REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1106 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.30284 OF 2015] DEPUTY COMMISSIONER OF INCOME TAX & ANR. ..APPELLANTS VERSUS M/S. PEPSI FOODS LTD. ..RESPONDENT (NOW PEPSICO INDIA HOLDINGS PVT. LTD.) WITH CIVIL APPEAL NO. 1127 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.32081 OF 2017] CIVIL APPEAL NO. 1107 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.34987 OF 2015] CIVIL APPEAL NO. 1108 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31311 OF 2015] CIVIL APPEAL NO. 1109 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31295 OF 2015] CIVIL APPEAL NO. 1110 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.30283 OF 2015] CIVIL APPEAL NO. 1111 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31297 OF 2015] CIVIL APPEAL NO. 1112 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.34142 OF 2016] CIVIL APPEAL NO. 1113 OF 2021 Signature Not Verified Digitally signed by R Natarajan Date: 2021.04.06 17:16:58 IST [ARISING OUT OF SLP (CIVIL) NO.3138 OF 2017] Reason: 1 CIVIL APPEAL NO. 1114 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.3136 OF 2017] CIVIL APPEAL NO. 1115 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8612 OF 2017 CIVIL APPEAL NO. 1116 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8215 OF 2017 CIVIL APPEAL NO. 1117 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.19322 OF 2017] CIVIL APPEAL NO. 1118 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] CC NO.8924 OF 2017 CIVIL APPEAL NO. 1119 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.15229 OF 2017 CIVIL APPEAL NO. 1120 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.720 OF 2018] CIVIL APPEAL NO. 1121 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.27498 OF 2017] CIVIL APPEAL NO. 1122 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.30215 OF 2017] CIVIL APPEAL NO. 1123 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.722 OF 2018] CIVIL APPEAL NO. 1124 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31873 OF 2017] CIVIL APPEAL NO. 1126 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.31720 OF 2017] CIVIL APPEAL NO. 1125 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.32236 OF 2017] 2 CIVIL APPEAL NO. 1128 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.33218 OF 2017] CIVIL APPEAL NO. 1129 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12200 OF 2018] CIVIL APPEAL NO. 1130 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.4186 OF 2018] CIVIL APPEAL NO. 1131 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12202 OF 2018] CIVIL APPEAL NO. 1132 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.12204 OF 2018] CIVIL APPEAL NO. 1133 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.4363 OF 2018 CIVIL APPEAL NO. 1134 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.6113 OF 2018 CIVIL APPEAL NO. 1135 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.16889 OF 2018] CIVIL APPEAL NO. 1136 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.16245 OF 2018] CIVIL APPEAL NO. 1137 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.26053 OF 2018] CIVIL APPEAL NO. 1138 OF 2021 [ARISING OUT OF SLP (CIVIL) NO. OF 2021] DIARY NO.22819 OF 2018 CIVIL APPEAL NO. 1139 OF 2021 [ARISING OUT OF SLP (CIVIL) NO.10941 OF 2019] 3 JUDGMENT R.F. Nariman, J 1. Delay condoned. Leave granted. 2. appeals before us raise important question as to constitutional validity of third proviso to Section 254(2A) of Income Tax Act, 1961 (hereinafter referred to as Income Tax Act ). 3. facts in Deputy Commissioner of Income Tax & Anr. v. M/s Pepsi Foods Ltd. [now Pepsico India Holdings Pvt. Ltd] (Civil Appeal arising out of Special Leave Petition (C) No.30284 of 2015) may be set out as being illustrative of facts in all appeals before us. Respondent-assessee is Indian company incorporated on 24.02.1989 and is engaged in business of manufacture and sale of concentrates, fruit juices, processing of rice and trading of goods for exports. assessee is group company of multi-national Pepsico Inc., company incorporated and registered in United States of America. assessee-company merged with Pepsico India Holdings Pvt. Ltd. w.e.f. 01.04.2010, in terms of scheme of arrangement duly approved by Hon ble Punjab and Haryana High Court. On 30.09.2008, return of income was filed for assessment year 2008-2009 declaring total income of INR 92,54,89,822. final assessment order was passed on 19.10.2012 4 which was adverse to assessee. Aggrieved by aforesaid order, assessee filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as Tribunal ) on 29.04.2013. On 31.05.2013, stay of operation of order of assessing officer was granted by Tribunal for period of six months. This stay was extended till 08.01.2014 and continued being extended until 28.05.2014. Since period of 365 days as provided in Section 254(2A) of Income Tax Act was to end on 30.05.2014 beyond which no further extension could be granted, assessee, apprehending coercive action from Revenue, filed writ petition before Delhi High Court on 21.05.2014 challenging constitutional validity of third proviso to Section 254(2A) of Income Tax Act. By judgment dated 19.05.2015, Delhi High Court struck down that part of third proviso to Section 254(2A) of Income Tax Act which did not permit extension of stay order beyond 365 days even if assessee was not responsible for delay in hearing appeal. It is this judgment and several other judgments from various High Courts that have been challenged by revenue in these appeals. 4. Shri Vikramjit Banerjee, learned ASG, assailed impugned judgment of Delhi High Court and other judgments following it, arguing that 5 there is no right to stay of judgment in appellate proceeding as such stay is dependent upon discretion of Appellate Court. discretion having been exercised once would not mean that automatic extensions of same could be granted despite reasonable period having gone-by. He also argued that discretionary remedy of stay is part and parcel of right to appeal which itself is statutory right, and can be taken away by legislature. He then argued that Article 14 of Constitution of India is not to be applied mechanically as far greater freedom in joints is given qua tax legislation and so long as State has laid down valid policy which it has followed without singling out anybody, no discrimination can possibly ensue. He also argued that equitable considerations and arguments based on hardship are out of place when it comes to tax statutes, which must be read literally. For all these propositions, he cited case law which will be dealt with later in this judgment. 