Case Law Details

Case Name : Commissioner of Income-tax-I, Vs Indo Gulf Fertilizers Ltd. (Allahabad High Court)
Appeal Number : IT Appeal No. 155 OF 2009 and 72 of 2010
Date of Judgement/Order : 10/10/2012
Related Assessment Year :
Courts : All High Courts (4158) Allahabad High Court (242)

HIGH COURT OF ALLAHABAD

Commissioner of Income-tax-I, Lucknow

versus

Indo Gulf Fertilizers Ltd.

IT APPEAL NOs. 155 OF 2009 and 72 of 2010

OCTOBER 10, 2012

ORDER

1. This is an appeal filed under Section 260 A of the Income Tax Act 1961, in short hereinafter referred as the Act, against the order passed by the Tribunal. For the assessment years under consideration, the appeal was filed raising three substantial questions of law by the appellant. After hearing the appellant the appeal was admitted on 20.4.2010, which is reproduced as under:-

“We admit the present appeal on the following substantial questions of law:-

  1.  Whether the purchase of catalyst by respondent is a part of capital expenditure incurred on plant and machinery of enduring nature and accordingly the finding recorded by the Tribunal is not sustainable ?

  2.  Whether the Tribunal has committed illegality while allowing the interest on refund computed under section 143(1) of the Act even though no such interest was due under section 244-A of the Act ? “

2. During the course of final hearing, on 15.9.2011, Shri D.D.Chopra, learned counsel for the appellant had invited attention towards substantial question of law framed by this court (supra) and submitted that one additional substantial of law should be framed and admitted keeping in view the pleading on record and after taking into account the substantial question of law at Sl. No. 1which was already proposed in the present appeal as under :-

“Whether under the facts and circumstances of the case, the learned Income Tax Appellate Tribunal is justified in holding the cost of machinery spares as revenue expenditure purchased admittedly in the period 1985-86 to 2000-01 and capitalized in a single assessment year. “

Being satisfied with the argument advanced by the appellant, when we proceeded to dictate the order to frame another substantial question of law, Shri J.D.Mistri learned Senior Counsel, representing the respondents- assessee submitted that he wants to cite certain case laws in support of his argument to the effect that no additional substantial question of law can be framed at later stage. The order dated 15.9.2011 is reproduced as under:-

“1. Heard Sri D.D. Chopra, learned counsel for the appellant and Sri J.D. Mistri, learned Senior Counsel assisted by Sri Akarsh Garg on behalf of the respondent.

2. To substitute in place of respondent Indo Gulf Fertilizer Limited, the appellant prays for time to move application for impleadment. However, learned Senior Counsel for the respondent Sri J.D. Mistri, assisted by Sri Akarsh Garg, submits that he has no objection in case appellant substitutes Aditya Birla Novo Limited in place of respondent.

3. Accordingly, the appellant is permitted to substitute Aditya Birla Novo Limited in place of respondent forthwith. During the course of hearing, Sri D.D.Chopra submits that keeping in view the facts and circumstances of the case, one more substantial question of law be framed broadly keeping in view the question of law framed by the appellant himself at serial No. 1. In response to submissions made by the appellant’s counsel, learned Senior Counsel for respondents submits that keeping in view the order dated 20.4.2010, no further substantial question of law may be framed by this Court that too, on the basis of pleading of record. He further submits that once the Court applied its mind over the pleading of record and framed only two substantial question of law by order dated 20.4.2011, then it is not open to frame another substantial question of law based on same pleadings since it amounts to review of earlier order passed by this Court and only option for the appellant is to prefer appeal before the Hon’ble Supreme Court.

4. It has further been submitted that in any case, the same substantial question of law, contained in the memo of appeal, which was initially framed by the appellant in the memo of appeal, cannot be looked into and taken into account while framing another substantial question of law.

5. Section 260A of Income Tax Act, 1961 is reproduced as under:

“260A. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law.

(2) The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be–

(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Chief Commissioner or Commissioner.

(b)** ** **

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) 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.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which –

(a)  Has not been determined by the Appellate Tribunal : or

(b)  Has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).

(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.”

6.A plain reading of sub-section (3) of Section 260A of the Income Tax Act, 1961 shows that at the time of hearing for admission of appeal in case High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. Sub-section (4) further provides that appeal shall be heard only on the question so formulated and the respondent be allowed to argue the case, be permitted to argue the case that no such substantial question of law is involved. However, the proviso to sub-section (4) provides that nothing in this case shall be deemed to take away or abridge the power of 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.

