Jharkhand High Court
The Commissioner Of Income Tax vs M/S New Punjab Motor Transport on 25 April, 2025
Bench: Sujit Narayan Prasad, Rajesh Kumar
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No. 26 of 2016
----
The Commissioner of Income Tax, Jamshedpur, 47, CH
Area, Bistupur, P.O. & P.S. Bistupur, Jamshedpur, District:
Singhbhum East.
... ... Appellant
Versus
M/s New Punjab Motor Transport, Room No. 28, Parking
Dimna Road, Mango, P.O. & P.S. Mango, Jamshedpur,
District: Singhbhum East
... ... Respondent
with
Tax Appeal No. 28 of 2016
----
The Commissioner of Income Tax, Jamshedpur, 47, CH
Area, Bistupur, P.O. & P.S. Bistupur, Jamshedpur, District:
Singhbhum East.
... ... Appellant
Versus
M/s New Punjab Motor Transport, Room No. 28, Parking
Dimna Road, Mango, P.O. & P.S. Mango, Jamshedpur,
District: Singhbhum East
... ... Respondent
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CORAM :HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
HON'BLE MR. JUSTICE RAJESH KUMAR
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For the Appellant : Mr. Kumar Vaibhav, Advocate
For the Respondents : Mr. Mahendra Kumar Chowdhary, Adv.
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C.A.V. on 21.04.2025 Pronounced on 25/04/2025
Per Sujit Narayan Prasad, J.
1. Both the appeals have been directed to be heard
together, as would be evident from order dated
06.11.2017 passed in Tax Appeal No. 28 of 2016.
Prayer:
2. Both the appeals have been directed against the order
dated 11.03.2016 passed by learned Income Tax
Appellate Tribunal, Circuit Bench, Ranchi in I.T.A. No.
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308/Ran/14 and I.T.A. No. 309/Ran/14 respectively for
the assessment year 2010-11 whereby and whereunder
the learned Tribunal has dismissed the case of the
Revenue Authority by allowing the case of the Assessee
and thus deleted the entire addition made by the
Assessing Officer.
Factual Aspect:
3. In both the cases, assessment order for
Assessment Year 2010-11 was framed on 30-03-2013
under Section 143(3) of the Income Tax Act, 1961, on a
total income of Rs. 8,99,42,090/-. The Assessee filed
return disclosing total income of Rs. 9,36,120/-. The
return was processed under Section 143(1) of the Act and
same was selected for scrutiny under CASS. The reason
for selection of the case for scrutiny assessment was to
examine the various aspects of the contractor business.
Finally, the Assessing Officer completed the assessment
under Section 143(3) of the Act determining total income
at Rs. 8,99,42,090/-. The Assessee being aggrieved
challenged the Assessment Order of the AO before the
CIT (A) being Appeal No. 520/Jsr./ 2012-13. The CIT(A)
vide order dated 29-08-2014 has partly allowed the
appeal of the assessee and sustained few additions made
by the Assessment Officer. The assessee as well as the
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Revenue Authority challenged the Order of the CIT (A)
before the learned ITAT. The assessee's appeal was
registered as I.T.A. No. 308/Ran/14 and the revenue's
appeal was registered as I.T.A. No. 309/Ran/14 for the
A.Y. 2010-11. The learned Tribunal vide its common
order dated 11-03-2016 has been pleased to allow the
case of the assessee and dismissed the case of the
Revenue, and deleted the entire addition made by the
AO.
4. Being aggrieved with the common order dated
11.03.2016 passed in I.T.A. No. 308/Ran/14 and I.T.A.
No. 309/Ran/14 respectively, the appellant has
approached this Court.
5. The matter was heard by the Co-ordinate Bench
of this Court on 22nd October, 2018. The Co-ordinate
Bench, after hearing learned counsel for the parties,
admitted the appeal(s) for hearing on the following
substantial questions of law:
I.Whether the Tribunal was right in deleting the
addition made by the Assessing Officer as well as
Commissioner under Section 4)(a)(ia) of the Income
Tax Act, 1961 in respect of payments made without
deduction of tax?
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II.Whether the Commissioner and the Tribunal were
right in law in allowing depreciation @ 30@ in respect
of trucks, trailors and excavators treating them as
plant and machinery?