5. Shri Ajay Vohra, learned Senior Advocate, Shri Himanshu S. Sinha, Shri Deepak Chopra and Shri Sachit Jolly, learned Advocates, appearing for assessees, countered each of submissions of Shri Banerjee, learned ASG. They relied strongly upon reasoning of impugned judgment of Delhi High Court and argued that once discretionary relief has been granted based upon strong prima 6 facie case, balance of convenience, etc. it would be wholly arbitrary and discriminatory that such relief be vacated automatically without reference to whether it is assessee who is prolonging appellate proceedings. Once there is vested right of appeal, there is right to obtain stay which, once obtained, cannot be vacated without dilatory tactics on part of Appellant being found against Appellant. They cited judgments of this Court to show that discriminatory taxation has been struck down under Article 14 of Constitution of India. They also argued that State cannot take shelter under policy , if policy or object laid down in statutory provision is itself arbitrary or discriminatory. They also cited judgments to show that even in interpreting tax statute, though equitable considerations are not to be given effect, yet they are not wholly irrelevant when constitutional validity of provision is itself challenged. 6. genesis of stay provision contained in Section 254 of Income Tax Act is in celebrated judgment of this Court in Income Tax Officer v. M.K. Mohammed Kunhi (1969) 2 SCR 65. In this judgment, Section 254 of Income Tax Act, as originally enacted, came up for consideration before this Court. After setting out Section 254(1), this Court referred to Sutherland, Statutory Construction (3rd Edn., Arts. 5401 and 5402), and then held that power which has 7 been conferred by said Section on Appellate Tribunal with widest possible amplitude must carry with it, by necessary implication, all powers incidental and necessary to make exercise of such power fully effective. Court held: Section 255(5) of Act does empower Appellate Tribunal to regulate its own procedure, but it is very doubtful if power of stay can be spelt out from that provision. In our opinion Appellate Tribunal must be held to have power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when Section 220(6) deals expressly with situation when appeal is pending before Appellate Assistant Commissioner, but Act is silent in that behalf when appeal is pending before Appellate Tribunal. It could well be said that when Section 254 confers appellate jurisdiction, it impliedly grants power of doing all such acts, or employing such means, as are essentially necessary to its execution and that statutory power carries with it duty in proper cases to make such orders for staying proceedings as will prevent appeal if successful from being rendered nugatory. certain apprehension may legitimately arise in minds of authorities administering Act that if Appellate Tribunals proceed to stay recovery of taxes or penalties payable by or imposed on assessees as matter of course revenue will be put to great loss because of inordinate delay in disposal of appeals by Appellate Tribunals. It is needless to point out that power of stay by Tribunal is not likely to be exercised in routine way or as matter of course in view of special nature of taxation and revenue laws. It wilt only be when strong prima facie case is made out that Tribunal will consider whether to stay recovery proceedings and on what conditions and stay will be granted in most deserving and appropriate cases where Tribunal is 8 satisfied that entire purpose of appeal will be frustrated or rendered nugatory by allowing recovery proceedings to continue during pendency of appeal. [at page 72] Importantly, this Court recognised that orders of stay prevent appeal, if ultimately successful, from being rendered nugatory or futile, and are granted only in deserving and appropriate cases. 7. judgment of this Court was followed for many decades, Appellate Tribunal granting stay without being constrained by any time limit. However, by Finance Act, 2001 (w.e.f. 01/06/2001), two provisos were introduced to Section 254(2A) as follows: 254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, Appellate Tribunal, where it is possible, may hear and decide such appeal within period of four years from end of financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253: Provided that where order of stay is made in any proceedings relating to appeal filed under sub- section (1) of section 253, Appellant Tribunal shall dispose of appeal within period of one hundred and eighty days from date of such order: Provided further that if such appeal is not so disposed of within period specified in first proviso, stay order shall stand vacated after expiry of said period. 8. Realising that hard and fast provision which is directory so far as disposal of appeal is concerned, but mandatory so far as vacation of 9 stay order is concerned, would lead to great hardship, legislature stepped in again and amended Section 254(2A) vide Finance Act, 2007 (w.e.f. 01/06/2007) as follows: 254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, Appellate Tribunal, where it is possible, may hear and decide such appeal within period of four years from end of financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253: Provided that Appellate Tribunal may, after considering merits of application made by assessee, pass order of stay in any proceedings relating to appeal filed under sub-section (1) of section 253, for period not exceeding one hundred and eighty days from date of such order and Appellate Tribunal shall dispose of appeal within said period of stay specified in that order: Provided further that where such appeal is not so disposed of within said period of stay as specified in order of stay, Appellate Tribunal may, on application made in this behalf by assessee and on being satisfied that delay in disposing of appeal is not attributable to assessee, extend period of stay, or pass order of stay for further period or periods as it thinks fit; so, however, that aggregate of period originally allowed and period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and Appellate Tribunal shall dispose of appeal within period or periods of stay so extended or allowed: Provided also that if such appeal is not so disposed of within period allowed under first proviso or period or periods extended or allowed under second proviso, order of stay shall stand vacated after expiry of such period or periods. 