7. Now, law is very well settled with regard to interpretation of statutes that every word, every line, para and section to be taken into account while interpreting the provisions. There cannot be any exclusion of any provision while interpreting the statutes. The reading should be combined one, section to section and word to word.

8. At this stage Sri J.D. Mistri learned Senior Counsel submits that he wants to site certain case law to advance the argument.

9. List on 29.9.2011 for further hearing. Parties counsel may submit written arguments and compilation of case laws on the next date of listing.”

3. At the face of record, on 15.9.2011, we were at the stage of final hearing of the matter and during the course of hearing learned counsel for the appellant had invited attention towards certain facts and circumstances and prayed for framing of one more substantial question of law. In view of request made by learned Senior counsel we have deferred the hearing and on 29.9.2012 again, we have heard learned counsel for the parties with regard to court’s right to frame additional substantial question of law keeping in view the provisions contained in Section 260 A of the Act.

4. Section 260 A of the Income Tax Act requires interpretation with regard to framing of additional substantial question of law at later stage, particularly, during the course of hearing. For convenience Section 260 A of the Income Tax Act is reproduced as under:-

Section 260A– APPEAL TO HIGH COURT

(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law.

(2) [The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be-

(a) filed within one hundred and twenty days from the date on which the order appealed against is [received by the assessee or the Chief Commissioner or Commissioner];

(b)** ** **

(c) In the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

[(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.]

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) 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.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which –

(a)  has not been determined by the Appellate Tribunal : or

(b)  has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1)

(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.]”

5. Shri D.D.Chopra, learned counsel for the appellant-Department, while advancing his argument to the court’s right to frame additional substantial of law submits that in view of the proviso of Sub-Section 4 of Section 260 A of the Act, courts have got right to formulate additional substantial question of law, if it is satisfied. The proviso categorically empowers the court that the mandate of sub-section 4 of Section 260A shall not deem 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. He submits that in any case, proviso contained in Sub-section 4 of Section 260 A does not take away courts power to frame additional substantial question of law by formulating new one, subject to satisfaction that the case involve such question. He relied on the ratio laid down in the case reported in [2011] 332 ITR 403 (Mad), Helios and Metheson information technology ltd. v. Assistant Commissioner of Income-Tax.

6. On the other hand, Shri J.D.Mistri, learned Senior Counsel assisted by Shri Ashish Bansal submits that the proviso should be interpreted keeping in view and within the ambit of Sub-Section 4 of Section 260 A of the Act. Learned counsel submits that by the proviso, right conferred by Sub-section 4 cannot be expanded. He further submits that courts have no jurisdiction to frame additional substantial question of law unless they are in the mid of hearing. He submits that framing of additional question of law would amount to review of order dated 20.4.2010 (supra) which is not permissible. The further submission of the learned Senior counsel is that since out of three questions framed by the appellant only two have been accepted and the third one shall deemed to be rejected. Hence, it cannot be a ground to frame additional question by de novo hearing. Once rejected then it amount to rejection for all time to come. He further submits that proviso cannot enlarge the main provision and court lacks jurisdiction to frame additional question. During the course of hearing when a question was raised to him by the court that how he define the word ‘satisfaction’ used in the proviso of sub-section 4 of Section 260 A, he submits that it is not necessary to look into it since he is questioning the jurisdiction of the court to frame additional substantial question of law on the basis of same pleading.

7. Learned Senior counsel relied upon a case decided on 15.12.1976 by Orissa High Court, Commissioner of Income-Tax v. Biju Patnaik reported in 1978 ITR 555 and 1993 (38) MPLJ 655, Kishanchand v. Ramkrishna.

PROVISO

8. The proviso being added in a Section is to qualify or create an exception to the original enactment. It qualifies the generality of the main enactment by providing an exception. LORD MACMILLAN in a case reported in AIR 1944 PC 171, Madras & Southern Maharatta Rly. Co. Ltd. v. Bezwada Municipality held that :-

“The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case.”

9. Hon’ble Supreme Court had followed the proposition of Madras & Southern Maharatta Rly (supra) in a case reported in AIR 1959 SC 713, CIT, Mysore etc. v. Indo Mercantile Bank Ltd. in the following words:-

“The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. It is a fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as a proviso………

It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. “

The aforesaid proposition of law has been again followed by Hon’ble Supreme Court in a case reported in AIR 1961 SC 1596, Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha.