6. Though the issues were framed by the Court but,
the parties have argued the matter on the issue that the
law laid by Allahabad High Court in the case of CIT Vs.
Vector Shipping Services (P) Ltd. [(2013) 262 CTR (All)
545] has been over-ruled by the Hon‟ble Apex Court in
the case of Palam Gas Service Vs. Commissioner of
Income Tax [(2017) 7 SCC 613] which is the basis of
passing the impugned order, as such with the consent of
learned counsel for the parties, the Court is proceeding
to examine the argument so advanced on this aspect of
the matter.
Submission on behalf of appellant-Revenue Authority:
7. At the outset, learned counsel for the appellant-
revenue has submitted that the impugned order has
been passed based upon the judgment rendered by
Allahabad High Court in the case of CIT Vs. Vector
Shipping Services (P) Ltd. (supra) which has been held
to be not a good law by the Hon‟ble Apex Court in the
case of Palam Gas Service Vs. Commissioner of
Income Tax (supra).
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8. It has been submitted by referring to paragraph
19 of the said judgment, wherein it has been taken note
of the fact that the High Court, after noticing the fact
that since the amounts had already been paid, it
straightaway concluded, without any discussion, that
Section 40(a)(i-a) of the Act would apply only when the
amount is "payable" and dismissed the appeal of the
Department stating that the question of law framed did
not arise for consideration. Thereafter, at paragraph 20
of the judgment, the Hon‟ble Apex Court has over-ruled
the judgment passed by Allahabad High Court holding it
to be not good in law.
9. Learned counsel for the appellant, based upon the
aforesaid ground, has submitted that since the very basis
of impugned order has been held to be not good in law,
therefore, the matter requires consideration.
Submission on behalf of respondent:
10. While on the other hand, Mr. Mahendra Kumar
Choudhary, learned counsel appearing for the assessee
has argued that even on merit there is no case of the
revenue and as such these matters may be decided on its
own merit. However, he has not disputed the fact that
the law laid by Allahabad High Court in the case of CIT
Vs. Vector Shipping Services (P) Ltd. (supra) has been
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over-ruled by Hon‟ble Apex Court in the case of Palam
Gas Service Vs. Commissioner of Income Tax (supra).
Analysis:
11. We have heard learned counsel for the parties and
gone through the pleading made in the memo of appeal
and the finding recorded by learned Tribunal.
12. The issue in dispute is
consideration/interpretation of Section 40(a)(i-a) of the
Income Tax Act, the same refers with respect to the
payable amount. Section 40 of the Act enumerates
certain situations wherein expenditure incurred by the
assessee, in the course of his business, will not be
allowed to be deducted in computing the income
chargeable under the head "Profits and Gains from
Business or Profession". One such contingency is
provided in sub-clause (i-a) of clause (a) of Section 40.
For ready reference, the said provision is quoted as
under:
"40. Amounts not deductible.--Notwithstanding anything
to the contrary in Sections 30 to 38, the following amounts
shall not be deducted in computing the income chargeable
under the head "Profits and gains of business or
profession"--
(i-a) any interest, commission or brokerage, fees for
professional services or fees for technical services payable
to a resident, or amounts payable to a contractor or sub-
contractor, being resident, for carrying out any work
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(including supply of labour for carrying out any work), on
which tax is deductible at source under Chapter XVII-B and
such tax has not been deducted or, after deduction, has not
been paid during the previous year, or in the subsequent
year before the expiry of the time prescribed under sub-
section (1) of Section 200:
Provided that where in respect of any such sum, tax has
been deducted in any subsequent year or, has been
deducted in the previous year but paid in any subsequent
year after the expiry of the time prescribed under sub-
section (1) of Section 200, such sum shall be allowed as a
deduction in computing the income of the previous year in
which such tax has been paid."
13. The fact about the applicability of Section 40(a)(i-
a) of the Income Tax Act is not the dispute herein for
which, the assessment has again been made and in
consequence thereof, the notice was issued under
Section 43(2) of the Income Tax Act, and the said reply
having not been found to be satisfactory, fresh
assessment order determining the total income of Rs.
8,99,42,090/- under Section 143(3) of the Income Tax
Act, 1961 has been made. The said order of assessment
has been challenged which went before the appellate
authority i.e., before the C.I.T (A) in Appeal No.520/Jsr./
2012-13 which was partly allowed vide order dated
29.08.2014 and sustained few additions made by the AO.
