Commissioner of Income-tax, Panaji v. V. M. Salgaonkar Brothers Private Limited
[Citation -2020-LL-1013-18]

Citation 2020-LL-1013-18
Appellant Name Commissioner of Income-tax, Panaji
Respondent Name V. M. Salgaonkar Brothers Private Limited
Court HIGH COURT OF BOMBAY AT GOA
Relevant Act Income-tax
Date of Order 13/10/2020
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags miscellaneous application • enduring benefit • low tax effect
Bot Summary: Of the to substantial questions of law the Revenue had framed, this Court accepted questions and as substantial questions law and reframed them. Faced with the objection the assessee has raised, we will examine whether the additional questions of law now the Revenue 4(1987) 1 SCC 213) 6 TXA No.72 of 2015 presented are the same as or similar to question this Court refused to take as a substantial question of law. The mandate of proviso of sub-section of Section 260 A is, according to Indo-Gulf Fertilizer, to formulate a new question in addition to question already framed and not to review, modify or annul the question originally framed. Second, if the question substantially affects the rights of the parties, then has the question been settled by the precedential Court or does it still admit of alternative judicial views In the former instance, it no longer remains a substantial question of law. The Tribunal s only function to formulate proper questions which arise out of those questions of law and to state a case which is germane to the questions of law indicated by the High Court. The High Court may either answer the questions as formulated by the Tribunal or may reframe or modify the questions and answer those questions. The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.


1 TXA No.72 of 2015 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 72/2015 COMMISSIONER OF INCOME TAX Aayakar Bhavan, Patto Plaza, Panaji Goa. ... APPELLANT VERSUS V. M. SALGAONKAR BROTHERS PRIVATE LIMITED Suvarna Bandekar Building P. B. No. 11, Swatantra Path Vasco da Gama. ... RESPONDENT Ms. Amira Razaq, Junior Standing Counsel for Appellant. Shri P. Pardiwala, Senior Advocate with Shri Ryan Menezes, Advocate for Respondent. Coram :- M.S. SONAK & DAMA SESHADRI NAIDU, JJ. Reserved on : 30th September 2020 Pronounced on : 13th October 2020 JUDGMENT : (Per Dama Seshadri Naidu, J.) Introduction: Revenue is appellant in this tax appeal; it was dissatisfied with order, dated 4 September 2014, of Income Tax Appellate Tribunal. On 7 January 2016, this Court admitted matter after framing two substantial questions of law. Then, Revenue wanted this Court to frame third substantial question of law on specific issue. But, through reasoned order, this Court refused. 2. When we took up matter for final hearing, Revenue filed miscellaneous application. It again wanted us to frame "the same" or "similar" substantial question of law. According to it, this Court earlier 2 TXA No.72 of 2015 refused to frame that substantial question of law, oblivious of Supreme Court judgment on identical issue. 3. Now question before us is this: can we Bench of different composition but of same strength, though reconsider issue, disregarding its earlier refusal, and frame substantial question of law, afresh? Facts: 4. disputed tax is less than one crore. Suppose we confine ourselves to two substantial questions of law already framed. In that case, we need not adjudicate them on merits because of Circular Revenue has issued earlier, setting out Revenue s policy not to contest matters with less than one crore disputed tax. So, unless we are persuaded to frame third substantial question of law, there is no scope for adjudication. 5. In these circumstances, we set out facts, first, to decide whether we should reconsider framing third substantial question of law. If Revenue has third substantial question of law framed, then we will get into other aspects of matter. 6. respondent-assessee deals in mining, processing, and exporting of iron ore. For assessment year 2008-09, it filed returns. Revenue processed return and selected it for scrutiny. In August 2009, as preliminary step, Revenue issued to assessee notice under Section 143 (2) of Income Tax Act ("Act"). Through order, dated 13 December 2010, Assessing Officer disallowed certain expenditure under section 14 of Act. 7. Aggrieved, assessee appealed to Commissioner of Income Tax (A). In November 2013, appellate authority partly allowed appeal. Then, though assessee and Revenue filed appeals before Income Tax Appellate Tribunal ( Tribunal ). Through its order, dated 3 TXA No.72 of 2015 31 October 2014, Tribunal dismissed Revenue s appeal