Case Law Details
Tamil Nadu State Marketing Corporation Ltd. Vs Union of India And Others (Supreme Court of India)
When the vires of Section 40(a)(iib) of the Income Tax Act were challenged, which can be decided by the High Court alone in exercise of powers under Article 226 of the Constitution of India, the High Court ought to have decided the issue with regard to vires of Section 40(a)(iib) on merits, irrespective of the fact whether the matter was sub judice before the Income Tax Authority. Vires of a relevant provision goes to the root of the matter. The High Court has observed that the issue of raising a challenge to the vires of the provision at this stage need not be entertained, as the matter is still sub judice before the Income Tax Authority, even though it is open to the aggrieved party to question the same at the appropriate moment. Once the show cause notice was issued by the assessing officer calling upon the appellant – assessee to show cause why the VAT expenditure is not allowable as deduction in accordance with Section 40(a)(iib) of the Income Tax Act, while computing the income of the appellant, it can be said that the cause of action has arisen for the appellant to challenge the vires of Section 40(a)(iib) of the Income Tax Act and the appellant may not have to wait till the assessment proceedings before the Income Tax Authority are finalised. The stage at which the appellant approached the High Court and challenged the vires of Section 40(a)(iib) of the Income Tax Act can be said to be an appropriate moment. Therefore, the High Court ought to have decided the issue with respect to the challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits. The High Court has failed to exercise the powers vested in it under Article 226 of the Constitution of India by not deciding the writ petition on merits and not deciding the challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits.
In view of the above and as the High Court has not decided the issue with respect to vires of Section 40(a)(iib) of the Income Tax Act on merits, the matter is required to be remanded to the High Court to decide the writ petition on merits and decide the question with respect to challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merits.
In view of the above and for the reasons stated above, the present appeal succeeds. The impugned judgment and order passed by the High Court is hereby quashed and set aside and the matter is remitted to the High Court to decide the writ petition on merits with respect to challenge to the vires of Section 40(a)(iib) of the Income Tax Act.
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