Delhi HC verdict that struck down IT provision in part, upheld by SC

Aryan Grover

A division bench of the Delhi High Court, headed by Justice R F Nariman and comprising of Justice B R Gavai and Justice Hrishkesh Roy.

While hearing an appeal against a Delhi Court verdict has upheld the order which partially struck down a provision of the Income Tax law. The judgement came on a batch of appeals, which specifically pertained to the facts of the case M/s Pepsi Foods Ltd, now Pepsico India Holdings Pvt Ltd.

This provision (Section 254(2A)) of the Income Tax Act, 1961, which did not permit extension of a stay on tax assessment beyond 365 days, even if the assessee was not responsible for delay in the haring of appeals before a tribunal, was termed as “arbitrary and discriminatory” by the Supreme Court.

Justice RF Nariman in his judgement expressed, “The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee. But such an object cannot itself be discriminatory or arbitrary.”

The bench hearing the appeals took note of the fact that no differentiation is made in the provisio between assessees who are responsible for delaying tribunal proceedings as against those who are not responsible and thus, unequals are treated equally in this manner.

The Apex court concluded in its judgement that the impugned judgement of the Delhi High Court on this matter is correct and that the judgements of various High Courts which follow this declaration are also correct.

It resolved that the third proviso of section 245(2A) of the Income Tax Act should now be read without the word “even”, and the words “is not” are no more present after the words “delay in disposing of the appeal”.

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