14. The Assessee as well as the Revenue challenged
the Order of the CIT (A) before the learned ITAT. The
Assessee's Appeal was registered as I.T.A. No.
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308/Ran/14 & the Revenue's Appeal was registered as
I.T.A. No. 309/Ran/14 for the A.Y. 10-11.
15. The assesse relied upon the judgment passed in
CIT Vs. Vector Shipping Services (P) Ltd. (supra),
wherein consideration has been made that interest upon
the TDS is not to be carried out on the amount already
paid in the financial year. The Tribunal, relying the
judgment rendered in the case of CIT Vs. Vector
Shipping Services (P) Ltd. (supra), vide its common
order dated 11-03-2016 has allowed the case of the
Assessee and dismissed the case of the Revenue, and
deleted the entire addition made by the AO.
16. Being aggrieved with the common order dated
11.03.2016 passed in I.T.A. No. 308/Ran/14 and I.T.A.
No. 309/Ran/14, the appellant has approached this
Court.
17. It is pertinent to note herein that consideration
which has been given by the Allahabad High Court with
respect to interpretation to provision of Section 40(a)(i-a)
of the Income Tax Act, fell for consideration before the
Hon‟ble Apex Court in the case of Palam Gas Service
Vs. Commissioner of Income Tax (supra).
18. The Hon‟ble Apex Court has interpreted the issue
namely the word „payable‟ in Section 40(a)(i-a) which
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would mean only when the amount is payable and not
when it is actually paid. Grammatically, it may be
accepted that the two words i.e. "payable" and "paid",
denote different meanings. For ready reference,
paragraph 15, 16 and 17 is quoted as under:
"15. In the aforesaid backdrop, let us now deal with the
issue, namely, the word "payable" in Section 40(a)(i-a)
would mean only when the amount is payable and not
when it is actually paid. Grammatically, it may be accepted
that the two words i.e. "payable" and "paid", denote
different meanings. The Punjab and Haryana High Court,
in P.M.S. Diesels [P.M.S. Diesels v. CIT, 2015 SCC OnLine
P&H 8793 : (2015) 374 ITR 562] , referred to above, rightly
remarked that the word "payable" is, in fact, an antonym of
the word "paid". At the same time, it took the view that it
was not significant to the interpretation of Section 40(a)(i-a).
Discussing this aspect further, the Punjab and Haryana
High Court first dealt with the contention of the assessee
that Section 40(a)(i-a) relates only to those assessees who
follow the mercantile system and does not cover the cases
where the assessees follow the cash system. That
contention was rejected in the following manner: (SCC
OnLine P&H paras 19-22)
19. There is nothing that persuades us to accept this
submission. The purpose of the section is to ensure the
recovery of tax. We see no indication in the section that this
object was confined to the recovery of tax from a particular
type of assessee or assessees following a particular
accounting practice. As far as this provision is concerned, it
appears to make no difference to the Government as to the
accounting system followed by the assessees. The
Government is interested in the recovery of taxes. If for
some reason, the Government was interested in ensuring
the recovery of taxes only from assessees following the
mercantile system, we would have expected the provision to
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so stipulate clearly, if not expressly. It is not suggested that
assessees following the cash system are not liable to
deduct tax at source. It is not suggested that the provisions
of Chapter XVII-B do not apply to assessees following the
cash system. There is nothing in Chapter XVII-B either that
suggests otherwise.
20. Our view is fortified by the Explanatory Note to Finance
Bill (No. 2) of 2004. Sub-clause (i-a) of clause (a) of Section
40 was introduced by the Finance Bill (No. 2) of 2004 with
effect from 1-4-2005. The Explanatory Note to Finance Bill,
2004 stated:
„... With a view to augment compliance of TDS provisions, it
is proposed to extend the provisions of Section 40(a)(i) to
payments of interest, commission or brokerage, fees for
professional services or fees for technical services to
residents, and payments to a resident contractor or sub-
contractor for carrying out any work (including supply of
labour for carrying out any work), on which tax has not
been deducted or after deduction, has not been paid before
the expiry of the time prescribed under sub-section (1) of
Section 200 and in accordance with the other provisions of
Chapter XVII-B.‟
21. The adherence to the provisions ensures not merely the
collection of tax but also enables the authorities to bring
within their fold all such persons who are liable to come
within the network of taxpayers. The intention was to
ensure the collection of tax irrespective of the system of
accounting followed by the assessees. We do not see how
this dual purpose of augmenting the compliance of Chapter
XVII and bringing within the Department's fold taxpayers is
served by confining the provisions of Section 40(a)(i-a) to
assessees who follow the mercantile system. Nor do we
find anything that indicates that for some reason the
legislature intended achieving these objectives only by
confining the operation of Section 40(a)(i-a) to assessees
who follow the mercantile system.
