REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3131 OF 2006 K. RAVEENDRANATHAN NAIR .....APPELLANT(S) VERSUS COMMISSIONER OF INCOME TAX & ANR. .....RESPONDENT(S) WITH CIVIL APPEAL NO. 3130 OF 2006 JUDGMENT A.K. SIKRI, J. By amendment in Income Tax Act, 1961 (hereinafter referred to as IT Act ) in year 1998, Section 260A was inserted providing for statutory appeal against orders passed by Income Tax Appellate Tribunal. In this very Section, under sub-section (2)(b), court fees on such appeals was also prescribed which was fixed at Rs.2,000/-. However, sub-section (2)(b) of Section 260A prescribing aforesaid Signature Not Verified Digitally signed by NEELAM GULATI fee was omitted by amendment carried out in said Act, with effect Date: 2017.08.11 15:52:24 IST Reason: from June 01, 1999. It was presumably for reason that insofar as court fee payable on such appeals are concerned, which are to be filed 2 in High Court, it is State Legislature which is competent to legislate in this behalf. 2) In State of Kerala, law of court fee is governed by Kerala Court Fees and Suits Valuation Act, 1959 (hereinafter referred to as 1959 Act ). Section 52 thereof relates to fee payable in appeals. Thus, with omission of clause (b) of sub-section (2) of Section 260A of IT Act, fee became payable on such appeals as per Section 52. State Legislature thereafter amended 1959 Act by Amendment Act of 2003 and inserted Section 52A therein, which was passed on March 06, 2003. In fact, before that Ordinance was promulgated on October 25, 2002 which was replaced by aforesaid Amendment Act, Act categorically provided that Section 52A is deemed to have come into force on October 26, 2002. As per amended provision, viz. Section 52A of 1959 Act, fee on memorandum of appeals against order of Income Tax Appellate Tribunal or Wealth Tax Appellate Tribunal is to be paid at rates specified in sub-item (c) of item (iii) of Article 3 of Schedule II. This sub-item (c) reads as under: (c) Where such income exceeds One percent of assessed two lakh rupees income, subject to maximum of ten thousand rupees. It is clear from above that fee is now payable, where such income exceeds two lakh rupees, at rate of 1% of assessed income , subject to maximum of ten thousand rupees. 3 3) question that arose for consideration before High Court in impugned judgment, against which these appeals arise, was payment of fee as per aforesaid schedule on appeals that are filed on or after October 26, 2002. As per State of Kerala, on all appeals which are filed against order of Income Tax Appellate Tribunal or Wealth Tax Appellate Tribunal on or after October 26, 2002, fee is payable as per aforesaid amended provisions. appellant herein, however, contend that in all those cases which were even pending before lower authorities, i.e. Assessing Officer, Commissioner of Income Tax (Appeals) or Income Tax Appellate Tribunal and orders were passed even before October 01, 1998, right to appeal had accrued with effect from October 01, 1998 and, therefore, such cases would be governed as on date when orders were passed by lower authorities and court fee would be payable as per unamended provisions. High Court has not accepted this plea of appellant and has held that any appeal filed on or after October 26, 2002 shall be governed by Section 52A of 1959 Act. 4) appeals are filed both by writ petitioner, whose writ has been dismissed, as well as Income Tax Department. Commissioner of Income Tax (Appeals) has not accepted decision of High Court and reason for that is obvious. Numerous appeals under Section 4 260A of IT Act are filed by Department as well and Department also gets hit by aforesaid Section 52A of 1959 Act, as interpreted by High Court. 5) Learned counsels appearing for assessee as well as Income Tax Department submitted that right of appeal is matter of substantive right and not merely matter of procedure. Therefore, this right becomes vested in party when proceedings are first initiated and before decision is given, by inferior court. Therefore, relevant date for paying court fee would be when proceedings are initiated in lowest court and not when appeal is filed in High Court. In support of this proposition, reliance is placed on judgment of this Court in Hosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh And Others1 wherein Court held as under: (i) that appellant had vested right to appeal when proceedings were initiated, i.e., in 1947, and his right to appeal was governed by law as it existed on that date; (ii) that amendment of 1950 cannot be regarded as mere alteration in procedure or alteration regulating exercise of right of appeal, but whittled down right itself, and it had no retrospective effect as Amendment Act of 1950 did not expressly or by necessary intendment give it retrospective effect, 1 1953 SCR 987 5 and appeal could not therefore be rejected for non-payment of tax in respect of which appeal was preferred. 