M. JANARDHANA RAO versus JOINT COMMISSIONER OF INCOME TAX

Citation: [2005] 1 S.C.R. 874 · Decided: 28-01-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Disposed off
Cited by 1 judgment(s) · see the full citation network in Lexace
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

A 
M. JANARDHANA RAO 
v. 
JOINT COMMISSIONER OF INCOME TAX 
JANUARY 28, 2005 
B 
[RUMA PAL, ARIJIT PASA YAT AND C.K. THAKKER, JJ.) 
Income Tax Act, 1961; Section 260-A : 
Appeal under Section 260-A-Procedural requirements-Held : High 
C Court not empowered to decide an appeal without following due procedure 
prescribed therefor-Since High Court disposed of the appeal without 
formulating and determining question of law at admission stage, matter remitted 
to the High Court for deciding it afresh strictly following the procedural 
requirements of Section 260-A. 
D 
Question of law vis-a-vis substantial question of law-Distinction 
1
between. 
Right of appeal-Regulations of 
The question which arose for determination in these appeals were 
E as to whether High Court is empowered to dispose of an appeal filed under 
Section 260-A of the Income Tax Act without formulating a question of 
law at the stage of admission and disposing it of without determining as 
to whether the question formulated was substantial question of law. 
However, the basic dispute/issue came befor:! the High Court for 
F determination was relating to Income tax liability on the amount received 
by the assessees/partners out of the sale proceeds of assets of a dissolved 
firm. 
It was contended by the appellant-assessees that the arguments raised 
by them relating to non-applicability of the principle of slump sale were 
G not considered by the High Court; that before amendment of Section SOB 
of the Income Tax Act by Finance Act, 1999 there was no scope for levying 
any tax under the heading 'capital gain'; and that no question was 
formulated by the High Court at the admission stage, however, the 
questions were formulated by the High Court for the purpose of 
H 
874 
M..l. RAOv. JOINTCOMMR. OF INCOME TAX 
875 
adjudicating the appeals. 
Disposing of the appeals, the Court 
HELD : I.I. An appeal under Section 260A of the Income Tax Act 
to the High Court lies only when a substantial question of law is involved. 
A 
It is essential for the High Court to first formulate question of law and B 
thereafter proceed in the matter. (880-A] 
J 
1.2. The High Court is not empowered to generally decide an appeal 
under Section 260A of the Act without adhering to the procedure 
prescribed thereunder. Further, the High Court must make every effort 
to distinguish between a question of law and a substantial question of law. C 
In exercise of powers under this Section, the findings of fact of the Tribunal 
cannot be disturbed. (880-B] 
Sir Chunilal V. Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd, 
AIR (1962) SC 1314, referred to. 
D 
1.3. Right of appeal is neither a natural nor an inherent right 
attached to the litigation. Being a substantive statutory right, it has to be 
regulated in accordance with law in force at the relevant time. The 
conditions mentioned in Section 260A of the Act must be strictly fulfilled 
before an appeal can be maintained under the Section. Such appeal cannot E 
be decided on merely equitable grounds. (880-C-DI 
.2. In the instant case, no substantial question of law was formulated 
at the time of admission of the appeal. Obviously, the High Court has 
formulated questions subsequently after conclusion of arguments for the 
purpose of adjudication. That is clearly against the scheme of Section 260A F 
of the Act. Additionally, certain points which were urged have not been 
dealt with by the High Court. Hence, the matter is remitted to the High 
Court for re-determination of the matter afresh keeping in view the 
prescriptions of Section 260-A of the Act. However, it is clarified that no 
opinion is expressed on the merits of the case. (880-G-H; 881-AI 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4232 of2003. 
From the Judgment and Order dated 19.12.2002 of the Karnataka High 
Court in LT.A. No. 137 of 2000. 
G 
H 
A 
876 
SUPREME COURT REPORTS 
[2005] I S.C.R. 
WITH 
C.A. Nos. 4242, 4237, 4233-34, 4235-36, 4240-41, 4238-39/2003, 761-
64, 755-56/2005, 5322/2003, 757-760, 765-66 of 2005. 
R.F. Nariman, S. Ganesh, Harish N. Salve, Joseph Vellapally, M.L. 
B Venna, Dhruv Mehta, A.A. Kulkarni, Mohit Chaudhary, Harsh Vardhan Jha, 
Gopal Jain, Ashok Kulkarni, Mahesh Agarwal, Ms. Dhanalakshmi, E.C. 
Agrawala, Manu Nair, Dhruv Dewan, Preetish Kapur, Satya Mitra and B.V. 
Balaram Das for the appearing parties. 
c 
The Judgment of the Court was delivered by 
ARIJIT PASAYAT, J. Leave granted in SLP (C) Nos. 13009-13012/ 
2003, 13021-
Excerpt shown. Read the full judgment & AI analysis in Lexace.