10 9. aforementioned provision (as amended by Finance Act, 2007) became subject matter of challenge before Bombay High Court in Narang Overseas Pvt. Ltd. v. ITAT (2007) 295 ITR 22. Bombay High Court, after referring to judgment in Mohammed Kunhi (supra), then held: Did section as it stood before Finance Act of 2007, and after Finance Act of 2007, exclude power of Tribunal to grant interim relief after period provided in proviso. Was it intendement of Parliament that Tribunal even in case where assessee was not at fault should be denuded of its incidental power to continue interim relief granted and if so what mischief was it seeking to avoid. mischief if and at all was long delay in disposing of proceedings where interim relief had been obtained by Assessee. second proviso as it earlier stood, in case when in appeal interim relief was granted, if appeal was not disposed off within 180 days provided that stay shall stand vacated. proviso as it stood could really have not have stood test of non-arbitrariness as it would result in appeal being defeated even if assessee was not at fault, as in meantime revenue could proceed against assets of assessee. proviso as introduced by Finance Act, 2007 was to extent to avoid mischief of it being rendered unconstitutional. Once appeal is provided, it cannot be rendered nugatory in cases were assessee was not at fault. amendment of 2007 conferred power to extend period of interim relief to 360 days. Parliament clearly intended that such appeals should be disposed of at earliest. If that be object mischief which was sought to be avoided was non- disposal of appeal during period interim relief was in operation. By extending period Parliament took note of laws delay. object was not 11 to defeat vested right of Appeal in assessee, whose appeal could not be disposed off not on account of any omission or failure on his part, but either failure of Tribunal or acts of revenue resulting in non-disposal of appeal within extended period as provided. Can it then be said that intention of Parliament by restricting period of stay or interim relief upto 360 days had effect of excluding by necessary intendment power of Tribunal to continue interim relief. Would not reading power not to continue power to continue interim relief in cases not attributable to acts of assessee result in holding that such provision would be unreasonable. Could Parliament have intended to confer remedy of Appeal by denying incidental power of Tribunal to do justice. In our opinion for reasons already discussed it would not be possible to so read it. It would not be possible on one hand to hold that there is vested right of appeal and on other hand to hold that there is no power to continue grant of interim relief for no fault of assessee by divesting incidental power of Tribunal to continue interim relief. Such reading would result in such exercise being rendered unreasonable and violative of Article 14 of Constitution. Courts must, therefore, construe and/or give construction consistent with constitutional mandate and principle to avoid provision being rendered unconstitutional. [at page 30-31] High Court then referred to judgment of this Court in Commissioner of Customs & Central Excise v. Kumar Cotton Mills (2005) 13 SCC 296, which dealt with similar provision contained in Central Excise Act, 1944, namely, Section 35C(2A), and then held: We are of respectful view that law as enunciated in Kumar Cotton Mills Pvt. Ltd. (supra) should also apply to construction of third proviso as introduced in section 254(2A) by 12 Finance Act, 2007. power to grant stay or interim relief being inherent or incidental is not defeated by provisos to sub-section. third proviso has to be read as limitation on power of Tribunal to continue interim relief in case where hearing of Appeal has been delayed for acts attributable to assessee. It cannot mean that construction be given that power to grant interim relief is denuded even if acts attributable are not of assessee but of revenue or of Tribunal itself. power of Tribunal, therefore, to continue interim relief is not overridden by language of third proviso to section 254(2A). This would be in consonance with view taken in Kumar Cotton Mills Pvt. Ltd. (supra). There would be power in Tribunal to extend period of stay on good cause being shown and on Tribunal being satisfied that matter could not be heard and disposed of for reasons not attributable to assessee. [at page 32] 10. Close on heels of this judgment, Section 254(2A) of Income Tax Act was again amended, this time by Finance Act, 2008 (w.e.f. 01/10/2008). This amendment reads as follows: 254. Orders of Appellate Tribunal. xxx xxx xxx (2A) In every appeal, Appellate Tribunal, where it is possible, may hear and decide such appeal within period of four years from end of financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253: Provided that Appellate Tribunal may, after considering merits of application made by assessee, pass order of stay in any proceedings relating to appeal filed under sub-section (1) of section 253, for period not exceeding one hundred and eighty days from date of such order and 13 Appellate Tribunal shall dispose of appeal within said period of stay specified in that order: Provided further that where such appeal is not so disposed of within said period of stay as specified in order of stay, Appellate Tribunal may, on application made in this behalf by assessee and on being satisfied that delay in disposing of appeal is not attributable to assessee, extend period of stay, or pass order of stay for further period or periods as it thinks fit; so, however, that aggregate of period originally allowed and period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and Appellate Tribunal shall dispose of appeal within period or periods of stay so extended or allowed: Provided also that if such appeal is not so disposed of within period allowed under first proviso or period or periods extended or allowed under second proviso, which shall not, in any case, exceed three hundred and sixty-five days, order of stay shall stand vacated after expiry of such period or periods, even if delay in disposing of appeal is not attributable to assessee. 11. amended provision came to be considered by Division Bench of Delhi High Court in Commissioner of Income Tax v. M/s Maruti Suzuki (India) Ltd. (2014) 362 ITR 215.The constitutional validity of said provision had not been challenged, as result of which Delhi High Court interpreted third proviso to Section 254(2A) as follows: In view of aforesaid discussion, we have reached following conclusion:- (i) In view of third proviso to Section 254(2A) of Act substituted by Finance Act, 2008 with effect 14 from 1st October, 2008, tribunal cannot extend stay beyond period of 365 days from date of first order of stay. (ii) In case default and delay is due to lapse on part of Revenue, tribunal is at liberty to conclude hearing and decide appeal, if there is likelihood that third proviso to Section 254(2A) would come into operation. (iii) Third proviso to Section 254(2A) does not bar or prohibit Revenue or departmental representative from making statement that they would not take coercive steps to recover impugned demand and on such statement being made, it will be open to tribunal to adjourn matter at request