6) In that case, Section 22(1) of Central Provinces and Berar Sales Tax Act, 1947, provided that no appeal against order of assessment should be entertained by prescribed authority unless it was satisfied that such amount of tax as appellant might admit to be due from his had been paid. This Act was amended on November 25, 1949 and Section 22(1), as amended, provided that no appeal should be admitted by said authority unless such appeal was accompanied by satisfactory proof of payment of tax in respect of which appeal had been preferred. On November 28, 1947, appellant submitted return to Sales Tax Officer, who, finding that turnover exceeded two lakh rupees, submitted case to Assistant Commissioner for disposal and latter made assessment on April 08, 1950. appellant preferred appeal on May 10, 1950 without depositing amount of tax in respect of which he had appealed. Board of Revenue was of opinion that Section 22(1), as amended, applied to case as assessment was made, and appeal was preferred, after amendment came into force, and rejected appeal. appellant in that case lost till High Court. However, this Court allowed appeal on ground that vested right had 6 accrued to appellant to file appeal in year 1947 itself when proceedings were initiated. Therefore, amendment carried out in Section 22(1) of Central Provinces and Berar Sales Tax Act, 1947 in year 1949 would not apply in case of appellant. Reference was also made to another judgment of this Court in State of Bombay v. Supreme General Films Exchange Ltd.2 In that case issue was whether in absence of provision giving retrospective effect to certain amendments to court fee payable with effect from April 01, 1954, court fee payable on appeal was payable according to law in force at time of filing of suit prior to this date or law in force at time of filing of appeal. This Court held that impairment of right of appeal by putting new restriction thereon or imposing more onerous condition is not matter of procedure only; it impairs or imperils substantive right and enactment which does so is not retrospective unless it says so expressly or by necessary intendment. 7) When proceedings originate in form of suit filed in lowest court, it is easy to ascertain that date of filing which becomes governing date for purpose of payment of court fee in respect of appeals, as vested right accrues on date of filing of initial court proceedings. How it is to be translated in tax matters? This was explained in 2 (1960) 3 SCR 640 7 Hardeodas Jagannath v. State of Assam and Others 3 by holding that appeal provisions applicable in tax matter for assessee would be one as on date of assessment and not one applicable during assessment period. For revenue appeal, same would be one as on date disputed demand is negative by appellate authority and not one applicable during period of assessment or as on date of assessment. 8) On aforesaid basis, it was argued by counsel for both assessees in these appeals that in all those cases where appeals were preferred by assessee against assessment orders, provision relating to payment of court fee which was prevailing on date of assessment would be applicable. On other hand, in those cases where Revenue preferred appeals, concerned date would be date on which disputed demand was negatived by appellate authority. It was, thus, submitted that High Court was not right in holding that in all those cases where appeals are filed in High Court, whether by assessee or Income Tax Department, after insertion of Section 52A, i.e. after October 26, 2002, fee is payable as provided under Section 52A of 1959 Act. In this hue, it was also pointed out that Section 260A of IT Act was inserted with effect from October 01, 1998 and, therefore, from this date right to file appeal in 3 (1969) 2 SCR 261 8 High Court accrued as vested right. Thus, all those proceedings where assessment orders were passed after October 01, 1998 by Assessing Officer and assessee had approached High Court by filing appeal under Section 260A of IT Act, fee as per unamended provision was payable and not under Section 52A of 1959 Act. Likewise, it was argued, in those cases where Revenue filed appeal in High Court where disputed demand was negative by appellate authority after October 01, 1998 and before October 26, 2002, court fee was payable as per unamended provision. 9) Mr. Pallav Sishodia, learned senior counsel appearing for State of Kerala, submitted that though there was no quarrel about proposition laid down in judgments cited by learned counsel for appellants, these judgments are premised on two postulates, namely: (i) there exists vested right of appeal and it accrued prior to coming into force of Section 52A of 1959 Act; and (ii) such vested right stands impaired and/or made conditional retrospectively expressly or by necessary intendment . He, thus, submitted that it was imperative to have requisite foundational facts to demonstrate aforesaid two conditions. According to him, however, issue appears academic as no assessee has come forward as aggrieved by levy of court fee under Section 52A 9 of 1959 Act in case in which appeal is filed where assessment is made and/or disputed demand in appeal is raised prior to October 26, 2002. Nor details are available of appeals filed by Income Tax or Wealth Tax Departments where assessments are reversed in part of full and/or disputed demand is quashed by Commissioner (Appeals) or Income Tax Appellate Tribunal prior to October 26, 2002, particularly number of such appeals pending before High Court of Kerala, if at all. In any case, in other appeals filed, if any, for tax demands negatived by appellate authorities prior to October 26, 2002, this issue of court fees does not appear to have been kept alive for grant of any effective relief. He cited few judgments in support of his submission that this Court should restrain itself from undertaking academic exercise and deciding issue in question. 