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22. The same view was taken by a Division Bench of the
Calcutta High Court in CIT v. Crescent Export
Syndicate [CIT v. Crescent Export Syndicate, 2013 SCC
OnLine Cal 23014 : (2013) 262 CTR 525 : (2013) 216
Taxman 258] . It was held: (SCC OnLine Cal para 9)
„9. ... "12.3. It is noticeable that Section 40(a) is applicable
irrespective of the method of accounting followed by an
assessee. Therefore, by using the term "payable"
legislature included the entire accrued liability. If assessee
was following mercantile system of accounting, then the
moment amount was credited to the account of payee on
accrual of liability, TDS was required to be made but if
assessee was following cash system of accounting, then on
making payment TDS was to be made as the liability was
discharged by making payment. The TDS provisions are
applicable both in the situation of actual payment as well of
the credit of the amount. It becomes very clear from the fact
that the phrase, "on which tax is deductible at source under
Chapter XVII-B", was not there in the Bill but incorporated
in the Act. This was not without any purpose."‟ [Ed.: As
observed in Merilyn Shipping & Transports v. CIT, ITA No.
477/viz of 2008, order dated 29-3-2012 (ITAT)] "
16. We approve the aforesaid view as well. As a fortiori, it
follows that Section 40(a)(i-a) covers not only those cases
where the amount is payable but also when it is paid. In
this behalf, one has to keep in mind the purpose with which
Section 40 was enacted and that has already been noted
above. We have also to keep in mind the provisions of
Sections 194-C and 200. Once it is found that the aforesaid
sections mandate a person to deduct tax at source not only
on the amounts payable but also when the sums are
actually paid to the contractor, any person who does not
adhere to this statutory obligation has to suffer the
consequences which are stipulated in the Act itself. Certain
consequences of failure to deduct tax at source from the
payments made, where tax was to be deducted at source or
failure to pay the same to the credit of the Central
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Government, are stipulated in Section 201 of the Act. This
section provides that in that contingency, such a person
would be deemed to be an assessee in default in respect of
such tax. While stipulating this consequence, Section 201
categorically states that the aforesaid sections would be
without prejudice to any other consequences which that
defaulter may incur. Other consequences are provided
under Section 40(a)(i-a) of the Act, namely, payments made
by such a person to a contractor shall not be treated as
deductible expenditure. When read in this context, it is clear
that Section 40(a)(i-a) deals with the nature of default and
the consequences thereof. Default is relatable to Chapter
XVII-B (in the instant case Sections 194-C and 200, which
provisions are in the aforesaid Chapter). When the entire
scheme of obligation to deduct the tax at source and paying
it over to the Central Government is read holistically, it
cannot be held that the word "payable" occurring in Section
40(a)(i-a) refers to only those cases where the amount is yet
to be paid and does not cover the cases where the amount
is actually paid. If the provision is interpreted in the manner
suggested by the appellant herein, then even when it is
found that a person, like the appellant, has violated the
provisions of Chapter XVII-B (or specifically Sections 194-C
and 200 in the instant case), he would still go scot-free,
without suffering the consequences of such monetary
default in spite of specific provisions laying down these
consequences.