of Revenue. (iv) assessee can file writ petition in High Court pleading and asking for stay and High Court has power and jurisdiction to grant stay and issue directions to tribunal as may be required. Section 254(2A) does not prohibit/bar High Court from issuing appropriate directions, including granting stay of recovery. We have not examined constitutional validity of provisos to Section 254(2A) of Act and issue is left open. [at page 231] 12. Close upon heels of judgment in Maruti Suzuki (supra), Gujarat High Court in DCIT v. Vodafone Essar Gujarat Ltd. (2015) 376 ITR 23, while disagreeing with view taken in Maruti Suzuki (supra), interpreted third proviso to Section 254(2A) of Income Tax Act as follows: Applying decision of Division Bench of this court in case of Small Industries Development Bank of India (supra) to facts of case on hand, more particularly while considering powers of 15 Tribunal under section 254(2A) of Act, it is observed and held that by section 254(2A) of Act, it cannot be inferred legislative intent to curtail/withdraw powers of Appellate Tribunal to extend stay of demand beyond period of 365 days. However, aforesaid extension of stay beyond period of total 365 days from date of grant of initial stay would always be subject to subjective satisfaction by learned Appellate Tribunal and on application made by assessee-appellant to extend stay and on being satisfied that delay in disposing of appeal within period of 365 days from date of grant of initial stay is not attributable to appellant-assessee. For that purpose, on expiry of every 180 days, appellant-assessee is required to make application to extend stay granted earlier and satisfy learned Appellate Tribunal that delay in not disposing of appeal is not attributable to him/it and learned Appellate Tribunal is required to review matter after every 180 days and while disposing of such application of extension of stay, learned Appellate Tribunal is required to pass speaking order after having satisfied that assessee-appellant has not indulged into any delay tactics and that delay in disposing of appeal within stipulated time is not attributable to assessee-appellant. However, at same time, it may not be construed that widest powers are given to Appellate Tribunal to extend stay indefinitely and that Appellate Tribunal is not required to dispose of appeals at earliest. object and purpose of section 35C(2A) of Act particularly one of object and purpose is to see that in case where stay has been granted by learned Appellate Tribunal, learned Appellate Tribunal is required to dispose of appeal within total period of 365 days, as ultimately revenue has not to suffer and all efforts should be made by learned Appellate Tribunal to dispose of such appeals in which stay has been granted as far as possible within total period of 365 days from date of grant of initial stay and Appellate Tribunal shall grant priority to such appeals over appeals in which no stay is granted. For that even Appellate Tribunal and/or registrar of Appellate 16 Tribunal is required to maintain separate register of appeals in which stay has been granted fully and/or partially and appeals in which no stay has been granted. [at page 42-43] xxx xxx xxx With greatest respect to Delhi High Court, if aforesaid procedure is adopted, either it would lead to multiplicity of proceedings before High Court and/or even granting stay of demand by Department itself. We are of opinion that instead if aforesaid procedure is followed, it would meet ends of justice and it may not increase litigation either before High Court and/or appropriate forum and purpose and object of section 254(2A) of Act is achieved. [at page 45-46] 13. impugned judgment in M/s Pepsi Foods Ltd. v. ACIT (2015) 376 ITR 87 dealt with challenge to constitutional validity of third proviso to Section 254(2A) of Income Tax Act, as amended by Finance Act, 2008. Division Bench of Delhi High Court, after setting out Bombay High Court judgment in Narang Overseas (supra), then referred to previous judgment of Delhi High Court in Maruti Suzuki (supra) and held: 12. From above extract, it is evident that Division Bench was not called upon and did not examine constitutional validity of provisos to Section 254(2A) of said Act and left issue open. It is only on plain reading of provisos, as they existed, that Division Bench came to conclusion that Tribunal had no power to extend stay beyond period of 365 days from date of first order of stay but that assessee could file writ petition in High Court asking for stay even beyond said period of 365 days and High Court had power and jurisdiction to grant stay and issue directions to 17 Tribunal and that Section 254(2A) did not prohibit/bar High Court from issuing appropriate directions, including grant of stay of recovery. similar view was taken by Bombay High Court in Jethmal Faujimal Soni (supra). But that decision was also rendered on plain meaning of provisos, as they stood. There was no challenge to constitutional validity of third proviso to Section 254(2A) of said Act after amendment introduced by Finance Act, 2008. No decision of any High Court has been brought to our notice by learned counsel for parties, wherein constitutional validity of third proviso to Section 254(2A) of said Act has been examined. [at page 96-97] After referring to this Court s judgment in Mardia Chemicals Ltd. v. Union of India (2004) 4 SCC 311 and judgment of Division Bench of Punjab and Haryana High Court in PML Industries Ltd. v. CCE (2013) SCC OnLine P&H 4440, which dealt with similar provision contained in Section 35C (2A) of Central Excise Act,1944, Court held: 23. Keeping in mind principles set out by Supreme Court in Dr Subramanian Swamy (supra), we need to examine whether present challenge to validity of third proviso to Section 254(2A) can be sustained. This is not case of excessive delegation of powers and, therefore, we need not bother about second dimension of Article 14 in its application to legislation. We are here concerned with question of discrimination, based on impermissible or invalid classification. It is abundantly clear that power granted to Tribunal to hear and entertain appeal and to pass orders would include ancillary power of Tribunal to grant stay. Of course, exercise of that power can be subjected to certain conditions. In 18 present case, we find that there are several conditions which have been stipulated. First of all, as per first proviso to Section 254(2A), stay order could be passed for period not exceeding 180 days and Tribunal should dispose of appeal within that period. second proviso stipulates that in case appeal is not disposed of within period of 180 days, if delay in disposing of appeal is not attributable to assessee, Tribunal has power to extend stay for period not exceeding 365 days in