Deputy Commissioner Of Income Tax & Anr v. M/S. Pepsi Foods Ltd. (Now Pepsico India Holdings Pvt. Ltd.)

[2021] 4 S.C.R. 1 DEPUTY COMMISSIONER OF INCOME TAX & ANR. M/S. PEPSI FOODS LTD. (NOW PEPSICO INDIA HOLDINGS PVT. LTD.) (Civil Appeal No. 1106 of 2021) APRIL 06, 2021 [ROHINTON FALI NARIMAN, B. R. GAVAI ANDHRISHIKESH ROY, JJ. ] Income Tax Act, 1961: s. 254(2A) third proviso – Provisionas regards appellate tribunal granting stay – Third proviso providingfor automatic vacation of a stay that has been granted on thecompletion of 365 days, whether or not the assessee is responsiblefor the delay caused in hearing the appeal – Constitutional validityof – Held: Third proviso to s. 254(2A), is both arbitrary anddiscriminatory and, thus, liable to be struck down as offending Art.14 – Unequals are treated equally – No differentiation is made bythe third proviso between the assessees who are responsible fordelaying the proceedings and assessees who are not so responsible– Also, the said proviso would result in the automatic vacation of astay upon the expiry of 365 days even if the Appellate Tribunalcould not take up the appeal in time for no fault of the assessee –Further, vacation of stay in favour of the revenue would ensue evenif the revenue is itself responsible for the delay in hearing the appeal– Thus, the Third proviso to s. 254(2A) will now be read without theword “even” and the words “is not” after the words “delay indisposing of the appeal” – Any order of stay shall stand vacatedafter the expiry of the period or periods mentioned in the Sectiononlyif the delay in disposing of the appeal is attributable to theassessee – Constitution of India – Art.14. Tax/Taxation: Tax statutes – Challenge to tax statutes u/Art. 14 – Groundsfor challenge – Held: Can be on grounds relatable to discriminationas well as grounds relatable to manifest arbitrariness, which maybe procedural or substantive in nature – Constitution of India –Art.14. ATax statutes – Interpretation of – Golden rule of interpretation– Significance of – Held: Golden rule of interpretation cannot beignored while interpreting tax statutes. Dismissing the appeals, the Court HELD: 1.1 The third proviso to Section 254(2A) of theBIncome Tax Act, introduced by the Finance Act, 2008, would beboth arbitrary and discriminatory and, therefore, liable to be struckdown as offending Article 14 of the Constitution of India. Firstand foremost, it is correctly held in the impugned judgment, thatunequals are treated equally in that no differentiation is made byCthe third proviso between the assessees who are responsible fordelaying the proceedings and assessees who are not soresponsible. This is a little peculiar in that the legislature itselfhas made the said differentiation in the second proviso to Section254(2A) of the Income Tax Act, making it clear that a stay ordermay be extended upto a period of 365 days upon satisfaction thatDthe delay in disposing of the appeal is not attributable to theassessee. [Para 17][21-B-D] 1.2 The second proviso was introduced by the Finance Act,2007 to mitigate the rigour of the first proviso to Section 254(2A)of the Income Tax Act in its previous avatar. Ordinarily, theEAppellate Tribunal, where possible, is to hear and decide appealswithin a period of four years from the end of the financial year inwhich such appeal is filed. It is only when a stay of the impugnedorder before the Appellate Tribunal is granted, that the appeal isrequired to be disposed of within 365 days. So far as the disposalFof an appeal by the Appellate Tribunal is concerned, this is adirectory provision. However, so far as vacation of stay on expiryof the said period is concerned, this condition becomes mandatoryso far as the assessee is concerned. The object sought to beachieved by the third proviso to Section 254(2A) of the IncomeTax Act is without doubt the speedy disposal of appeals beforeGthe Appellate Tribunal in cases in which a stay has been grantedin favour of the assessee. But such object cannot itself bediscriminatory or arbitrary. [Para 17][21-D-G] Art.14 | [20 22 22 [2021] 4 ਐੀ Nagpur Improvement Trust v. Vithal Rao [1973] 3 SCR39 – relied on. Narang Overseas Pvt. Ltd. v. ITAT (2007) 295 ITR 22– approved. 