10. In view of above, the proviso of sub-section 4 is an exception giving High Court a judicial discretion to frame additional substantial question of law during the course of hearing. The language used by the legislature in the proviso is quite clear and does not suffer from any ambiguity.

11. The legislature to their wisdom has used the words “nothing shall be deemed to take away or abridge the power of court”, means, in spite of Sub section 4 of Section 260 A, Court may frame additional substantial question of law. Court may formulate another substantial question of law for the reasons recorded if satisfied and feels that such substantial question of law involves.

REVIEW

12. It is incorrect to say that framing of another substantial question of law shall amount to review of order dated 20.4.2010. Argument seems to be misconceived. In Black’s Law Dictionary word “review” has been defined as under:-

“Review

  1.  Consideration, inspection, or reexamination of a subject or thing.

  2.  Plenary power to direct and instruct an agent or subordinate, including the right to remand, modify, or vacate any action by the agent or subordinate, or to act directly in place of the agent or subordinate <Subject to the Assembly’s review, the Council enjoys the same powers of review and delegation as the Assembly.”

13. In The Law Lexicon by P. Ramanatha Aiyar, 2nd Edition 2009; word “review” has been defined as under:-

“review–A review is a proceeding which exists by virtue of statue. It is in its nature a new trial of the issue previously tried between the parties, the cause of action being brought into court again for trail by a new petition. The proceedings in some respects resembles a writ of error, and also a new trial.

The process under which a court in certain circumstances can reconsider its own judgement; a general survey or re-examination; a retrospective survey of past actions etc. [Or. 47, R.1(2), C.P.C.]

The term ‘review’ means a judicial re-examination of the case in certain specified and prescribed circumstances. Parduman Singh v. State of Punjab, AIR 1958 Pun 63, 68.

Review his own order. Does not mean particular person passing the order. Kastar Singh Surjan Singh v. Custodian Muslim Evacuee Property Pepsu, AIR 1952 Pepsu 82. [Administration of evacuee Property Act, 1950, S. 26(2)]

Review of judgement. The expression, “review of judgement” in Art. 179, cl. (3) of the Limitation Act, 1877, is not defined anywhere in that Act. That expression in the Limitation Act, is used in the same sense in which it is used in C.P. Code, 1882. It is used interchangeably with the expression “review of decree” so as to include an amendment of decree that does not necessitate any alteration in the judgement.”

14. Shri J.D. Mistri learned Senior counsel vehemently argued that Section 260 A is pari materia to Section 100 of Code of Civil Procedure. Section 114 of the Code of Civil Procedure contains the provision with regard to review, which is reproduced as under:-

“Review–Subject as aforesaid, any person considering himself aggrieved–

(a)  by a decree or order from which an appeal is allowed by this Code, but from which no appeal has been preferred,

(b)  by a decree or order from which no appeal is allowed by this Code, or

(c)  by a decision on a reference from a Court of Small Causes, may apply for a review of judgement to the Court which passed the decree or made the order, and the Court may make such order thereon as it thinks fit.”

15. Order XLVII Rule 1 of the Code of Civil Procedure provides the condition under which a person aggrieved by an order or judgement may prefer a review under Section 114 of the Code of Civil Procedure. For convenience, Order XLVII Rule 1 of the CPC is reproduced as under:-

“1. Application for review of judgment. – (1) Any person considering himself aggrieved,-

 (a)  by a decree or order from which an appeal is allowed, but from which no appeal has been preferred,

 (b)  by a decree or order from which no appeal is allowed, or

 (c)  by a decision on a reference from a Court of Small Causes,

and who, from the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or order made, 6r on account of some mistake or error apparent on the face of the record, or for any other sufficient reason, desires to obtain a review of the decree passed or order made against him, may apply for a review of judgment to the Court which passed the decree or made the order.

(2) A party who is not appealing from a decree or order may apply for a review of judgment notwithstanding the pendency of an appeal by some other party except where the ground of such appeal is common to the applicant and the appellant, or when, being respondent, he can present to the Appellate Court the case on which he applies for the review.

[Explanation : The fact that the decision on a question of law on which the judgment of the court is based has been reversed or modified by the subsequent decision of a superior court in any other case, shall not be a ground for the review of such judgment.]