17. The Punjab and Haryana High Court has exhaustively
interpreted Section 40(a)(i-a) keeping in mind different
aspects. We would again quote the following paragraphs
from the said judgment, with our complete approval thereto:
(P.M.S. Diesels case [P.M.S. Diesels v. CIT, 2015 SCC
OnLine P&H 8793 : (2015) 374 ITR 562] , SCC OnLine P&H
paras 26-28)
"26. Further, the mere incurring of a liability does not
require an assessee to deduct the tax at source even
if such payments, if made, would require an
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assessee to deduct the tax at source. The liability to
deduct tax at source under Chapter XVII-B arises
only upon payments being made or where so
specified under the sections in Chapter XVII, the
amount is credited to the account of the payee. In
other words, the liability to deduct tax at source
arises not on account of the assessee being liable to
the payee but only upon the liability being discharged
in the case of an assessee following the cash system
and upon credit being given by an assessee following
the mercantile system. This is clear from every
section in Chapter XVII.
27. Take for instance, the case of an assessee, who
follows the cash system of accounting and where the
assessee who though liable to pay the contractor,
fails to do so for any reason. The assessee is not then
liable to deduct tax at source. Take also the case of
an assessee, who follows the mercantile system.
Such an assessee may have incurred the liability to
pay amounts to a party. Such an assessee is also not
bound to deduct tax at source unless he credits such
sums to the account of the party/payee, such as, a
contractor. This is clear from Section 194-C set out
earlier. The liability to deduct tax at source, in the
case of an assessee following the cash system,
arises only when the payment is made and in the
case of an assessee following the mercantile system,
when he credits such sum to the account of the party
entitled to receive the payment.
28. The Government has nothing to do with the
dispute between the assessee and the payee such as
a contractor. The provisions of the Act including
Section 40 and the provisions of Chapter XVII do not
entitle the tax authorities to adjudicate the liability of
an assessee to make payment to the payee/other
contracting party. The appellant's submission, if
accepted, would require an adjudication by the tax
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authorities as to the liability of the assessee to make
payment. They would then be required to investigate
all the records of an assessee to ascertain its liability
to third parties. This could in many cases be an
extremely complicated task especially in the absence
of the third party. The third party may not press the
claim. The parties may settle the dispute, if any. This
is an exercise not even remotely required or even
contemplated by the section."
19. The Hon‟ble Apex Court in the light of
consideration so made has been pleased to hold that the
view taken by the High Courts of Punjab and Haryana
[P.M.S. Diesels v. CIT, 2015 SCC OnLine P&H 8793 :
(2015) 374 ITR 562] , Madras [Tube Investments of India
Ltd. v. CIT, 2009 SCC OnLine Mad 2976 : (2010) 325 ITR
610] and Calcutta [CIT v. Crescent Export Syndicate,
2013 SCC OnLine Cal 23014 : (2013) 262 CTR 525 :
(2013) 216 Taxman 258] as the correct view.
20. The Hon‟ble Apex Court has also considered the
judgment passed by the Allahabad High Court
in CIT v. Vector Shipping Services (P) Ltd., the very basis
upon which the appellate forum has passed the order in
favour of the assesse holding therein that no doubt, the
special leave petition there against was dismissed by this
Court in limine. However, that would not amount to
confirming the view of the Allahabad High Court Court in
V.M. Salgaocar & Bros. (P) Ltd. v. CIT [V.M. Salgaocar &
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Bros. (P) Ltd. v. CIT, (2000) 5 SCC 373 : (2000) 243 ITR
383] and Supreme Court Employees' Welfare
Assn. v. Union of India [Supreme Court Employees'
Welfare Assn. v. Union of India, (1989) 4 SCC 187 : 1989
SCC (L&S) 569] ], accordingly, the view taken by
Allahabad High Court was overruled.
21. For ready reference, the paragraph 19 and 20 of
the judgment is quoted as under:
"19. Insofar as judgment of the Allahabad High
Court [CIT v. Vector Shipping Services (P) Ltd., 2013
SCC OnLine All 13698 : (2013) 357 ITR 642] is
concerned, reading thereof would reflect that the High
Court, after noticing the fact that since the amounts
had already been paid, it straightaway concluded,
without any discussion, that Section 40(a)(i-a) would
apply only when the amount is "payable" and
dismissed the appeal of the Department stating that
the question of law framed did not arise for
consideration. No doubt, the special leave petition
there against was dismissed by this Court in limine.