aggregate. Once again, Tribunal is directed to dispose of appeal within said period of stay. third proviso, as it stands today, stipulates that if appeal is not disposed of within period of 365 days, then order of stay shall stand vacated, even if delay in disposing of appeal is not attributable to assessee. While it could be argued that condition that stay order could be extended beyond period of 180 days only if delay in disposing of appeal was not attributable to assessee was reasonable condition on power of Tribunal to grant order of stay, it can, by no stretch of imagination, be argued that where assessee is not responsible for delay in disposal of appeal, yet Tribunal has no power to extend stay beyond period of 365 days. intention of legislature, which has been made explicit by insertion of words - even if delay in disposing of appeal is not attributable to assessee - renders right of appeal granted to assessee by statute to be illusory for no fault on part of assessee. stay, which was available to him prior to 365 days having passed, is snatched away simply because Tribunal has, for whatever reason, not attributable to assessee, been unable to dispose of appeal. Take case of delay being caused in disposal of appeal on part of revenue. Even in that case, stay would stand vacated on expiry of 365 days. This is despite fact that stay was granted by Tribunal, in first instance, upon considering prima facie merits of case through reasoned order. 19 24. Furthermore, petitioners are correct in their submission that unequals have been treated equally. Assessees who, after having obtained stay orders and by their conduct delay appeal proceedings, have been treated in same manner in which assessees, who have not, in any way, delayed proceedings in appeal. two classes of assessees are distinct and cannot be clubbed together. This clubbing together has led to hostile discrimination against assessees to whom delay is not attributable. It is for this reason that we find that insertion of expression - even if delay in disposing of appeal is not attributable to assessee - by virtue of Finance Act, 2008, violates non-discrimination clause of Article 14 of Constitution of India. object that appeals should be heard expeditiously and that assesses should not misuse stay orders granted in their favour by adopting delaying tactics is not at all achieved by provision as it stands. On contrary, clubbing together of well behaved assesses and those who cause delay in appeal proceedings is itself violative of Article 14 of Constitution and has no nexus or connection with object sought to be achieved. said expression introduced by Finance Act, 2008 is, therefore, struck down as being violative of Article 14 of Constitution of India. This would revert us to position of law as interpreted by Bombay High Court in Narang Overseas (supra), with which we are in full agreement. Consequently, we hold that, where delay in disposing of appeal is not attributable to assessee, Tribunal has power to grant extension of stay beyond 365 days in deserving cases. writ petitions are allowed as above. [at page 107-109] 14. It is settled law that challenges to tax statutes made under Article 14 of Constitution of India can be on grounds relatable to discrimination as well as grounds relatable to manifest arbitrariness. These grounds may be procedural or substantive in nature. Thus, in Suraj Mall Mohta 20 and Co. v. A.V. Visvanatha Sastri (1955) 1 SCR 448, this Court struck down Section 5(4) of Taxation on Income (Investigation Commission) Act, 1947 on ground that procedure prescribed was substantially more prejudicial and more drastic to assessee than procedure contained in Indian Income Tax Act, 1922. Section 5(4) of aforesaid Act was thus struck down as piece of discriminatory legislation offending against provisions of Article 14 of Constitution of India. 15. Instances of taxation statutes being struck down on substantive grounds which had alleged discrimination can be found in 5-Judge decision of this Court in Kunnathat Thatehunni Moopil Nair v. State of Kerala (1961) 3 SCR 77, in which uniform tax called basic tax levied under provisions of Travancore Cochin Land Tax Act, 1955 was held to be discriminatory as it treated unequals equally. Court held: Ordinarily, tax on land or land revenue is assessed on actual or potential productivity of land sought to be taxed. In other words, tax has reference to income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to incidence of taxation. Under Act in question we shall take hypothetical case of number of persons owning and possessing same area of land. One makes nothing out of land, because it is arid desert. second one does not make any income, but could raise some crop after disproportionately large investment of labour and 21 capital. third one, in due course of husbandry, is making land yield just enough to pay for incidental expenses and labour charges besides land tax or revenue. fourth is making large profits, because land is very fertile and capable of yielding good crops. Under Act, it is manifest that fourth category, in our illustration, would easily be able to bear burden of tax. third one may be able to bear tax. first and second one will have to pay from their own pockets, if they could afford tax. If they cannot afford tax, property is liable to be sold, in due process of law, for realisation of public demand. It is clear, therefore, that inequality is writ large on Act and is inherent in very provisions of taxing section. It is also clear that there is no attempt at classification in provisions of Act. Hence, no more need be said as to what could have been basis for valid classification. It is one of those cases where lack of classification creates inequality. It is, therefore, clearly hit by prohibition to deny equality before law contained in Article 14 of Constitution. [at page 91-92] Likewise, in Union of India v. A. Sanyasi Rao (1996) 3 SCC 465, this Court struck down Section 44-AC of Income Tax Act as being discriminatory when only particular trades were singled out for discriminatory treatment, reliefs under Sections 28 to 43-C of Income Tax Act being denied only to such trades. This was done as denial of such relief had no nexus to object sought to be achieved by legislation and resulted in unfairness, arbitrariness and denial of equality of treatment (see paragraph 22). 22 16. other facet of Article 14 has been recently resurrected by 5- Judge Bench judgment in Shayara Bano v. Union of India (2017) 9 SCC 1 as follows: 101. It will be noticed that Constitution Bench of this Court in Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] stated that it was settled law that subordinate legislation can be challenged on any of grounds available for challenge against plenary legislation. This being case, there is no rational distinction between two types of legislation when it comes to this ground of challenge under Article 14. test of manifest arbitrariness, therefore, as laid down in aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of view that arbitrariness in sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14. 