High Court Amendments

Kerala. – In Order XLVII, in rule 1, in sub-rule (1), in clause (c), for the words “court of small causes,” substitute the words “Court exercising small cause jurisdiction” [Vide Notification No. B1-3312/58, dated 7th April, 1959.] (9.6.1959).

16. It is trite law that review, revision and appeal are statutory remedy unless provided under the statue court cannot exercised such power. Question cropped up whether the formation of a new question amounts to review of original order. It appears that formulation of a new question keeping in view the letter and spirit of sub-section 4 of Section 260 A shall not amount to review of earlier order. From the dictionary meaning as well as statutory provisions, it is evident that a review deals with a situation where the court proceed to rehear over an order, judgement or decree passed by it earlier on the ground of error apparent at the face of record. The mandate of proviso of Subsection 4 of Section 260 A is to formulate a new question in addition to question already framed and not to review, modify or annul the question originally framed.

In case 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 the ends of justice, it may do so. Power conferred to High Court by the proviso cannot be abridged or taken away by Sub-section 4 of Section 260 A of the Act.

17. Accordingly, argument to the effect that formulation of new question shall amount to review of earlier order dated 20.4.2010 seems to be not sustainable, hence, rejected.

LEGAL FICTION

18. There is one another aspect of the matter. Legislature to their wisdom in the proviso added the word “shall deem to take away”. Deeming provision has been added consciously to confer wide power on the High Court to formulate additional substantial question of law and in case High Court to do so, the provision contained in subsection 4 shall not come into the way.

19. In Black’s Law Dictionary, word ‘deemed’ has been defined as under:-

“To treat (something) as if (1) it were really something else, or (2) it has qualities that is does not have<although the document was not in fact signed until April 21, it explicitly states that it must be deemed to have been signed on April 14>. 2. To consider, think, or judge <she deemed it necessary>.

“Deem’ has been traditionally considered to be a useful word when it is necessary to establish a legal fiction either positively by ‘deeming something be what it is not or negatively by ‘deeming’ something not to be what it is…All other uses of the word should be avoided….Phrases like’ if he deems fit’ or ‘as he deems necessary’ or nothing in this Act shall be deemed to…’are objectionable as necessary deviations from common language. ‘Thinks’ or ‘considers’ are preferable in the first two examples and ‘construed’ or ‘interpreted’ in the third…Deeming’ creates an artificiality and artificiality should not be resorted to if it can be avoided. “G.C. Thornton, Legislative Drafting 99 (4th ed. 1996)”

20. The word ‘deemed’ is frequently used in law to create a legal fiction which means for the purpose of respective law, what is deemed to be, must be regarded as being in fact also.

21. Hon’ble Supreme Court in the case reported in AIR 1954 SC 155 Income Tax Commissioner v. Bhogilal Laherchand while interpreting Section 4 of the Income Tax Act held that the term ‘deemed’ brings within the act of chargeability income not actually accruing but which is supposed notionally to have accrued.

22. In AIR 1959 SC 763 Income Tax, West Bengal v. Calcutta Stock Exchange Association, their Lordships held that the use of word ‘deemed’ shows that the Legislature is deliberately using the fiction of law treating a thing as something which otherwise it may not have been.

23. In AIR 2004 SC 5120 Sudha Rani Garg v. Jagdish Kumar, their Lordships ruled that the word ‘deemed’ is used to put beyond doubt a particular construction that might otherwise be uncertain.

24. In AIR 1980 SC 1468 Consolidated Coffee Ltd. and another v. Coffee Board, Bangalore, their Lordships held that a deeming provision might be made to include what is obvious or what is uncertain or to impose, for the purpose of a statute, an artificial construction of a word or phrase that would not otherwise prevail.

25. In (1996) 3 SCC 282 Governor of Andhra Pradesh v. H.E.H., The Nizam, Hyderabad, their Lordships ruled that the word ‘deemed’ used in Section 10 (3) of the Act is used to give effect to the operation of a statutory provision from a particular date or from the date the Act was brought into force.

26. In (2000) 5 SCC 415 Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. their Lordships held that the word ‘deemed’ means ‘supposed’, ‘considered’, ‘construed’, ‘thought’, ‘taken to be’, or ‘ presumed’.