However, that would not amount to confirming the
view of the Allahabad High Court [see V.M. Salgaocar
& Bros. (P) Ltd. v. CIT [V.M. Salgaocar & Bros. (P)
Ltd. v. CIT, (2000) 5 SCC 373 : (2000) 243 ITR 383]
and Supreme Court Employees' Welfare
Assn. v. Union of India [Supreme Court Employees'
Welfare Assn. v. Union of India, (1989) 4 SCC 187 :
1989 SCC (L&S) 569] ].
20. In view of the aforesaid discussion, we hold that
the view taken by the High Courts of Punjab and
Haryana [P.M.S. Diesels v. CIT, 2015 SCC OnLine
P&H 8793 : (2015) 374 ITR 562] , Madras [Tube
Investments of India Ltd. v. CIT, 2009 SCC OnLine
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Mad 2976 : (2010) 325 ITR 610] and Calcutta
[CIT v. Crescent Export Syndicate, 2013 SCC OnLine
Cal 23014 : (2013) 262 CTR 525 : (2013) 216
Taxman 258] is the correct view and the judgment of
the Allahabad High Court in CIT v. Vector Shipping
Services (P) Ltd. [CIT v. Vector Shipping Services (P)
Ltd., 2013 SCC OnLine All 13698 : (2013) 357 ITR
642] did not decide the question of law correctly.
Thus, insofar as the judgment of the Allahabad High
Court is concerned, we overrule the same.
Consequences of the aforesaid discussion will be to
answer the question against the appellant/assessee
thereby approving the view taken by the High Court."
22. Admittedly, the impugned order has been passed
on 11.03.2016 and the judgment has been passed in
Palam Gas Service Vs. Commissioner of Income Tax
(supra) is on 03.05.2017 i.e., subsequent to the
impugned order. Therefore, the question may arise that
as to whether the judgment which is subsequent to the
decision taken by the forum can be made applicable
retrospectively?
23. The aforesaid issue has been considered by the
Hon‟ble Apex Court in the recent judgment rendered in
the case of Directorate of Revenue Intelligence vs. Raj
Kumar Arora & Ors. [Criminal Appeal No. 1319 of
2013] passed on 17th April, 2025, wherein the law has
been laid down that the when a previous judgment is
overruled by a subsequent one, the later judgment
operates retrospectively, as it clarifies the correct legal
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position that may have been misunderstood due to the
earlier ruling, therefore, if the subsequent decision alters
or overrules the earlier one, it cannot be said to have
made a new law. The Hon‟ble Apex Court after framing
the issue as to "Whether the decision in Sanjeev V.
Deshpande (supra) should operate with prospective
effect?, has answered the same as under:
"II. "Whether the decision in Sanjeev V. Deshpande
(supra) should operate with prospective effect?
a.An overruling decision generally operates
retrospectively.
91.The declaration of a statute dealing with substantive
rights, by the legislature, is considered to be prospective
unless it is expressly or by necessary implication made to
have retrospective operation. The legal maxim "Nova
Constitutio Futuris Forman Imponere Debet, Non Praeteritis"
indicating that a new law ought to regulate what is to
follow and not the past, carries with it a presumption of
prospectivity and this presumption is generally said to
operate unless the contrary is shown by an express
provision in the statute or if the retrospectivity is otherwise
discernible through necessary implication. This is because
such statutes would have the consequence of affecting
vested rights, impose new burdens or impair existing
obligations. However, when a decision rendering an opinion
as regards the interpretation of a penal provision is
subsequently overruled by the decision of a larger bench,
the consequence of the overruling is starkly different and by
default, retrospective. This is because it is settled law that
the law declared by this Court is retrospective and is
normally assumed to be the law from the inception.