but allowed assessee s. In that context, Revenue filed this Tax Appeal. Substantial Questions of Law before this Court: 8. In its appeal, Revenue framed three substantial questions of law: (a) to (c). This Court accepted two and reframed them: (a) and (c). Through order, dated 7 January 2016, it refused to accept one substantial question of law: (b). Renewed Effort: 9. Revenue, now, has come up with Miscellaneous Application. It wants Court to frame few more questions of law. But respondent-assessee objects to it. It contends these substantial questions of law are identical to what this Court earlier refused to frame. So we have taken up as preliminary issue whether we should frame additional substantial question of law despite this Court s earlier rejection on that count. Arguments: Revenue: 10. Ms Amira A. Razaq, learned Standing Counsel for Revenue, has submitted that taxation jurisprudence does not recognise common law principle of res judicata. According to her, if Court finds vital issue affecting case outcome, it must frame substantial question of law at any stage of proceedings. Its earlier disinclination or rejection notwithstanding, Court ought to reframe issue in interest of justice. 11. Ms Razaq has forcefully argued in alternative, too: issue then rejected to be framed and issue now pressed into service are different; latter is more comprehensive. According to her, this Court earlier erred in holding that substantial question (b) was based on Dr Prafulla Hede v. Asst. Commissioner of Income Tax, Circle-1(1), Panaji. But 4 TXA No.72 of 2015 fact remains, Ms Razaq adds, that Dr Prafulla Hede ignored Apex Court s dictum in Ambika Quarry Works v. State of Gujarat 1 and subsequent judgments, including Nature Lovers Movement v. State of Kerala2. 12. Ms Razaq has also drawn our attention to Section 260A of Act. Then, she has submitted that this Court may, nay ought to, frame substantial question of law even at stage of final hearing if this Hon ble Court is satisfied that such question arises in matter . She has eventually argued that in Dr Prafulla Hede, there was no appreciation of decisions rendered by Apex Court regarding grant of renewals of mining leases in forest lands after enforcement of Forest Conservation Act, 1980 . To support her contentions, Ms Razaq has, among others, relied on Sir Chunilal Mehta & Sons v. Century Spinning and Mfg Ltd3. Respondent: 13. Shri Pardiwala, learned counsel for respondent-assessee has submitted that this Court has already refused to frame substantial question of law on issue now Revenue is trying to resurrect. According to him, Revenue ought to have challenged this Court's order of first refusal. Discussion: 14. This Court admitted Revenue s appeal through order, dated 7 January 2016. Of (a) to (c) substantial questions of law Revenue had framed, this Court, then, accepted questions (a) and (c) as substantial questions law and reframed them. It has expressly refused to accept Revenue s question (b) as substantial question of law. That question, as framed by Revenue, reads thus: On facts and in circumstances of case, was Appellate Tribunal right in holding that afforestation 1AIR 1987 SC 1073 2(2009) 5 SCC 373 3AIR 1962 SC 1314 5 TXA No.72 of 2015 expenses paid are of revenue nature and not of capital nature, by ignoring fact that compensatory afforestation charges paid to government of Goa in nature of non-recurring expenditure and provides enduring benefit to assessee? 15. To justify its refusal to accept above as substantial question of law, this Court has felt that identical question already stands answered. To elaborate, this Court has noted that in Tax Appeal No. 15/2012, Division Bench framed similar issue and answered it against Revenue. Later, Supreme Court dismissed Revenue's Special Leave to Appeal (C) No. 24920/2012. Besides, this Court has specifically recorded that "the learned counsel appearing for appellant does not dispute that issue stands covered by said Order". 