforesaid ground alone.
8. The appeal is accordingly allowed. No order as to costs.
……………………………………..J.
[ASHOK BHUSHAN]
……………………………………..J.
[R. SUBHASH REDDY]
NEW DELHI; ……………………………………..J.
NOVEMBER 25, 2020. [M.R. SHAH]
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