17. Judged by both these parameters, there can be no doubt that third proviso to Section 254(2A) of Income Tax Act, introduced by Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of Constitution of India. First and foremost, as has correctly been held in impugned judgment, unequals are treated equally in that no differentiation is made by third proviso between assessees who 23 are responsible for delaying proceedings and assessees who are not so responsible. This is little peculiar in that legislature itself has made aforesaid differentiation in second proviso to Section 254(2A) of Income Tax Act, making it clear that stay order may be extended upto period of 365 days upon satisfaction that delay in disposing of appeal is not attributable to assessee. We have already seen as to how, as correctly held by Narang Overseas (supra), second proviso was introduced by Finance Act, 2007 to mitigate rigour of first proviso to Section 254(2A) of Income Tax Act in its previous avatar. Ordinarily, Appellate Tribunal, where possible, is to hear and decide appeals within period of four years from end of financial year in which such appeal is filed. It is only when stay of impugned order before Appellate Tribunal is granted, that appeal is required to be disposed of within 365 days. So far as disposal of appeal by Appellate Tribunal is concerned, this is directory provision. However, so far as vacation of stay on expiry of said period is concerned, this condition becomes mandatory so far as assessee is concerned. object sought to be achieved by third proviso to Section 254(2A) of Income Tax Act is without doubt speedy disposal of appeals before Appellate Tribunal in cases in which stay has been granted in favour of assessee. But such object cannot itself be discriminatory 24 or arbitrary, as has been felicitously held in Nagpur Improvement Trust v. Vithal Rao (1973) 3 SCR 39 as follows: It is now well-settled that State can make reasonable classification for purpose of legislation. It is equally well-settled that classification in order to be reasonable must satisfy two tests: (i) classification must be founded on intelligible differentia and (ii) differentia must have rational relation with object sought to be achieved by legislation in question. In this connection it must be borne in mind that object itself should be lawful. object itself cannot be discriminatory, for otherwise, for instance, if object is to discriminate against one section of minority discrimination cannot be justified on ground that there is reasonable classification because it has rational relation to object sought to be achieved. [at page 47] Since object of third proviso to Section 254(2A) of Income Tax Act is automatic vacation of stay that has been granted on completion of 365 days, whether or not assessee is responsible for delay caused in hearing appeal, such object being itself discriminatory, in sense pointed out above, is liable to be struck down as violating Article 14 of Constitution of India. Also, said proviso would result in automatic vacation of stay upon expiry of 365 days even if Appellate Tribunal could not take up appeal in time for no fault of assessee. Further, vacation of stay in favour of revenue would ensue even if revenue is itself responsible for delay in hearing appeal. In this sense, said 25 proviso is also manifestly arbitrary being provision which is capricious, irrational and disproportionate so far as assessee is concerned. 18. In fact, in recent judgment of this Court in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta (2020) 8 SCC 531, word mandatorily in 2 nd proviso inserted through amendment made to Section 12(3) of Insolvency and Bankruptcy Code, 2016 was struck down. This Court held: 124. Given fact that timely resolution of stressed assets is key factor in successful working of Code, only real argument against amendment is that time taken in legal proceedings cannot ever be put against parties before NCLT and NCLAT based upon Latin maxim which subserves cause of justice, namely, actus curiae neminem gravabit. 125. In Atma Ram Mittal v. Ishwar Singh Punia [Atma Ram Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284] , this Court applied maxim to time taken in legal proceedings under Haryana Urban (Control of Rent and Eviction) Act, 1973, holding: (SCC pp. 288-89, para 8) 8. It is well settled that no man should suffer because of fault of court or delay in procedure. Broom has stated maxim actus curiae neminem gravabit act of court shall prejudice no man. Therefore, having regard to time normally consumed for adjudication, ten years' exemption or holiday from application of Rent Act would become illusory, if suit has to be filed within that time and be disposed of finally. It is common knowledge that unless suit is instituted soon after date of letting it would never be disposed of within ten years and even then within 26 that time it may not be disposed of. That will make ten years holiday from Rent Act illusory and provide no incentive to landlords to build new houses to solve problem of shortages of houses. purpose of legislation would thus be defeated. Purposive interpretation in social amelioration legislation is imperative irrespective of anything else. 126. Likewise, in Sarah Mathew v. Institute of Cardio Vascular Diseases [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] , this Court held that for purpose of computing limitation under Section 468 of Code of Criminal Procedure, 1973 relevant date is date of filing of complaint and not date on which Magistrate takes cognizance, applying aforesaid maxim as follows: (SCC pp. 96-97, para 39) 39. As we have already noted in reaching this conclusion, light can be drawn from legal maxims. Legal maxims are referred to in Bharat Kale [Bharat Damodar Kale v. State of A.P., (2003) 8 SCC 559 : 2004 SCC (Cri) 39] , Japani Sahoo [Japani Sahoo v. Chandra Sekhar Mohanty, (2007) 7 SCC 394 : (2007) 3 SCC (Cri) 388] and Vanka Radhamanohari [Vanka Radhamanohari v. Vanka Venkata Reddy, (1993) 3 SCC 4 : 1993 SCC (Cri) 571] . object of criminal law is to punish perpetrators of crime. This is in tune with well- known legal maxim nullum tempus aut locus occurrit regi, which means that crime never dies. At same time, it is also policy of law to assist vigilant and not sleepy. This is expressed in Latin maxim vigilantibus et non dormientibus, jura subveniunt. Chapter XXXVI CrPC which provides limitation period for certain types of offences for which lesser sentence is provided draws support from this maxim. But, even certain offences such as Section 384 or 465 IPC, which have lesser punishment may have serious social consequences. provision is, therefore, made for condonation of delay. Treating date of filing of complaint or date of initiation of proceedings as relevant date for computing limitation under Section 468 of Code 27 is supported by legal maxim actus curiae neminem gravabit which means that act of court shall prejudice no man. It bears repetition to state that court's inaction in taking cognizance i.e. court's inaction in applying mind to suspected offence should not be allowed to cause prejudice to diligent complainant. Chapter XXXVI thus presents interplay of these three legal maxims. provisions of this Chapter, however, are not interpreted solely on basis of these maxims. They only serve as guiding principles. 