16. Now, Revenue has once again come up with miscellaneous application, asking this Court to frame couple more substantial questions of law. They read: A. Whether renewal of mining lease in forest area can be granted only if prior mandatory requirement of Section 2 of Forest Conservation Act, 1980, are satisfied as laid down by Hon ble Apex Court, in case of Ambika Quarry Works v. State of Gujarat4 and subsequent decisions, and hence, payment of NPV is expenditure which is necessitated for securing renewal of lease and thus capital in nature. B. Whether decision of this Hon'ble Court dated 6 February 2012 in Tax Appeal no. 15/2012 CIT v. Dr Prafulla Hede having been rendered without appreciating decision of Hon ble Supreme Court in Ambika Quarry Works (1987) 1 SCC 213) and subsequent decisions are required to be referred to larger Bench? C. Whether in facts and circumstances of case, findings of CIT (Appeals) and ITAT are perverse findings? (italics supplied) 17. Faced with objection assessee has raised, we will examine whether additional questions of law now Revenue 4(1987) 1 SCC 213) 6 TXA No.72 of 2015 presented are same as or similar to question (b) this Court refused to take as substantial question of law. If it is similar, is there any bar against this Court s reframing substantial question of law despite its earlier refusal? Before we determine this issue, let us examine few precedents cited at Bar. New, Additional Question of Law: 18. In Commissioner of Income-tax-I, Lucknow, v. Indo-Gulf Fertilizers Ltd.5, High Court of Allahabad has framed two substantial questions of law and admitted Revenue s appeal. During final hearing, Revenue s counsel wanted Court to frame one additional substantial of law keeping in view pleadings on record and substantial question of law already framed. Court was prepared to do so, but assessee s counsel objected. 19. Repelling assessee s counter assertions, Indo-Gulf Fertilizer has held that "formulation of new question keeping in view letter and spirit of sub-section (4) of Section 260 shall not amount to review of earlier order". mandate of proviso of sub-section (4) of Section 260 is, according to Indo-Gulf Fertilizer, to formulate new question in addition to question already framed and not to review, modify or annul question originally framed . It has also noted that if High Court is satisfied that it has escaped or missed to frame some substantial question of law which is necessary to be formulated and framed for substantial justice or for ends of justice, it may do so . 20. Indeed, in Indo-Gulf Fertilizer, Allahabad High Court wanted to frame new question in addition to questions already framed . And it was so because it was satisfied that it has escaped [omitted?] or missed to frame some substantial question of law . We respectfully agree with that proposition. But here, case is on converse. We were not asked to frame new substantial question of law that has missed our 5[2012] 26 taxmann.com 66 (Allahabad) 7 TXA No.72 of 2015 attention. Instead, we were asked to reconsider what we had earlier rejected. It is different ball game. What is Substantial Question of Law? 21. In Sir Chunilal V. Mehta, Constitution Bench of Supreme Court has considered proper test for determining whether question of law raised in case is substantial. First, what we should look at is whether question is of general public importance or of inter-party importance. Second, if question substantially affects rights of parties, then has question been settled by precedential Court or does it still admit of alternative judicial views? In former instance, it no longer remains substantial question of law. 22. Here, this Court earlier felt that question (b) raised by Revenue stood already answered. So it cannot be treated as substantial question of law requiring adjudication. According to Ms Razaq, it was not. To that extent, Court is said to have erred. Even if we accept that which we do not, though can we revisit question we had refused to frame. Here comes into play law of case doctrine . Law-of-the-Case Doctrine: 23. doctrine of Law of Case, according to Black's Law Dictionary6, holds that decision rendered in former appeal of case is binding in later appeal [of same case.] It differs from law of trial, res judicata, or stare decisis. On other hand, "Law of Trial" is legal theory or court ruling that is not objected to and is used or relied on in trial. 24. In Messenger v. Anderson7 Justice Holmes observes that in absence of statute, phrase, "law of case," as applied to "the effect of previous orders on later action of court rendering them in 69th Edn. 7225 U.S. 436, 444 (1912) 8 TXA No.72 of 2015 same case," merely expresses practice of courts generally refusing to reopen what has been decided. It is not limit to their power, though. 25. law-of-the-case doctrine is said to come in at least two forms. One form, also called mandate rule, forestalls "relitigation in trial court of matters that were explicitly or implicitly decided by early appellate decision in same case. Once appellate court decides issue, then it stands settled in further proceedings in trial court and controls case. other form generally binds court to its own earlier ruling in same case in absence of intervening ruling by higher court on same issue. This doctrine wants courts to "display disciplined self-consistency" throughout case8. It distinguishes itself from res judicata (for instance, Section 11 of CPC) and 'issue estoppel' (as seen in Order 2, Rule 2 of CPC), both of which are much more rigid9. 