27. Aforesaid proposition has been reiterated by catena of judgments. Some of them are AIR 1958 All 498 M.R. Mehrotra v. State, AIR 1972 SC 2350 Ramprakash v. S.A.F. Abbas, AIR 1959 Bom 477 New Shorrok Spinning And Manufacturing Co. Ltd. v. N.V. Raval Income Tax Officer AIR 1971 SC 44 Hira H. Advani v. State of Maharashtra, AIR 1951 Cal 139 Madhai Mondal v. Pram Krishna Binsar, AIR 1963 Bom. 61 Khatizabai Mohamed Ibrahim v. Controller of Estate Duty.

28. To sum up, whenever word ‘deemed’ is used in the statute in relation to a person or thing, it implies that the legislature after due consideration exercised their judgment in conforming with the status attributed to a person or thing. These two synonyms of the word ‘deemed’ are to be adjudged accordingly.

29. In view of above submission of Shri J.D. Mistri learned Senior Counsel that because of the word used in sub-section 4 to the effect that “only on the question so formulated” court lacks jurisdiction to formulate new question under the power conferred by the proviso seems to be not correct.

INTERPRETATION

30. The second argument of the learned Senior Counsel that proviso may not be enlarged the main provision as contained in sub-section 4 seems also to be misconceived argument. Once the proviso itself empowers the court to formulate another substantial question of law or new substantial question of law, in case, it is satisfied and power vested in court cannot be abridged away because of subsection 4 section 260 A, such argument seems to be not sustainable. Language of the proviso as well as entire Section 260 A does not suffer from any ambiguity.

31. Accepting the argument of Shri J.D. Mistri will amount to apply the principle of reading down or supply causus omissus. Causus Omisus/principle of reading down in a provision; ordinarily should not be supplied by judicial interpretative process, in language used in a provision is clear. Court cannot read anything into a statutory provision or rewrite a provision which is plain and unambiguous vide 2003 (6) SCC 516, Union of India Vs. Rajiv Kumar (para 18).The same principle has been reiterated in the cases reported in 2006 (2) SCC 670, Vemareddy Kumaraswamy Reddy and another v. State of A.P.; (2004) 11 SCC 625, Delhi Financial Corporation and others v. Rajeev Anand and others; AIR 1953 SC 148, Nalinakhya Bysacik v. Shyam Sunder Haldar and 2001 (8) SCC 61, Dental Council of India v. Hari Prakash.

32. Needless to say that the courts are not precluded to supply causus omissus in the statutory provisions in case a plain reading of the statute result into absurdity, anomaly and loss or injury to public exchequer or public at large, but present in not such case.

33. In AIR 1959 SC 422 (at page 427, 428) Viluswami Thevar v. G. Raja Nainar, their Lordships of Hon’ble Supreme Court held that a construction which gives rise to anomalies should be avoided.

34. In AIR 1955 SC 830(p. 833) Tirath Singh v. Bachittar Singh, Hon’ble Supreme Court observed, to quote :

“Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence.”

35. In view of above, since, provision itself by clear words empower the courts to formulate other question, in case satisfied for the reasons to be recorded, such argument seems to be not sustainable.

REOPENING OF ISSUE

36. The other argument of learned Senior counsel is that formulation of new question shall amount to reopening of the issue seems to be not correct. Everything left on the satisfaction of court by the legislature and there is purpose behind it. At the time of admission ordinarily questions are formulated by the court after hearing appellant’s counsel, on its own. There may be cases where court could have escaped from framing of substantial question of law touching root of the matter. Miscarriage of justice may cause because of non- framing of some substantial question of law. To deal with such situation, legislature to their wisdom had empowered the court to formulate additional substantial question of law, in case satisfied. As observed (supra) such power conferred to the court cannot be abridged or take away in view of proviso contained in Section 260 A (4) of the Act. Power conferred by the proviso is an exception and independent one.

37. Argument raised by Shri J.D. Mistri, that neither assessee nor appellant could advance argument to formulate new or additional substantial question of law, seems to be not sustainable. In case, during the course of hearing attention is invited by the appellant or the assessee with regard to certain important substantial question of law which has not been taken into account or escaped or has not been formulated for any other just reason court is vested with power to correct itself and formulate new or additional substantial question of law in case it is satisfied. Needless to say that power conferred to the court is judicious power and discretion should be exercised cautiously and judiciously after assigning reasons in terms of the proviso of subsection 4 of Section 260 A of the Act.

