- (1.) HEARD Mr. Sundeep Bhandawat, learned counsel appearing for the Deputy Commissioner of Income-tax.
(2.) THIS appeal under Section 260A of the Income-tax Act, 1961, hereinafter referred to as "the Act", is directed against the order dated November 10, 1998, passed by the Income-tax Appellate Tribunal, Jaipur, It appears that the assessing authority made a disallowance of Rs. 3,07,501 being interest attributable to interest-free advance to a sister concern of the assessee-company. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who deleted the disallowance of Rs. 15,000 and Rs. 3,07,501 holding that no nexus was established between the interest-bearing" funds raised and the interest-free advance. The Department preferred a second appeal before the Appellate Tribunal, which has been dismissed by the impugned order dated November 10, 1998. Mr. Sundeep Bhandawat, learned counsel appearing for the Commissioner, contends that the company might have borrowed large amounts for the purpose of its business every year, but no explanation has been given for the huge advances to the directors/shareholders. It is submitted that had this money not been advanced to the directors, it would have been available to the assessee for its business purpose and to that extent, it would not have been necessary to borrow from the bank. According to learned counsel, the following substantial question of law arises : "Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in upholding the decision of the Commissioner of Income-tax (Appeals) deleting the disallowance of interest of Rs. 15,000 and Rs. 3,07,501 ?" We are not inclined to entertain this appeal as we are not satisfied that the case involves a substantial question of law. Section 260A of the Income-tax Act was inserted by the Finance (No. 2) Act, 1998, with effect from October 1, 1998. The amendment was felt necessary as the existing provisions for making reference to the High Court led to a plethora of conflicting judgments, which created confusion in the minds of the public with respect to interpretation of the various provisions of the Income-tax Act. The existing provisions also burden the High Courts and the Supreme Court with an unnecessarily large number of references and appeals. Thus, the litigation has been confined to cases where a question of law is involved and such question of law is a substantial question of law. The provision provides that the appellant is required to state precisely the substantial question of law in the memo of appeal and when the High Court is satisfied that a substantial question of law is involved, it is required to formulate that question. Section 260A reads as follows : "260A. Appeal to High Court--(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) An appeal under this Section shall be-- (a) filed within one hundred and twenty days from the date on which the order appealed against is communicated to the appellant ; (b) accompanied by a fee of ten thousand rupees where such appeal is filed by an assessee ; (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (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)." Section 260A is analogous to the provisions of Section 100 of the Civil Procedure Code. Under Section 100 of the Civil Procedure Code, also the second appeal can be entertained only when a substantial question of law is involved. Such substantial question of law is required to be formulated in the memo of appeal. If the High Court is satisfied that a substantial question of law is involved in the case, then the court is also required to formulate that question. The appeal is required to be heard only on the question so formulated. The said amendment was introduced in the Civil Procedure Code as far back as in the year 1976. In spite of the fact that the jurisdiction of the High Court has been confined only in a case where substantial question of law is involved, it is felt the purpose of the amendment has not been achieved, because of liberal use of the provision. Thus, the apex court recently in Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, AIR 1999 SC 2213 ; [1999] 3 SCC 722, was at pains to observe thus (page 2214 of AIR 1999 SC) : "Despite amendment by the amending Act 104 of 1976, Section 100 of the Code of Civil Procedure appears to have been liberally construed and generously applied by some judges of various High Courts with the result that the drastic changes made in the law and the object behind that appears to have been frustrated. The amending Act was introduced on the basis of various Law Commission Reports recommending for making appropriate provisions in the Code of Civil Procedure which were intended to minimise the litigation, to give the litigant fair trial in accordance with the accepted principles of natural justice, to expedite the disposal of civil suits and proceedings so that justice is not delayed, to avoid complicated procedure, to ensure a fair deal to the poor Sections of the community and restrict the second appeals only on such questions which are certified by the courts to be substantial questions of law." The court further found that in a number of cases, no efforts are being made to differentiate between the "question of law" and "substantial question of law". The court reminded that a right of appeal is neither natural nor an inherent right attached to the litigation. The court further observed that being a substantive statutory right, it has to be regulated in accordance with the law in force at the relevant time. The court also indicated certain guidelines to deal with the matters coming up under Section 100 of the Civil Procedure Code. The Constitution Bench in Chunilal V. Mehta and Sons Ltd. v. Century Spinning and Manufacturing Co. Ltd., AIR 1962 SC 1314, has laid down guidelines to determine as to what is "substantial question of law" within the meaning of Section 100 of the Civil Procedure Code. There are also later decisions of the apex court, some of which deserve to be referred to, as Mahindra and Mahindra Ltd. v. Union of India [1979] 49 Comp Cas 419 and Panchugopal Barua v. Umesh Chandra Goswami, AIR 1997 SC 1041 ; [1997] 4 SCC 713. With a view to ensure that the purpose of amendment in the Income-tax Act introducing Section 260A is not frustrated, it is expedient to state the parameters culled out from the aforesaid decisions as follows ; (a) An appeal under Section 260A cannot be entertained simply because on the same question of law, a reference has been made and it has been admitted for hearing by the High Court. (b) The finding of fact, howsoever erroneous, cannot be disturbed by the High Court in exercise of the powers under Section 260A. (c) Whether the substantial question of law raised, directly and substantially affects the rights of the parties and if so, whether it is either an open question in the sense that it is not finally settled by the apex court or by the concerned High Court or is not free from difficulty or calls for discussion of alternative views ; (d) If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. (e) It is not within the domain of the High Court to investigate the grounds on which the findings were arrived at, by the Tribunal or the first appellate authority. In a case where from a given set of circumstances two inferences are possible, the one drawn by the Tribunal or the first appellate authority, shall be binding on the High Court in appeal under Section 260A. The High Court cannot substitute its opinion for the opinion of the Tribunal unless it is found that conclusions drawn by the Tribunal arc erroneous being' contrary to the mandatory provisions of law applicable or the settled position on the basis of pronouncements made by the apex court, or was based upon inadmissible evidence or arrived at without evidence. Where a point of law has not been pleaded or found to be arising between the parties in the absence of any factual format, a litigant should not be allowed to raise that question as a substantial question of law in appeal under Section 260A. Where it is found that the Tribunal or appellate authority has assumed jurisdiction which did not vest in it, the same can be adjudicated in the appeal, treating it as a substantial question of law.
(3.) IT is contended by learned counsel that a question, whether the Tribunal was justified in deleting the disallowance in the identical circumstances was considered to be a question of law by this court in CIT v. Udaipur Mineral Development Syndicate Put. Ltd. [1995] 211 ITR 555. At the first instance, the said case is distinguishable from the present case. Even if it is found that the question involved is identical, then also, simply because a question of law is involved in the appeal and on the same question, a reference has been made, it will not be a substantial question of law for the purpose of Section 260A of the Act. Learned counsel has failed to satisfy us that a substantial question of law is involved in this appeal. In view of the aforesaid, this appeal does not deserve to be entertained under the provisions of Section 260A of the Act, which is hereby dismissed in limine. ;