92.The operation of a newly enacted statute or rule must
not be confused with the effect of a judgment. A judgement
or decision which interprets a statute or provision thereof
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declares the meaning of the statute as it should be
construed from the date of its enactment. In other words,
the judgment declares what the legislature had said at the
time when the law was promulgated and therefore, it has
retrospective effect. On the contrary, it is the statute or the
rule which is presumed to be prospective unless expressly
made retrospective. What follows from the same, is that a
decision or judgment enunciating a principle of law is
applicable to all cases irrespective of the stage of pendency
before different forums since what has been enunciated is
the meaning of the law which existed from the inception of
the concerned statute or provision. What has been declared
to be the law of the land must be held to have always been
the law of the land. This conclusion also stems from the
rationale that the duty of the court is not to "pronounce a
new law but to maintain and expound the old one". The
judge rather than being the creator of the law, is only its
discoverer
93. This Court in Sarwan Kumar and Another v. Madan
Lal Aggarwal reported in (2003) 4 SCC 147, opined that
when this Court interprets an existing law while overruling
the interpretation assigned to it earlier, it cannot be said
that a new law is laid down. The declaration of law relates
back to the law itself. In other words, it would be deemed
that the law was never otherwise. Herein, a 5-judge bench
of this Court in Gian Devi Anand v. Jeevan Kumar and
Others reported in (1985) 2 SCC 683 had held that the
rule of heritability extends to the statutory tenancy of a
commercial premises as much as to a residential premises
under the Delhi Rent Control Act, 1958. In light of the same,
the question for determination in Sarwan Kumar (supra)
was whether a decree for ejectment which was passed by a
civil court qua a commercial tenancy on the basis that the
tenancy was not heritable, before the declaration of law in
Gian Devi Anand (supra), was executable or not? By
stating that the jurisdiction of the civil court to pass the
decree for ejectment was barred and that the decree
obtained by the decree-holder cannot be executed owing to
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it being a nullity and non-est, this Court observed as
follows
15. [...] The doctrine of "prospective overruling" was
initiallymade applicable to the matters arising
under the Constitution but we understand the
same has since been made applicable to the
matters arising under the statutes as well. Under
the doctrine of "prospective overruling" the law
declared by the Court applies to the cases arising
in future only and its applicability to the cases
which have attained finality is saved because the
repeal would otherwise work hardship on those
who had trusted to its existence. Invocation of the
doctrine of "prospective overruling" is left to the
discretion of the Court to mould with the justice of
the cause or the matter before the Court. This Court
while deciding Gian Devi Anand case [(1985) 2
SCC 683 : 1985 Supp (1) SCR 1] did not hold that
the law declared by it would be prospective in
operation. It was not for the High Court to say that
the law laid down by this Court in Gian Devi
Anand case [(1985) 2 SCC 683 : 1985 Supp (1)
SCR 1] would be prospective in operation. If this is
to be accepted then conflicting rules can
supposedly be laid down by different High Courts
regarding the applicability of the law laid down by
this Court in Gian Devi Anand case [(1985) 2 SCC
683 : 1985 Supp (1) SCR 1] or any other case. Such
a situation cannot be permitted to arise. In the
absence of any direction by this Court that the rule
laid down by this Court would be prospective in
operation, the finding recorded by the High Court
that the rule laid down in Gian Devi Anand case
[(1985) 2 SCC 683 : 1985 Supp (1) SCR 1] by this
Court would be applicable to the cases arising from
the date of the judgment of this Court cannot be
accepted being erroneous.
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20. [...] This Court in Gian Devi Anand case [(1985)
2 SCC 683 : 1985 Supp (1) SCR 1] did not lay
down any new law but only interpreted the
existing law which was in force. As was observed
by this Court in Lily Thomas case [(2000) 6 SCC
224 : 2000 SCC (Cri) 1056] the interpretation of a
provision relates back to the date of the law itself
and cannot be prospective of the judgment. When
the court decides that the interpretation given to a
particular provision earlier was not legal, it
declares the law as it stood right from the
beginning as per its decision. In Gian Devi case
[(1980) 17 DLT 197] the interpretation given by the
Delhi High Court that commercial tenancies were
not heritable was overruled being erroneous.
Interpretation given by the Delhi High Court was
not legal. The interpretation given by this
Court declaring that the commercial
tenancies heritable would be the law as it
stood from the beginning as per the
interpretation put by this Court. It would be
deemed that the law was never otherwise.
Jurisdiction of the civil court has not been
taken away by the interpretation given by
this Court. This Court declared that the civil
court had no jurisdiction to pass such a
decree. It was not a question of taking away
the jurisdiction; it was the declaration of law
by this Court to that effect. The civil court
assumed the jurisdiction on the basis of the
interpretation given by the High Court in Gian Devi
case [(1980) 17 DLT 197] which was set aside by
this Court.