26. To put this doctrine in perspective, we may observe that interpretative intricacies in understanding precedent differ from those involved in understanding law of case. precedent binds to extent holding accords with facts on hand. law of case, on other hand, fetters later Bench in same case from taking contrary stand to that taken earlier by previous Bench. Of course, this constraint flows down to lower judicial echelons or applies to coordinate Benches, but not appellate or higher fora10. Indian Scenario: 27. In Arjun Singh v Mohindra Kumar11, Supreme Court elaborately discussed how interlocutory orders attain finality and, consequently, how principle of res judicata or estoppel applies to them. Arjun Singh 8The Law of Judicial Precedent, Bryan A. Garner et al., Thomson Reuters (2016), p.442 9State of Kerala v. K. K. Mathai, AIR 2018 Kerala 18 (DB) 10Ibid 11AIR 1964 SC 993, as quoted in K. K. Mathai 9 TXA No.72 of 2015 classifies interlocutory orders into three types: (a) orders like staying proceedings, injuncting parties, appointing receivers; (b) orders like restoring proceedings, as under Order 9, Rule 7 of CPC; (c) orders like those that cannot be reopened or reconsidered unless fresh facts emerge. 28. Type (a) orders preserve status quo pending litigation and ensure that parties are not prejudiced by procedural delays. They do not, in that sense, decide merits of controversy in issue. Type (b) orders do not preclude aggrieved person from challenging them in appeal taken against final decree and judgment. In that sense, trial court's refusal "to permit defendant to 'set clock back' does not attain finality. Indeed, Section 105 of CPC statutorily acknowledges this position. 29. Type (c) orders concern those that bind 'same' Court at later stages, precluding it from reconsidering decision. Arjun Singh observes that "[e]ven if rule of res judicata does not apply, it would not follow that on every subsequent day which suit stands adjourned for further hearing, petition could be repeated and fresh orders sought on basis of identical facts." 30. Indeed, in In Prahlad Singh v. Col. Sukhdev Singh12, Supreme Court has quoted with approval its earlier dictum in Satyadhyan Ghosal v. Deorajin Debi13. It is for proposition that principle of res judicata also applies between two stages in same proceedings if party to proceedings wants to reagitate matter at later stage, despite court deciding matter at earlier stage. 31. Let us examine Commissioner of Income-tax v. Biju Patnaik14. There, Orissa High Court has considered relative scope of sub- sections (1) and (2) of Section 256, provision deleted in 2005. Under sub-section (1), either assessee or Commissioner may require 12(1987) 1 SCC 727 13AIR 1960 SC 941 14[1978] 112 ITR 555 (ORI.) 10 TXA No.72 of 2015 Appellate Tribunal to refer to High Court any question of law. Then, Tribunal, in its discretion, draws up statement of case and refers it to High Court. On other hand, if Tribunal refuses to state case on ground that no question of law arises, assessee or Commissioner may apply under sub-section (2) of Section 256 to High Court. In such event, High Court may require Tribunal to state case and to refer questions to it. 32. On facts, we may notice that Revenue applied to Tribunal under section 256(1) of Act. But it rejected that application. Then, Revenue moved Orissa High Court under section 256(2) of Act; it wanted High Court to direct Tribunal to frame five questions of law. But High Court wanted Tribunal to frame only one question. Once Tribunal referred question, High Court took up final hearing. Then, Revenue once again wanted High Court to frame same substantial questions of law which High Court had earlier rejected. Revenue, in fact, argued that Bench hearing matter at final stage is not bound by view expressed at preliminary hearing . 33. In above context, Orissa High Court in Biju Patnaik has referred to this Court s judgment in Jethabhai Hirji and Co. v. Commissioner of Income-tax [1949] 17 ITR 533. In Jethabhai Hirji, this Court s Division Bench (per Chagla C. J), has held that, on Tribunal s refusal under Section 256 (1) of Act, it is for High Court alone to indicate to Tribunal what questions of law are . And Tribunal s only function to formulate proper questions which arise out of those questions of law and to state case which is germane to questions of law indicated by High Court. Then, High Court may either answer questions as formulated by Tribunal or may reframe or modify questions and answer those questions. 