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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3131 OF 2006

K. RAVEENDRANATHAN NAIR & ANR.

.....APPELLANT(S)

VERSUS

COMMISSIONER OF INCOME TAX & ORS. .....RESPONDENT(S)

W I T H

CIVIL APPEAL NO. 3130 OF 2006

J U D G M E N T

A.K. SIKRI, J.

By amendment in the Income Tax Act, 1961 (hereinafter referred to

as the ‘IT Act’) in the year 1998, Section 260A was inserted providing for

statutory appeal against the orders passed by the Income Tax Appellate

Tribunal.  In this very Section, under sub-section (2)(b), court fees on

such  appeals  was  also  prescribed  which  was  fixed  at  Rs.2,000/-.

However, sub-section (2)(b) of Section 260A prescribing the aforesaid

fee was omitted by amendment carried out in the said Act, with effect

from June 01, 1999.  It was presumably for the reason that insofar as

court fee payable on such appeals are concerned, which are to be filed

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in  the  High  Court,  it  is  the  State  Legislature  which  is  competent  to

legislate in this behalf.

2) In the State of Kerala, the law of court fee is governed by the Kerala

Court Fees and Suits Valuation Act, 1959 (hereinafter referred to as the

‘1959 Act’).  Section 52 thereof relates to the fee payable in appeals.

Thus, with the omission of clause (b) of sub-section (2) of Section 260A

of the IT Act, fee became payable on such appeals as per Section 52.

The State Legislature thereafter amended the 1959 Act by Amendment

Act  of  2003 and inserted Section 52A therein,  which was passed on

March 06, 2003.  In fact, before that an Ordinance was promulgated on

October 25, 2002 which was replaced by the aforesaid Amendment Act,

the Act categorically provided that Section 52A is deemed to have come

into force on October 26,  2002.  As per the amended provision,  viz.

Section 52A of the 1959 Act, the fee on memorandum of appeals against

the order of the Income Tax Appellate Tribunal or Wealth Tax Appellate

Tribunal is to be paid at the rates specified in sub-item (c) of item (iii) of

Article 3 of Schedule II.  This sub-item (c) reads as under:

(c)  Where such income exceeds two lakh rupees

One  percent  of  the  assessed income, subject  to a maximum of ten thousand rupees.

It  is  clear  from the above that  fee is  now payable,  where such

income exceeds two lakh rupees, at the rate of 1% of the ‘assessed

income’, subject to a maximum of ten thousand rupees.

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3) The question that arose for consideration before the High Court in the

impugned judgment, against which these appeals arise, was payment of

fee as per the aforesaid schedule on the appeals that are filed on or

after October 26, 2002.  As per the State of Kerala, on all appeals which

are  filed  against  the  order  of  Income  Tax  Appellate  Tribunal  or  the

Wealth  Tax  Appellate  Tribunal  on  or  after  October  26,  2002,  fee  is

payable  as  per  the  aforesaid  amended  provisions.   The  appellants

herein,  however,  contend  that  in  all  those  cases  which  were  even

pending  before  the  lower  authorities,  i.e.  the  Assessing  Officer,

Commissioner  of  Income  Tax  (Appeals)  or  Income  Tax  Appellate

Tribunal and orders were passed even before October  01,  1998, the

right  to  appeal  had  accrued with  effect  from October  01,  1998 and,

therefore,  such  cases  would  be  governed  as  on  the  date  when  the

orders were passed by the lower authorities and the court fee would be

payable  as per  the unamended provisions.   The High Court  has not

accepted this plea of the appellants and has held that any appeal ‘filed’

on or after October 26, 2002 shall be governed by Section 52A of the

1959 Act.

4) The appeals are filed both by the writ petitioner, whose writ has been

dismissed, as well as the Income Tax Department.  The Commissioner

of Income Tax (Appeals) has not accepted the decision of the High Court

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and the reason for that is obvious.  Numerous appeals under Section

260A  of  the  IT  Act  are  filed  by  the  Department  as  well  and  the

Department also gets hit by the aforesaid Section 52A of the 1959 Act,

as interpreted by the High Court.

5) Learned counsels appearing for the assessee as well  as Income Tax

Department submitted that the right of appeal is a matter of substantive

right  and  not  merely  a  matter  of  procedure.   Therefore,  this  right

becomes vested in a party when the proceedings are first initiated and

before a decision is given, by the inferior court.  Therefore, the relevant

date  for  paying  the  court  fee  would  be  when  the  proceedings  are

initiated in the lowest court and not when the appeal is filed in the High

Court.  In support of this proposition, reliance is placed on the judgment

of  this  Court  in  Hosein  Kasam  Dada  (India)  Ltd.  v.  The  State  of

Madhya Pradesh And Others1 wherein the Court held as under:

(i) that  the  appellant  had  a  vested  right  to  appeal  when  the

proceedings were initiated, i.e.,  in 1947, and his right to appeal

was governed by the law as it existed on that date;

(ii) that  the  amendment  of  1950  cannot  be  regarded  as  a  mere

alteration in procedure or an alteration regulating the exercise of

the right of appeal, but whittled down the right itself, and it had no

retrospective  effect  as  the  Amendment  Act  of  1950  did  not

1  1953 SCR 987

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expressly or by necessary intendment give it retrospective effect,

and the appeal could not therefore be rejected for non-payment of

the tax in respect of which the appeal was preferred.