127. Both these judgments in Atma Ram Mittal [Atma Ram Mittal v. Ishwar Singh Punia, (1988) 4 SCC 284] and Sarah Mathew [Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC 62 : (2014) 1 SCC (Cri) 721] have been followed in Neeraj Kumar Sainy v. State of U.P. [Neeraj Kumar Sainy v. State of U.P., (2017) 14 SCC 136 : 8 SCEC 454] , SCC paras 29 and 32. Given fact that time taken in legal proceedings cannot possibly harm litigant if Tribunal itself cannot take up litigant's case within requisite period for no fault of litigant, provision which mandatorily requires CIRP to end by certain date without any exception thereto may well be excessive interference with litigant's fundamental right to non-arbitrary treatment under Article 14 and excessive, arbitrary and therefore unreasonable restriction on litigant's fundamental right to carry on business under Article 19(1)(g) of Constitution of India. This being case, we would ordinarily have struck down provision in its entirety. However, that would then throw baby out with bath water, inasmuch as time taken in legal proceedings is certainly important factor which causes delay, and which has made previous statutory experiments fail as we have seen from Madras Petrochem [Madras Petrochem Ltd. v. BIFR, (2016) 4 SCC 1 : (2016) 2 SCC (Civ) 478] . Thus, while leaving provision otherwise intact, we strike down word mandatorily as being manifestly arbitrary under Article 14 of Constitution of India and as being excessive and unreasonable restriction on litigant's 28 right to carry on business under Article 19(1)(g) of Constitution. effect of this declaration is that ordinarily time taken in relation to corporate resolution process of corporate debtor must be completed within outer limit of 330 days from insolvency commencement date, including extensions and time taken in legal proceedings. However, on facts of given case, if it can be shown to Adjudicating Authority and/or Appellate Tribunal under Code that only short period is left for completion of insolvency resolution process beyond 330 days, and that it would be in interest of all stakeholders that corporate debtor be put back on its feet instead of being sent into liquidation and that time taken in legal proceedings is largely due to factors owing to which fault cannot be ascribed to litigants before Adjudicating Authority and/or Appellate Tribunal, delay or large part thereof being attributable to tardy process of Adjudicating Authority and/or Appellate Tribunal itself, it may be open in such cases for Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under newly added proviso to Section 12, if by reason of all aforesaid factors grace period of 90 days from date of commencement of Amending Act of 2019 is exceeded, there again discretion can be exercised by Adjudicating Authority and/or Appellate Tribunal to further extend time keeping aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, general rule being that 330 days is outer limit within which resolution of stressed assets of corporate debtor must take place beyond which corporate debtor is to be driven into liquidation. 19. Coming to arguments of learned ASG, his reliance upon passages contained in M/s M. Ramnarain (P) Ltd. v. State Trading Corpn. of India Ltd. (1983) 3 SCC 75 (paragraph 16) and M. 29 Janardhana Rao v. CIT (2005) 2 SCC 324 (paragraph 14) do not carry matter any further. In M/s M. Ramnarain (supra) what was held in paragraph 16 was that statutory right of appeal conferred on party may be lost by application of provisions of some law or by conduct of party. This was held in context of provisions of Order XX Rule 11 of Code of Civil Procedure, 1908, which was held by High Court in that case to deprive Appellant of his right to prefer appeal against main decree. High Court judgment was set aside, this Court holding: 21. Though by virtue of provisions of Original Side Rules of Bombay High Court earlier appeal could be permitted to be filed without certified copy of decree or order, appeal would not be valid and competent unless further requirement of filing certified copy had been complied with. At time when earlier Appeal No. 36 of 1981 had been withdrawn, certified copy of decree had not been filed. said appeal without certified copy of decree remained incompetent appeal. withdrawal of incompetent appeal which will indeed be no appeal in eye of law cannot in any way prejudice right of any appellant to file proper appeal, if right of appeal is not otherwise lost by lapse of time or for any other valid reason. We are, therefore, of opinion that provisions contained in Order 20 Rule 11 of Code do not in facts and circumstances of present case deprive appellant of his right to file appeal against decree. This judgment is distinguishable as it does not deal with constitutional validity of appeal provision. 30 20. Likewise, judgment in Janardhana Rao (supra), which held that right of appeal is neither natural nor inherent right but has to be regulated in accordance with law in force at relevant time, conditions of appellate provision having to be strictly fulfilled, is also judgment which has no reference to constitutional validity of appeal provision being assailed. In point of fact, this Court s judgment in Mardia Chemicals (supra) comes nearer home when constitutional validity of condition for exercise of right of appeal is assailed. This was felicitously put by this Court as follows: 60. requirement of pre-deposit of any amount at first instance of proceedings is not to be found in any of decisions cited on behalf of respondent. All these cases relate to appeals. amount of deposit of 75% of demand, at initial proceeding itself sounds unreasonable and oppressive, more particularly when secured assets/the management thereof along with right to transfer such interest has been taken over by secured creditor or in some cases property is also sold. Requirement of deposit of such heavy amount on basis of one-sided claim alone, cannot be said to be reasonable condition at first instance itself before start of adjudication of dispute. Merely giving power to Tribunal to waive or reduce amount, does not cure inherent infirmity leaning one-sidedly in favour of party, who, so far has alone been party to decide amount and fact of default and classifying dues as NPAs without participation/association of borrower in process. Such onerous and oppressive condition should not be left operative in expectation of reasonable exercise of discretion by authority concerned. Placed in situation as indicated above, where it may not be possible for borrower to raise 31 any amount to make deposit, his secured assets having already been taken possession of or sold, such rider to approach Tribunal at first instance of proceedings, captioned as appeal, renders remedy illusory and nugatory. 