11 TXA No.72 of 2015 34. Thus, taking aid of Jethabhai Hirji, Orissa High Court has, on facts, noted that Revenue has not asked for reframing or modification of question. It has further noted that at preliminary hearing, Court held that no question of law arose regarding items omitted. So, [T]he effect of that order really is that application by Revenue for stating case with regard to those questions was not entertained. Reviving matters which are closed cannot come within ambit of reframing question or making suitable modification so as to bring true dispute into picture. . . . Accordingly, we decline to reopen matter at this stage, and present reference shall be confined to consideration of question referred by Tribunal for opinion of Court. 35. Finally, we may refer to Kishanchand v. Ramkrishna15. There, Madhya Pradesh High Court, per R. C. Lahoti J (as his Lordship then was), considered under Section 100 of CPC identical question as has arisen now before us. In second appeal arising out of eviction proceedings, Madhya Pradesh High Court chose few questions from memorandum of appeal and framed them into substantial questions of law. But it has rejected few others from appeal memorandum. During final hearing, appellant wanted Court to reframe those questions of law Court had omitted earlier. 36. In that context, Kishanchand has noted that appellant may state questions of law and press High Court to formulate those questions as substantial questions of law. It must be at stage of motion hearing. Then, High Court may either agree or disagree with appellant's prayer. Proviso protects, Kishanchand notes, High Court s powers to hear such other question of law which might not have been formulated by it, if it is satisfied that such question, case involves . But proviso contemplates hearing being permitted on such question not formulated by [the High Court], but not on question refused to be formulated earlier by it . 151991 SCC OnLine MP 105 12 TXA No.72 of 2015 37. In other words, if High Court felt that particular question did not arise for hearing or was not substantial question of law worth being heard at final hearing, that was end. And that would deprive High Court of its jurisdiction to permit rehearing on that question at stage of final hearing . That is, additional question may be formulated and heard if at earlier stage question has been left out from being formulated because it was either not raised or escaped attention of Court at that stage. substantial question of law, left out sub silentio, as neither argued nor considered by Court, can always be permitted to be formulated at later stage, but not when it has been abandoned or refused to be formulated by Court positively . 38. We respectfully agree with Kishanchand. True, Kishanchand interprets Section 100 CPC. But Section 260A of Income Tax Act is analogous to and more exhaustive than Section 100 CPC. provision reads: S. 260A. Appeal to High Court. (1) appeal shall lie to High Court from every order passed in appeal by Appellate Tribunal (2) (2A) (3) Where High Court is satisfied that substantial question of law is involved in any case, it shall formulate that question. (4) appeal shall be heard only on question so formulated, and respondents shall, at hearing of appeal, be allowed to argue that case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge power of Court to hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it, if it is satisfied that case involves such question. (5) High Court shall decide question of law so formulated and deliver such judgment thereon containing grounds on which such decision is founded and may award such cost as it deems fit. (6) High Court may determine any issue which 13 TXA No.72 of 2015 (a) has not been determined by Appellate Tribunal; or (b) has been wrongly determined by Appellate Tribunal, by reason of decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, provisions of Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to High Court shall, as far as may be, apply in case of appeals under this section. (italics supplied) 39. Seen from above extract, sub-section (4) of Section 260A, especially proviso appended to it, liberates High Court to formulate and hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it. But it does not, despite Revenue s insistence, empower High Court to reconsider its earlier view in same proceedings and reformulate question of law which it had refused to formulate. In other words, (1) question that escaped Court s earlier attention, or (2) question appellant not presented to Court, or even (3) question that cropped up because of subsequent developments stands on different footing. But question High Court consciously refused to treat as substantial question of law fails to qualify under none of above three categories. 