J.K. INDUSTRIES LTD. & ANR versus UNION OF INDIA AND ORS.

Citation: [2007] 12 S.C.R. 136 · Decided: 19-11-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed

Cited by 8 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
J.K. INDUSTRIES LTD. & ANR. 
v. 
UNION OF INDIA AND ORS. 
NOVEMBER 19, 2007 
B 
(S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.) 
~ . 
Companies (Accounting Standards) Rules, 2006: 
c 
Accounting for taxes on income-Accounting Standard 22 (AS 
22)-Adoption of-By the Rules framed by Central Government-
Challenged as being ultra vires the provisions of Companies Act so 
far as it related to 'deferred taxation; and as being in excess of the 
powers conferred upon Central Government-Held: Rule is neither 
D ultra vires nor inconsistent with the provisions of the Companies Act-
Rules and the Act form part of the composite scheme-Rules are 
;. 
supplementary to the Act and constitute a legitimate aid to the 
construction of the provisions of the Act-Rules also not suffering from 
the vice of excessive delegation-Companies Act, 1956-ss. 209, 
E 211 (3A) and (3C), 641, 642, Schedule VI Parts I and II. 
Accounting Standard 22-Provisions relating to 'deferred 
taxation '-Whether violative of Articles 14 and 19(J)(g) of the 
Constitution-Question left open-Constitution of India, 1950-
Articles 14 and 19(1)(g). 
F 
Companies Act, 1956-s. 642(1)-Rule making power of Central 
Government-Scope of 
Delegated Legislation-Scope of-Held: Valid only when it is 
confined to legislative policy and guidelines. 
G 
Doctrines/ Principles-Doctrine of ultra vires-Applicability of 
Words and Phrases-- 'delegated legislation '-Meaning of 
1-
~ 
Accounting Standard 22 (AS 22) titled as "Accounting for taxes 
H 
136 
) 
J.K. INDUSTRIES LTD. v. UNION OF INDIA 
137 
on income", issued by Institute of Chartered Accountants in 2001 A 
had been made mandatory for all companies listed in stock 
Exchanges oflndia in preparation of their accounts for the fmancial 
year 2001-02 onwards. Central Government by a Notification dated 
7.12.2006 prescribed AS 22 u/s 211 (3Q of the Companies Act, 1956, 
in consultation with National Advisory Committee on Accounting B 
Standards, by enacting Companies (Accounting Standards) Rules, 
2006. 
In the present appeals AS 22 was challenged, alleging that it 
was inconsistent with and ultra vires the provisions of Companies 
Act, 1956, Income Tax Act, 1961 and the Constitution oflndia, 1950, C 
insofar as it.relates to deferred taxation. 
The questions for determination before this Courtwer_e: 
1. Whether Companies (Accounting Standards) Rules, 2006, 
-' 
adopting AS 22 was in excess of the powers conferred upon Central D 
Government u/s 642 (1) of the Companies Act, 1956? 
2. Whether AS 22 was inconsistent with the provisions of 
Companies Act, 1956? 
Dismissing the appeals, the Court 
HELD: 1.1. Notification dated 7.12.2006 or Companies 
(Accounting Standards) Rules, 2006, does not suffer from the vice 
of excessive delegation. [Para 56) (265-C) 
E 
1.2. On account of globalization and socio-economic problems, F 
the power of delegation has become a consituent element of 
legislative powers as a whole. Subordinate legislation does not carry 
the same degree of immunity which is enjoyed by a statute passed 
by a competent Legislature. Subordinate legislation may be 
questioned on any of the grounds on which plenary legislation is G 
questioned. In addition, it may also be questioned on the ground that 
it does not conform to the statute under which it is made. It may 
further be questioned on the ground that it is inconsistent with the 
provisions of the Act or that it is contrary to some other statute 
H 
138 
SUPREME COURT REPORTS 
[2007] 12 S.C.R. 
A applicable on the same subject matter. Therefore, it has to yield to 
plenary legislation. It can also be questioned on the ground that it is 
lllanifestly arbitrary and unjust. That, any inquiry into its vires must 
be confined to the grounds on which plenary legislation may be 
questioned, to the grounds that it is contrary to the statute under 
B which it is made, to the grounds that it is contrary to other statutory 
provisions or on the ground that it is so patently arbitrary that it 
¢annot be said to be inconformity with the statute. It can also be 
¢hallenged on the ground that it violates Article 14 of the 
Constitution. Subordinate legislation cannot be questioned on the 
C ground of violation of principles of natural justice on which 
administrative action may be questioned. A distinction must, 
bowevcr, be made between delegation of a legislative function in 
which case the question of reasonableness cannot be gone into and 
the investment by the statute to exerci

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