Supreme Court upholds Bombay High Court's reading down of Section 245HA(1)(iv) of Income Tax Act.

Case Name:

Union of India vs Star Television News Ltd.

Petition(s) for Special Leave to Appeal (C) No(s).27873/2010

Key Takeaways

- The Supreme Court upheld the Bombay High Court's well-reasoned judgment reading down Section 245HA(1)(iv) to avoid declaring it unconstitutional.

- The court accepted the High Court's interpretation that settlement proceedings would abate under Section 245HA(1)(iv) only if the delay was caused by reasons attributable to the applicant.

- The court did not find any reason to interfere with the High Court's judgment, which struck a balance between upholding the provision's validity and preventing arbitrary application.

Issue

Whether the Supreme Court should uphold the Bombay High Court's judgments reading down Section 245HA(1)(iv) of the Income Tax Act, 1961, to avoid declaring it unconstitutional.

Facts

- The Union of India filed appeals challenging the Bombay High Court's judgments in a batch of writ petitions filed by various assessees.

- The writ petitions challenged the validity of Sections 245HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by the Finance Act, 2007.

- The High Court found the provisions, particularly Section 245HA(1)(iv), to be violative of Article 14 of the Constitution (right to equality) but read them down to avoid invalidation.

Judgement

The Supreme Court dismissed the appeals filed by the Union of India and upheld the Bombay High Court's judgments. The court found the High Court's judgment to be well-considered and saw no reason to interfere with it.

The High Court had read down Section 245HA(1)(iv) to mean that settlement proceedings would abate only if the delay in disposing of the application was attributable to reasons on the part of the applicant who had made the application under Section 245C of the Income Tax Act.

FAQs

Q1. What was the issue with Section 245HA(1)(iv) of the Income Tax Act?

A1. The Bombay High Court found the provision, which fixed a cut-off date of March 31, 2008, for abatement of settlement proceedings, to be arbitrary and violative of Article 14 of the Constitution (right to equality).

Q2. How did the Bombay High Court resolve the issue?

A2. Instead of invalidating the provision, the High Court read it down to mean that settlement proceedings would abate only if the delay in disposing of the application was attributable to reasons on the part of the applicant.

Q3. What was the Supreme Court's decision?

A3. The Supreme Court dismissed the appeals filed by the Union of India and upheld the Bombay High Court's well-reasoned judgments reading down Section 245HA(1)(iv).

Q4. What was the significance of the Supreme Court's decision?

A4. The decision upheld the High Court's balanced approach of preserving the provision's validity while preventing its arbitrary application, ensuring fairness and adherence to the principles of equality enshrined in the Constitution.

Q5. Does the judgment set any legal precedent?

A5. The judgment does not explicitly set a new legal precedent but reinforces the principles of constitutional interpretation and the courts' power to read down statutory provisions to uphold their validity while preventing arbitrary application.

Delay condoned.

In all these appeals filed by the Union of India, the correctness of judgments dated 16.09.2014 and 23.09.2014 rendered by the Bombay High Court in a batch of writ petitions is questioned. In those writ petitions filed by various assessees, the validity of Sections 245 HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by Finance Act, 2007 was challenged. The High Court, by a detailed judgment, found the aforesaid provisions to be violative of Article 14 etc but at the same time, it did not invalidate these petitions as the High Court was of the opinion that it was possible to read down the provisions of Section 245HA(1)(iv) in particular to avoid holding the provisions as unconstitutional. The conclusion so arrived at is summed up in paragraph 54 of the impugned judgment, which reads as under:

“54. From the above discussion having arrived at a conclusion that fixing the cutoff date as 31st March, 2008 was arbitrary the provisions of Section 245HA(1)(iv) to that extent will be also arbitrary. We have also held that it is possible to read down the provisions of Section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read Section 245HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under Section 245C. Consequently only such proceedings would abate under Section 245HA(1)(iv).

Considering the above, the Settlement Commissioner to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the Applicant. If it comes to the conclusion that it was not so, then to proceed with the application as if not abated.

Respondent No.1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so as the Benches where there is heavy pendency like Delhi and Mumbai.”

We are of the opinion that it is a well-considered judgment of the High Court and does not call for any interference.

All these appeals are accordingly dismissed.

(A.K. SIKRI)

(ROHINTON FALI NARIMAN)

NEW DELHI;

MARCH 25, 2015.