38. In The Major Law Lexicon, 4th Edition 2010, by P. Ramantha Aiyar, the meaning of word “satisfaction” on the basis of different pronouncement of the courts has been defined as under:-

“Satisfaction only means that ‘he must be in fact satisfied’ and not a dishonest satisfaction, which will be no satisfaction at all.–S.3 U.P. Maintenance of Public Order (Temporary) Act (4 of 1947), Durgadass v. Rex, AIR 1949 All 148 (FB)

Satisfied. ‘Satisfied” is a neutral word “with a wide range of meanings covering the criminal burden of proof (Satisfied to be sure) through the civil burden of proof (satisfied on a balance of prbabilities) to a synonym for “conclude’ or ‘determine’.”[Principles of Statutory Interpretation by G.P. Singh]

In construing S. 210, IPC (45 of 1860), it is necessary to attach to the word “satisfied” its ordinary meaning, and not to understand it as referring only to decrees the satisfaction of which has been certified.

The important words which came for consideration before the court were “satisfied on the evidence”. These words imply that the duty of the court is to pronounce decree if satisfied that the case for the petitioner has been proved but dismiss the petition if not so satisfied. In a suit based on a matrimonial offence it is not necessary and it is indeed rarely possible to prove the issue by any direct evidence for in very few cases can such proof is obtainable.

The word ‘satisfied’ means satisfied on preponderance of probabilities and not satisfied beyond a reasonable doubt, Gauri Dey v. Bidhu Bhusan Dey, AIR 1986 Gau 22, 23.

The word satisfied ‘satisfied’ in S. 2(1) Madras Maintenance of Public Order Act (1 of 1947). Thus must be read as meaning reasonably satisfied. It cannot import an arbitrary or irrational state of being satisfied. The satisfaction must be honest, careful and deliberate arrived at by the detaining authority, after exercising due care and caution. In re Venkataraman,. AIR 1949 Mad 529, 532.

The word ‘satisfied’ in Section 4(h) must be construed to mean ‘reasonably satisfied”, and, therefore, the finding of the Collector under Section 4(h) cannot be a subjective or arbitrary finding but must be based upon the adequate material, Chandreshwar Prasad v. State of Bihar, MLJ :QD (1956-1960) Vol. IV C2138: 1956 BLJRT 24 : AIR 1956 Pat 104.[Bihar Land Reforms Act (30 of 1950), S. 4(h)]

The word ‘satisfied’ in S. 4(h) must be construed to mean ‘reasonably satisfied’, and, therefore, the finding of the collector under S. 4(h) cannot be a subjective or arbitrary finding but must be based upon adequate material. The satisfaction of the collector under S. 4 (h) is not capricious satisfaction but must be capable of being tested in an objective manner. Chandreshwari Prasad Narain Deo v. State of Bihar, AIR 1956 Pat 104, 107. [Bihar Land Reforms Act (30 of 1950), S. 4(h)]

The phrase ‘satisfied’ occurs in many taxing statutes and is a familiar one for a great many years. The phrase “is satisfied” means, simply “makes up it mind.” 1977 Tax LR 1921 (DB) (Del).”

39. In view of above, keeping in view the meaning of word “satisfaction” or “satisfied”, after assigning reason court may formulate new substantial question of law, if it is necessary under the peculiar facts and circumstances of particular case after assigning reason.

40. Non-exercise of discretion by the court may be resulted into miscarriage of justice, hence, submission of learned Senior counsel that court lacks jurisdiction, seems to be not correct.

41. In the case of Helios and Metheson Information technology (supra) during the course of arguments when it was felt that some substantial question of law could not be formulated originally, the Madras High Court opined that it may formulate new substantial question of law, to quote relevant portion:-

“That apart, under section 260A of the Act, the proviso to sub-section (4) specifically provides that nothing in the sub-section should 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 specified that the case involves such question. Therefore, there is every power vested in this court to deal with the substantial question of law not formulated at the time when the appeal was entertained, subject however to the satisfaction of the court, that such a question was involved in the case and for reasons to be recorded for that purpose.”

42. The case of Commissioner of Income-Tax v. Biju Patnaik, (supra) relates to old provision and seems to be not applicable under the facts and circumstances of the present case. The subject matter before the Orissa High Court was under the old provision where there was no provision for consideration like Subsection 4 of Section 260 A of the Act which confers the court to formulate additional substantial question of law during hearing.