40. Revenue ought to have challenged this Court s order, dated 7 January 2016, which refused to frame particular question as substantial question of law. That said, Revenue is not remediless. If it chooses to question High Court's judgment under Section 260A of Act before Apex Court, it may have its options open. It may comprehensively contend even on grounds that High Court has erred in not formulating substantial question of law at stage of admission. Res Judicata and Tax Disputes: 41. second contention Revenue has advanced is that concept of res judicata is alien to tax jurisprudence. So it wants us to 14 TXA No.72 of 2015 reformulate substantial question of law despite Court s earlier rejection. 42. In Commissioner of Income-Tax-I v. Forest Development Corporation of Maharashtra Ltd.16, for AY 2003-04, Tribunal dismissed Revenue's appeal. To do that, it simply relied on its order for AY 2002-03. It recorded no independent reasons except stating issue stood concluded against revenue by its earlier order. Granted, Revenue filed no appeal against Tribunal s order for AY 2002-03, but it did against order for AY 2003-04. 43. In above context, in Forest Development Corporation of Maharashtra Ltd., Revenue contended that in matters of tax laws, there was no question of res judicata. Then, Division Bench of this Court has held that even if appellant has not appealed against earlier order, it may appeal against second order. But that appeal against second order must be "supported by averments or submissions showing distinction in facts and/or in law". That distinction must give rise to substantial question of law "in backdrop of distinctive features in subsequent order". 44. In this regard, Forest Development Corporation of Maharashtra Ltd., has stressed two aspects. One concerns consistency; it is law's cardinal virtue. That is, even if principle of res judicata does not apply to tax matters, yet consistency and certainty of law would require State to take uniform position and not change their stand in absence of change in facts and/or law. second one concerns distinct factors that differentiate one order from other. That is, mere change in assessment year, will not warrant appeal. appellant should show distinctive features either in facts or in law warrant different treatment to order in succeeding assessment year. 16[2017] 84 taxmann.com 294 (Bombay) 15 TXA No.72 of 2015 45. On fact, however, Forest Development Corporation of Maharashtra Ltd., found no distinction in facts or law between orders for AY 2002-03 and AY 2003-04. Unquestionable as proposition of law in Forest Development Corporation of Maharashtra Ltd., we wonder how it relates to issue before us. Regrettably, this case does not help Revenue s cause. 46. As we have already noted, what we have been faced with may not be termed res judicata per se. In some jurisdictions, it is called law of case: entertaining what has been rejected earlier in same proceedings. And we have addressed that principle above. So even if we were to hold that res judicata is alien to adjudication under taxation regime, that plea is unavailable for Revenue here. Circular: 47. Ministry of Finance, Government of India, has issued Circular No.17/2019. It reveals Revenue s policy decision. To file appeals before High Court, Central Board of Direct Taxes has fixed limit of Rs.1,00,00,000/-. Here, disputed tax falls short of that amount. In tune with Revenue s consistent policy, learned Standing Counsel has already told us that if this Court does not find favour with Revenue on additional substantial questions of law it wanted us to frame, there is nothing further in this matter to be adjudicated. Result: Accordingly, we dismiss Miscellaneous Application under Stamp No.1499 of 2020. Consequences: 48. Given this Court s earlier refusal to frame third substantial question of law, now it has been left with only two questions of law. And because of Circular CBDT No.17/2019, dt. 08.08.2019 and 16 TXA No.72 of 2015 clarification dated 20.08.2019, these questions of law need no adjudication, for disputed tax falls below Rs.1 Crore. Result: As result, we dismiss this appeal. No order on costs. DAMA SESHADRI NAIDU, J. M.S. SONAK, J. NH Commissioner of Income-tax, Panaji v. V. M. Salgaonkar Brothers Private Limited
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