10) We are not inclined to accept aforesaid plea inasmuch as High Court has decided issue in categorical terms. Therefore, it would be appropriate to reflect on said decision and to find out as to whether this decision is correct in law. It is different matter that after legal position is clarified, same can be applied in respect of those appeals which are covered thereby. 11) Hence, we proceed to decide legal issue involved in these appeals. 12) We may mention at outset that after referring to judgments 10 noted above even High Court in impugned judgment has accepted that right of appeal is not matter of procedure and that it is substantive right. It is also recognised that this right gets vested in litigants at commencement of lis and, therefore, such vested right cannot be taken away or cannot be impaired or imperilled or made more stringent or onerous by any subsequent legislation unless subsequent legislation said so either expressly or by necessary intendment. intention to interfere with or impair or imperil vested right cannot be presumed unless such intention be clearly manifested by express words or by necessary implication. However, High Court has still dismissed writ petition as it was of opinion that vested right of appeal conferred under Section 260A of IT Act, insofar as payment of court fee is concerned, is taken away by necessary implication. In other words, provisions of Section 52A of 1959 Act inserted by Amendment Act of 2003, in that sense, have retrospective operation thereby effecting earlier assessment also. This proposition is advanced with logic that before prior to introduction of Section 260A in IT Act with effect from October 01, 1998, there was no right of appeal. 13) It is difficult to accept such logic given by High Court. No doubt, before October 01, 1998, in absence of any statutory right of appeal to High Court, there was no such vested right. At same 11 time, moment Section 260A was added to statute, right to appeal was recognised statutorily. Therefore, as already pointed out, in respect of those proceedings where assessment orders were passed after October 01, 1998, vested right of appeal in High Court had accrued. Same was position qua Department in respect of those cases where demand raised by Department stood negatived by appellate authority after October 01, 1998. 14) In present case, as noted above, when Section 260A of IT Act was introduced by way of amendment with effect from October 01, 1998, it contained provision in form of clause (2) of sub-section (2) thereof relating to payment of court fee as well. As per that provision, fixed court fee of Rs.2,000/- was provided. This provision was, however, omitted with effect from June 01, 1999. court fee became payable as per Section 52 of 1959 Act. amendment in question in 1959 Act, i.e. Section 52A, was made effective from March 06, 2003. This provision has not been made retrospective. 15) We, therefore, are not able to subscribe to aforesaid view of High Court and set aside same. In fine, we hold as under: (i) Wherever assessee is in appeal in High Court which is filed under Section 260A of IT Act, if date of assessment is prior to March 06, 2003, Section 52A of 1959 Act shall not apply and court fee payable shall be one which was payable on 12 date of such assessment order. (ii) In those cases where Department files appeal in High Court under Section 260A of IT Act, date on which appellate authority set aside judgment of Assessing Officer would be relevant date for payment of court fee. If that happens to be before March 06, 2003, then court fee shall not be payable as per Section 260A of IT Act on such appeals. 16) These appeals stand allowed in aforesaid terms. ...............J. (A.K. SIKRI) ................J. (ASHOK BHUSHAN) NEW DELHI; AUGUST 10, 2017. 13 ITEM NO.1501 COURT NO.7 SECTION XI -A SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Civil Appeal No(s). 3131/2006 K. RAVEENDRANATHAN NAIR Appellant(s) VERSUS COMMNR. OF INCOME TAX . & ORS. Respondent(s) WITH C.A. No. 3130/2006 (XI -A) Date : 10-08-2017 These appeals were called on for pronouncement of Judgment today. For Appellant(s) Mr. K. Radhakrishnan, Sr. Adv. Mr. S. Udaya Kumar Sagar, Adv. Ms. Bina Madhavan, Adv. Ms. Akanksha Mehra, Adv. Mr. Mrityunjai Singh, Adv. Ms. Swati Bhardwaj, Adv. Mr. Piyush Dwivedi, Adv. Mr. Pareteek Dhir, Adv. Ms. Ramandeep Kaur, Adv. For M/s. Lawyer S Knit & Co, AOR Mr. Mukesh Kumar Maroria, AOR Ms. Anil Katiyar, AOR For Respondent(s) Mr. G. Prakash, AOR Mr. Jishnu M.L. Adv. Ms. Priyanka Prakash, Adv. Ms. Beena Prakash, Adv. Ms. Anil Katiyar, AOR Mr. Ramesh Babu M. R., AOR Hon'ble Mr. Justice A.K. Sikri pronounced judgment of Bench comprising His Lordship and Hon'ble Mr. Justice Ashok Bhushan. appeals stand allowed in terms of signed reportable 14 judgment. Pending application(s), if any, stands disposed of accordingly. (Ashwani Thakur) (Mala Kumari Sharma) COURT MASTER COURT MASTER (Signed reportable judgment is placed on file) K. Raveendranathan Nair v. Commissioner of Income-tax & Anr