43. In the case of Kishanchand v. Ramkrishna (supra), learned Single Judge of Madra High Court while considering Section 100 of the Code of Civil Procedure ruled that once substantial question of law is framed ordinarily another may not be framed but that is subject to certain exception, to quote relevant portion:-

“To put in other words, additional question may be formulated and heard if at an earlier stage the question has been left out from being formulated either because it was not raised or escaped the attention of the court at that stage. The substantial question of law left out sub-silentio, as neither argued nor considered by the Court, can always be permitted to be formulated at a latter stage, but not when it has been abandoned or refused to be formulated by the court positively.”

44. Thus, even Hon’ble Single Judge of the Madras High Court admitted the courts power that in case while formulating the substantial question at original stage if courts escaped to formulate another question and attention of the court invited to that effect, court has option to frame a new substantial question of law for the reasons to be recorded. However, Hon’ble Single Judge of Madras High Court had not considered the provision contained in Section 100 of the Code of Civil Procedure in its totality as discussed in the preceding para.

45. Substantial question of law is to be determined and formulated by the Court keeping in view the overall material and evidence on record. In (2011) 1 SCC 673, Vijay Kumar Talwar v. Commissioner of Income Tax, Delhi, their Lordships defined the substantial question of law as under:-

“A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See Madan Lal v. Gopi, Narendra Gopal Vidyarthi v. Rajat Vidyarthi, Commr. of Customs v. Vijay Dasharath Patel Metroark Ltd. v. CCE and W.B. Electricity Regulatory Commission v. CESC Ltd.)

46. As observed (supra) there may be a situation when court fails to take notice of substantial question of law formulated by the appellant at the time of admission of appeal or during the course of hearing court may arrive to the conclusion that under the pleading on record and the factual matrix of the case it is necessary to frame additional substantial question of law, court may formulate new questions. Since, proviso of sub-section 4 of section 260 A of the Act provides that it shall not deem to take away or abridge the power of the court to hear for the reasons to be recorded the appeal or any other substantial question of law not formulated by it and if satisfied it may formulate and hear it, court can do so.

47. In the present case, language of both substantial question of law framed on 20.4.2010 seems to be different than what has been used by the appellant which reveals that after considering the pleading on record the substantial question of law was formulated by the court itself. The first question relates to capital expenditure incurred in catalyst of enduring nature. However, the appellant during the course of hearing argued that expenditure incurred on catalyst as capital expenditure co-relate with the expenditure of machineries spares etc, which requires consideration under the proviso.

48. Needless to mention that the Commissioner of Income Tax (Appeal) Lucknow in its order dated 22.3.2007 observed that to quote, “Furthermore the extent to which such spares & catalysts were utilized year to year, or were carried forward is unspecified. Yearly consumption and the circumstances leading them to be declared obsolete is not brought on record. Nor the manner in which the inventory is accounted. There is no sound logic for keeping catalysts ammonia etc. for so many years without use/disposal. The entire claim is without evidence. Catalysts & spares are specialized items and the writing off of such items after 18-5 years is irrational.” Thus, there is co-relation with the issue pertaining to the catalyst and spares. Now the proposed portion pertaining to spares may be admitted.

49. Argument advanced by the appellant’s counsel that power may be exercised during the course of hearing carries weight. This Court had proceeded to formulate another substantial question of law during hearing with regard to purchase of catalyst read with other evidence on record and at that juncture objection was raised by Shri J.D. Mistri learned Senior counsel with assertion that court lacks jurisdiction to formulate additional or new question of law.

49A. In view of above, we are of the view that for the reasons discussed (supra) under the proviso of sub-section 4 of Section 260 A of the Act, High Court has got ample power to frame new or additional substantial question of law during the course of hearing if it is satisfied on its own or on the pointing out of either of the parties for the reasons recorded. The provision contained in sub-section 1,2,3 or sub-section 4 of Section 260 A of the Act shall not come in the way of the High Court to exercise power conferred by the proviso of Subsection 4.

50. For the aforesaid reason objection raised by learned counsel for the respondent assessee is overruled and rejected. Court has right to frame new or additional substantial question of law at the stage of hearing in pursuance to power conferred by the proviso of Sub-Section 4 of Section 260 A of the Income Tax Act.

During the course of hearing learned counsel for the assessee submitted that in case objection is overruled then some time may be granted so that he may be preferred an appeal.

51. Accordingly, list the present appeal immediately after three weeks for further hearing so that after hearing parties and subject to satisfaction and reasons recorded, additional substantial question of law may be framed.

Question raised is decided accordingly.

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