DEPUTY COMMISSIONER OF INCOME TAX & ANR. versus M/S. PEPSI FOODS LTD. (NOW PEPSICO INDIA HOLDINGS PVT. LTD.)

Citation: [2021] 4 S.C.R. 1 · Decided: 06-04-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Dismissed

Cited by 7 judgment(s) · cites 12 · see the full citation network in Lexace

Judgment (excerpt)

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   [2021] 4 S.C.R. 1
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DEPUTY COMMISSIONER OF INCOME TAX & ANR.
v.
M/S. PEPSI FOODS LTD.
(NOW PEPSICO INDIA HOLDINGS PVT. LTD.)
(Civil Appeal No. 1106 of 2021)
APRIL 06, 2021
[ROHINTON FALI NARIMAN, B. R. GAVAI AND
HRISHIKESH ROY, JJ. ]
Income Tax Act, 1961: s. 254(2A) third proviso – Provision
as regards appellate tribunal granting stay – Third proviso providing
for automatic vacation of a stay that has been granted on the
completion of 365 days, whether or not the assessee is responsible
for the delay caused in hearing the appeal – Constitutional validity
of – Held: Third proviso to s. 254(2A), is both arbitrary and
discriminatory and, thus, liable to be struck down as offending Art.
14 – Unequals are treated equally – No differentiation is made by
the third proviso between the assessees who are responsible for
delaying the proceedings and assessees who are not so responsible
– Also, the said proviso would result in the automatic vacation of a
stay upon the expiry of 365 days even if the Appellate Tribunal
could not take up the appeal in time for no fault of the assessee –
Further, vacation of stay in favour of the revenue would ensue even
if the revenue is itself responsible for the delay in hearing the appeal
– Thus, the Third proviso to s. 254(2A) will now be read without the
word “even” and the words “is not” after the words “delay in
disposing of the appeal” – Any order of stay shall stand vacated
after the expiry of the period or periods mentioned in the Section
only if the delay in disposing of the appeal is attributable to the
assessee – Constitution of India – Art.14.
Tax/Taxation:
Tax statutes – Challenge to tax statutes u/Art. 14 – Grounds
for challenge – Held: Can be on grounds relatable to discrimination
as well as grounds relatable to manifest arbitrariness, which may
be procedural or substantive in nature – Constitution of India –
Art.14.
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SUPREME COURT REPORTS
[2021] 4 S.C.R.
Tax statutes – Interpretation of – Golden rule of interpretation
– Significance of – Held: Golden rule of interpretation cannot be
ignored while interpreting tax statutes.
Dismissing the appeals, the Court
HELD: 1.1 The third proviso to Section 254(2A) of the
Income Tax Act, introduced by the Finance Act, 2008, would be
both arbitrary and discriminatory and, therefore, liable to be struck
down as offending Article 14 of the Constitution of India. First
and foremost, it is correctly held in the impugned judgment, that
unequals are treated equally in that no differentiation is made by
the third proviso between the assessees who are responsible for
delaying the proceedings and assessees who are not so
responsible. This is a little peculiar in that the legislature itself
has made the said differentiation in the second proviso to Section
254(2A) of the Income Tax Act, making it clear that a stay order
may be extended upto a period of 365 days upon satisfaction that
the delay in disposing of the appeal is not attributable to the
assessee. [Para 17][21-B-D]
1.2 The second proviso was introduced by the Finance Act,
2007 to mitigate the rigour of the first proviso to Section 254(2A)
of the Income Tax Act in its previous avatar. Ordinarily, the
Appellate Tribunal, where possible, is to hear and decide appeals
within a period of four years from the end of the financial year in
which such appeal is filed. It is only when a stay of the impugned
order before the Appellate Tribunal is granted, that the appeal is
required to be disposed of within 365 days. So far as the disposal
of an appeal by the Appellate Tribunal is concerned, this is a
directory provision. However, so far as vacation of stay on expiry
of the said period is concerned, this condition becomes mandatory
so far as the assessee is concerned. The object sought to be
achieved by the third proviso to Section 254(2A) of the Income
Tax Act is without doubt the speedy disposal of appeals before
the Appellate Tribunal in cases in which a stay has been granted
in favour of the assessee. But such object cannot itself be
discriminatory or arbitrary. [Para 17][21-D-G]
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Nagpur Improvement Trust v. Vithal Rao [1973] 3 SCR
39 – relied on.
Narang Overseas Pvt. Ltd. v. ITAT (2007) 295 ITR 22
– approved.
1.3 Since the object of the third proviso to Section 254(2A)
of the Income Tax Act is the automatic vacation of a stay that has
been granted on the completion of 365 days, whether or not the
assessee is responsible for the delay caused in hear

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