(Emphasis supplied)
94.While addressing the issue of the temporal and
retrospective effect of a judicial decision and declaring that
a tribunal or court is bound by a higher court‟s decision on
the point in issue, irrespective of whether it is declared
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either prior to or subsequent to the order which is sought to
be called into question by a party, this Court in Assistant
Commissioner, Income Tax, Rajkot v. Saurashtra
Kutch Stick Exchange Limited reported in (2008) 14
SCC 171 stated that a judicial decision acts retrospectively
by placing reliance on the Blackstonian theory. According to
this theory, it is not the function of the court to pronounce a
"new rule" but to maintain and expound the "old one".
Therefore, if the subsequent decision alters or overrules the
earlier one, it cannot be said to have made a new law. The
correct principle of law is just discovered and applied
retrospectively. In other words, if in a given situation an
earlier decision of the court operated for quite some time
and it is overruled by a subsequent decision, the decision
rendered subsequently would have retrospective effect and
would serve to clarify the legal position which was not
clearly understood earlier. Any transaction would then be
covered by the law declared by the overruling decision. The
overruling is generally retrospective with the only caveat
being that matters that are res judicatae or accounts that
have been settled in the meantime would not be disturbed.
The relevant
observations made by this Court are reproduced
hereinbelow:
"35. In our judgment, it is also well settled that a judicial
decision acts retrospectively. According to
Blackstonian theory, it is not the function of the
court to pronounce a "new rule" but to maintain
and expound the "old one". In other words, Judges
do not make law, they only discover or find the
correct law. The law has always been the same. If a
subsequent decision alters the earlier one, it (the
later decision) does not make new law. It only
discovers the correct principle of law which has to
be applied retrospectively. To put it differently,
even where an earlier decision of the court
operated for quite some time, the decision rendered
later on would have retrospective effect clarifying
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the legal position which was earlier not correctly
understood.
36. Salmond in his well-known work states:
"[T]he theory of case law is that a judge does not
make law; he merely declares it; and the overruling
of a previous decision is a declaration that the
supposed rule never was law. Hence any
intermediate transactions made on the strength of
the supposed rule are governed by the law
established in the overruling decision. The
overruling is retrospective, except as regards
matters that are res judicatae or accounts that
have been settled in the meantime."
(Emphasis supplied)
24. Herein, in the instant case also, the sole
consideration taken by the forum is the judgment passed
by the Allahabad High Court in CIT Vs. Vector Shipping
Services (P) Ltd. (supra), which has been over-ruled by
the Hon‟ble Apex Court in the case of Palam Gas
Service Vs. Commissioner of Income Tax (supra),
holding therein that the Allahabad High Court has not
laid down good law; meaning thereby the error has been
rectified by the Hon‟ble Apex Court, said to be committed
by the Allahabad High Court, by laying down the correct
law. Therefore, applying the law laid down by the Hon‟ble
Apex Court in the case of Directorate of Revenue
Intelligence vs. Raj Kumar Arora & Ors. (supra), will
have retrospective application.
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25. This Court, taking into consideration the fact the
forum has passed the impugned order solely taking into
consideration the judgment passed by Allahabad High
Court in the case of CIT Vs. Vector Shipping Services
(P) Ltd. (supra) which has been over-ruled holding the
same to be not good in law by the Hon‟ble Apex Court, as
such it is not rendered to be in existence, as such the
impugned order requires interference.
26. In view thereof, order dated 11.03.2016 passed by
the Income Tax Appellate Tribunal, Circuit Bench,
Ranchi in I.T.A. No. 308/Ran/14 and I.T.A. No.
309/Ran/14 requires interference.
27. Accordingly, the impugned order dated
11.03.2016 passed by the Income Tax Appellate
Tribunal, Circuit Bench, Ranchi in I.T.A. No.
308/Ran/14 and I.T.A. No. 309/Ran/14 are hereby
quashed and set aside.
28. The matter is remitted before the forum, i.e.
Income Tax Appellate Tribunal, Circuit Bench, Ranchi for
fresh adjudication of the issue, taking into consideration
the observation made by this Court, as above.
29. The parties are at liberty to raise all legal/factual
issue before the forum in accordance with law.
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30. It is made clear that the Tribunal shall pass order
afresh without being prejudice of the order passed by
this Court.
31. With the aforesaid observations and directions,
both the appeals stands disposed of.
32. Interlocutory Application(s), if any, stands
disposed of.
I agree (Sujit Narayan Prasad, J.)
(Rajesh Kumar, J.) (Rajesh Kumar, J.)
Alankar/
A.F.R
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