61. In case of Seth Nand Lal [1980 Supp SCC 574] while considering question of validity of pre-deposit before availing right of appeal Court held: (SCC p. 590, para 22) [R]ight of appeal is creature of statute and while granting right legislature can impose conditions for exercise of such right so long as conditions are not so onerous as to amount to unreasonable restrictions rendering right almost illusory. [emphasis supplied] This Court ultimately struck down Section 17(2) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act ) holding that in circumstances mentioned, deposit of 75% of amount claimed as pre-condition to hearing of appeal before Debt Recovery Tribunal under Section 17 of SARFAESI Act was onerous, oppressive, unreasonable, arbitrary and hence violative of Article 14 of Constitution of India. 21. learned ASG then relied upon judgments which indicate that when Article 14 of Constitution of India is applied to tax legislation, greater freedom in joints must be allowed by Court in adjudging constitutional validity of same. For this purpose, he relied upon 32 State of M.P. v. Bhopal Sugar Industries Ltd. (1964) 6 SCR 846. In this case, judgment of this Court held that if statute discloses permissible policy of taxation, Courts will uphold it. If, however, tax was imposed deliberately with object of differentiating between persons similarly circumstanced, such tax would be liable to be struck down. 22. We have already seen how unequals have been treated equally so far as assessees who are responsible for delaying appellate proceedings and those who are not so responsible, resulting in violation of Article 14 of Constitution of India. Also, expression permissible policy of taxation would refer to policy that is constitutionally permissible. If policy is itself arbitrary and discriminatory, such policy will have to be struck down, as has been found in paragraph 17 above. 23. other judgment relied upon by learned ASG is judgment in N. Venugopala Ravi Varma Rajah v. Union of India (1969) 1 SCC 681 (paragraph 14). This judgment speaks of larger play in joints to legislative discretion in matter of classification being granted when such legislation is tax legislation. caveat applied in this paragraph is that taxing statute may contravene Article 14 of Constitution of India if it seeks to impose upon same class of property, persons, etc., something which leads to obvious inequality. It 33 is this caveat that has been applied to third proviso to Section 254(2A) of Income Tax Act. 24. learned ASG then relied upon Commr. of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1 (paragraphs 32 to 34). This judgment only reiterates well-settled principle that in field of taxation hardship or equity has no role to play in determining eligibility to tax. present appeals have nothing to do with determining eligibility to tax. They have only to do with frontal challenge to constitutional validity of appeal provision in Income Tax Act. Also, it is important to remember that golden rule of interpretation is not given go-by when it comes to interpretation of tax statutes. This Court in CIT v. J.H. Gotla (1985) 4 SCC 343, put it well when it said: 46. Where plain literal interpretation of statutory provision produces manifestly unjust result which could never have been intended by Legislature, Court might modify language used by Legislature so as to achieve intention of Legislature and produce rational construction. task of interpretation of statutory provision is attempt to discover intention of Legislature from language used. It is necessary to remember that language is at best imperfect instrument for expression of human intention. It is well to remember warning administered by Judge Learned Hand that one should not make fortress out of dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is surest guide to their meaning. 47. We have noted object of Section 16(3) of Act which has to be read in conjunction with Section 34 24(2) in this case for present purpose. If purpose of particular provision is easily discernible from whole scheme of Act which in this case is, to counteract effect of transfer of assets so far as computation of income of assessee is concerned then bearing that purpose in mind, we should find out intention from language used by Legislature and if strict literal construction leads to absurd result i.e. result not intended to be subserved by object of legislation found in manner indicated before, and if another construction is possible apart from strict literal construction then that construction should be preferred to strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if construction results in equity rather than in injustice, then such construction should be preferred to literal construction. Furthermore, in instant case we are dealing with artificial liability created for counteracting effect only of attempts by assessee to reduce tax liability by transfer. It has also been noted how for various purposes business from which profit is included or loss is set off is treated in various situations as assessee's income. scheme of Act as worked out has been noted before. 25. law laid down by impugned judgment of Delhi High Court in M/s Pepsi Foods Ltd. (supra) is correct. Resultantly, judgments of various High Courts which follow aforesaid declaration of law are also correct. Consequently, third proviso to Section 254(2A) of Income Tax Act will now be read without word even and words is not after words delay in disposing of appeal . Any order of stay shall stand vacated after expiry of period or periods mentioned in Section only if delay in disposing of 35 appeal is attributable to assessee. appeals of revenue are, therefore, dismissed. .......................J. [ ROHINTON FALI NARIMAN ] .......................J. [ B.R. GAVAI ] .......................J. [ HRISHIKESH ROY ] New Delhi; April 06, 2021. 36 Deputy Commissioner of Income-tax & Anr. v. Pepsi Foods Ltd. (Now Pepsico India Holdings Pvt. Ltd.)