1.3 Since the object of the third proviso to Section 254(2A)of the Income Tax Act is the automatic vacation of a stay that hasbeen granted on the completion of 365 days, whether or not theassessee is responsible for the delay caused in hearing the appeal,such object being itself discriminatory, in the sense pointed out,is liable to be struck down as violating Article 14 of theConstitution of India. Also, the said proviso would result in theautomatic vacation of a stay upon the expiry of 365 days even ifthe Appellate Tribunal could not take up the appeal in time for nofault of the assessee. Further, vacation of stay in favour of therevenue would ensue even if the revenue is itself responsiblefor the delay in hearing the appeal. In this sense, the said provisois also manifestly arbitrary being a provision which is capricious,irrational and disproportionate so far as the assessee is concerned.[Para 17][22-C-E] 1.4 Unequals have been treated equally so far as assesseeswho are responsible for delaying appellate proceedings and thosewho are not so responsible, resulting in a violation of Article 14of the Constitution of India. Also, the expression “permissible”policy of taxation would refer to a policy that is constitutionallypermissible. If the policy is itself arbitrary and discriminatory,such policy will have to be struck down. [Para 22][28-C-D] 1.5 The law laid down by the impugned judgment of theHigh Court is correct. Resultantly, the judgments of the variousHigh Courts which follow the said declaration of law are alsocorrect. Consequently, the third proviso to Section 254(2A) ofthe Income Tax Act will now be read without the word “even”and the words “is not” after the words “delay in disposing of theappeal”. Any order of stay shall stand vacated after the expiry ofthe period or periods mentioned in the Section onlyif the delayin disposing of the appeal is attributable to the assessee.[Para 25][30-A-B] A2. It is settled law that challenges to tax statutes made underArticle 14 of the Constitution of India can be on grounds relatableto discrimination as well as grounds relatable to manifestarbitrariness. These grounds may be procedural or substantivein nature. Also, it is important to remember that the golden ruleof interpretation is not given a go-by when it comes toBinterpretation of tax statutes. [Para 14, 24][19-A-B; 28-H; 29-A] M/s M. Ramnarain (P) Ltd. v. State Trading Corpn. ofIndia Ltd.(1983) 3 SCC 75: [1983] 3 SCR 25; M.Janardhana Rao v. CIT (2005) 2 SCC 324:[2005]1 SCR 874 – distinguished. Income Tax Officer v. M.K. Mohammed Kunhi [1969] 2SCR 65; Commissioner of Customs & Central Excise v.Kumar Cotton Mills (2005) 13 SCC 296; Commissionerof Income Tax v. M/s Maruti Suzuki (India) Ltd.(2014)362 ITR 215; DCIT v. Vodafone Essar Gujarat Ltd.D(2015) 376 ITR 23; M/s Pepsi Foods Ltd. v. ACIT (2015)376 ITR 87; Mardia Chemicals Ltd. v. Union of India(2004) 4 SCC 311 : [2004] 3 SCR 982; PML IndustriesLtd. v. CCE (2013) SCC OnLine P&H 4440; SurajMall Mohta and Co. v. A.V. Visvanatha Sastri [1955] 1ESCR 448; Kunnathat Thatehunni Moopil Nair v. Stateof Kerala [1961] 3 SCR 77; Union of India v. A. SanyasiRao (1996) 3 SCC 465 : [ 1996] 2 SCR 57; ShayaraBano v. Union of India (2017) 9 SCC 1 : [2017]9 SCR 797; Essar Steel India Ltd. Committee ofCreditors v. Satish Kumar Gupta (2020) 8 SCC 531 :F[2019] 16 SCR 275; State of M.P. v. Bhopal SugarIndustries Ltd. [1964] 6 SCR 846; N. Venugopala RaviVarma Rajah v. Union of India (1969) 1 SCC 681 :[1969] 3 SCR 827; Commr. of Customs v. Dilip Kumar& Co. (2018) 9 SCC 1 : [2018] 7 SCR 1191; CIT v.GJ.H. Gotla (1985) 4 SCC 343 : [1985] 2 Suppl. SCR 711 – referred to. Case Law Reference DEPUTY COMMISSIONER OF INCOME TAX & ANR. v. M/S.PEPSI FOODS LTD. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1106of 2021. From the Judgment and Order dated 19.05.2015 of the High Courtof Delhi at New Delhi in W.P. (C) No. 3650 of 2014. With Civil Appeal Nos. 1125, 1107, 1108, 1109, 1110, 1111, 1112, 1113,1114, 1115, 1116, 1117, 1118, 1119, 1120, 1121, 1122, 1123, 1124, 1126,1127, 1128, 1129, 1130, 1131, 1132, 1133, 1134, 1135, 1136, 1137, 1138,1139 of 2021. Vikramjit Banerjee, ASG., Arijit Prasad, Sr. Adv., Zoheb Hossain,N.K. Karheil, Amit Verma, H.R. Rao, D.L. Chidananda, Sanjay Kr.Visen, Mrs. Anil Katiyar, Advs. for the Appellants. AAjay Vohra, Sr. Adv., Ms. Kavita Jha, Ms. Devika Jain, UditNaresh, Deepak Chopra, Harpreet Singh Ajmani, Anmol Anand, Ms.Priya Tandon, Prakash Kumar, Rahul Gupta, D. Nageswar Rao, AmbhojKumar Sinha, Ms. Sherry Goyal, R. Chandrachud, Ms. Anuradha Dutt,Sachit Jolly, Tushar Jarwal, Ms. Disha Jham, Ms. B. Vijayalakshmi Menon,Shekhar Prit Jha, Dr. Ashutosh Garg, Salil Kapoor, Sumit Lal Chandani,BMs. Ananya Kapoor, Sanat Kapoor, Ms. Souma Singh, K.P. Singh,Praveen Swarup, Himanshu S. Sinha, Bhuwan Dhoopar, Yash Varmani,Syed Jafar Alam, Advs. for the Respondent. The Judgment of the Court was delivered by CR. F. NARIMAN, J. 1. Delay condoned. Leave granted. 2. The appeals before us raise an important question as to theconstitutional validity of the third proviso to Section 254(2A) of the IncomeTax Act, 1961 (hereinafter referred to as “Income Tax Act”).D 3. The 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 the facts in all the appeals beforeus. The Respondent-assessee is an Indian company incorporated onE24.02.1989 and is engaged in the business of manufacture and sale ofconcentrates, fruit juices, processing of rice and trading of goods forexports. The assessee is a group company of the multi-national PepsicoInc., a company incorporated and registered in the United States ofAmerica. The assessee-company merged with Pepsico India HoldingsFPvt. Ltd. w.e.f. 01.04.2010, in terms of a scheme of arrangement dulyapproved by the Hon’ble Punjab and Haryana High Court. On 30.09.2008,a return of income was filed for the assessment year 2008-2009 declaringa total income of INR 92,54,89,822. A final assessment order was passedon 19.10.2012 which was adverse to the assessee. Aggrieved by theaforesaid order, the assessee filed an appeal before the Income TaxGAppellate Tribunal (hereinafter referred to as “Tribunal”) on 29.04.2013.On 31.05.2013, a stay of the operation of the order of the assessingofficer was granted by the Tribunal for a period of six months. This staywas extended till 08.01.2014 and continued being extended until28.05.2014. Since the period of 365 days as provided in Section 254(2A)of the Income Tax Act was to end on 30.05.2014 beyond which noH further extension could be granted, the assessee, apprehending coerciveaction from the Revenue, filed a writ petition before the Delhi HighCourt on 21.05.2014 challenging the constitutional validity of the thirdproviso to Section 254(2A) of the Income Tax Act. By a judgment dated19.05.2015, the Delhi High Court struck down that part of the third provisoto Section 254(2A) of the Income Tax Act which did not permit theextension of a stay order beyond 365 days even if the assessee was notresponsible for delay in hearing the appeal. It is this judgment and severalother judgments from various High Courts that have been challenged bythe revenue in these appeals. 4. Shri Vikramjit Banerjee, learned ASG, assailed the impugnedjudgment of the Delhi High Court and other judgments following it, arguingthat there is no right to stay of a judgment in an appellate proceeding assuch stay is dependent upon the discretion of the Appellate Court. Thediscretion having been exercised once would not mean that automaticextensions of the same could be granted despite a reasonable periodhaving gone-by. He also argued that the discretionary remedy of a stayis part and parcel of the right to appeal which itself is a statutory right,and can be taken away by the legisl