6) In that case, Section 22(1) of the Central Provinces and Berar Sales Tax

Act,  1947,  provided  that  no  appeal  against  an  order  of  assessment

should be entertained by the prescribed authority unless it was satisfied

that such amount of tax as the appellant might admit to be due from his

had been paid.   This Act  was amended on November 25,  1949 and

Section 22(1), as amended, provided that no appeal should be admitted

by  the  said  authority  unless  such  appeal  was  accompanied  by

satisfactory  proof  of  the  payment  of  the  tax  in  respect  of  which  the

appeal  had  been  preferred.   On  November  28,  1947,  the  appellant

submitted a return to the Sales Tax Officer, who, finding that the turnover

exceeded  two  lakh  rupees,  submitted  the  case  to  the  Assistant

Commissioner for disposal and the latter made an assessment on April

08, 1950.  The appellant preferred an appeal on May 10, 1950 without

depositing the amount of tax in respect of which he had appealed.  The

Board of Revenue was of the opinion that Section 22(1), as amended,

applied to the case as the assessment was made, and the appeal was

preferred,  after  the  amendment  came  into  force,  and  rejected  the

appeal.

The appellant in that case lost till the High Court.  However, this

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Court  allowed  the  appeal  on  the  ground  that  the  vested  right  had

accrued to the appellant to file the appeal in the year 1947 itself when

the proceedings were initiated.   Therefore,  amendment carried out  in

Section 22(1) of the Central Provinces and Berar Sales Tax Act, 1947 in

the year 1949 would not apply in the case of the appellant.

Reference was also made to another  judgment  of  this  Court  in

State of Bombay v. Supreme General Films Exchange Ltd.2  In that

case  the  issue  was  whether  in  the  absence  of  provision  giving

retrospective  effect  to  certain  amendments  to  court  fee  payable  with

effect from April 01, 1954, the court fee payable on appeal was payable

according to the law in force at the time of the filing of the suit prior to

this date or the law in force at the time of the filing of the appeal.  This

Court held that an impairment of the right of appeal by putting a new

restriction thereon or imposing a more onerous condition is not a matter

of  procedure  only;  it  impairs  or  imperils  a  substantive  right  and  an

enactment which does so is not retrospective unless it says so expressly

or by necessary intendment.

7) When the proceedings originate in the form of a suit filed in the lowest

court, it is easy to ascertain that date of filing which becomes governing

date for the purpose of payment of court fee in respect of appeals, as

vested right accrues on the date of filing of the initial court proceedings.

2  (1960) 3 SCR 640

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How  it  is  to  be  translated  in  tax  matters?   This  was  explained  in

Hardeodas Jagannath v. State of Assam and Others3 by holding that

the appeal provisions applicable in a tax matter for assessee would be

the one as on date of assessment and not the one applicable during the

assessment period.  For revenue appeal, the same would be one as on

the date disputed demand is negative by the appellate authority and not

the one applicable during the period of assessment or as on the date of

assessment.

8) On  the  aforesaid  basis,  it  was  argued  by  the  counsel  for  both  the

assessees in these appeals that in all those cases where appeals were

preferred by the assessee against the assessment orders, the provision

relating to the payment of court fee which was prevailing on the date of

assessment would be applicable.  On the other hand, in those cases

where Revenue preferred the appeals, the concerned date would be the

date  on  which  disputed  demand  was  negatived  by  the  appellate

authority.  It was, thus, submitted that the High Court was not right in

holding that in all those cases where the appeals are filed in the High

Court, whether by the assessee or the Income Tax Department, after the

insertion of Section 52A, i.e. after October 26, 2002, fee is payable as

provided under Section 52A of the 1959 Act.  In this hue, it was also

pointed out that Section 260A of the IT Act was inserted with effect from

3  (1969) 2 SCR 261

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October 01, 1998 and, therefore, from this date right to file the appeal in

the High Court accrued as a vested right.  Thus, all those proceedings

where the assessment orders were passed after October 01, 1998 by

the Assessing Officer and the assessee had approached the High Court

by  filing  appeal  under  Section  260A  of  the  IT  Act,  fee  as  per  the

unamended provision was payable and not under Section 52A of the

1959 Act.  Likewise, it was argued, in those cases where the Revenue

filed  the  appeal  in  the  High  Court  where  the  disputed  demand  was

negative by the appellate authority after October 01, 1998 and before

October  26,  2002,  court  fee  was  payable  as  per  the  unamended

provision.

9) Mr. Pallav Sishodia, learned senior counsel appearing for the State of

Kerala, submitted that though there was no quarrel about the proposition

laid  down  in  the  judgments  cited  by  the  learned  counsel  for  the

appellants, these judgments are premised on two postulates, namely:

(i) there exists a vested right of appeal and it accrued prior to coming

into force of Section 52A of the 1959 Act; and

(ii) such  a  vested  right  stands  impaired  and/or  made  conditional

retrospectively ‘expressly or by necessary intendment’.

He,  thus,  submitted  that  it  was  imperative  to  have  requisite

foundational  facts  to  demonstrate  the  aforesaid  two  conditions.

According to him, however, the issue appears academic as no assessee

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has come forward as aggrieved by levy of court fee under Section 52A

of the 1959 Act in a case in which appeal is filed where assessment is

made and/or disputed demand in appeal is raised prior to October 26,

2002.  Nor the details are available of the appeals filed by the Income

Tax or Wealth Tax Departments where assessments are reversed in part

of  full  and/or  disputed  demand  is  quashed  by  the  Commissioner

(Appeals) or Income Tax Appellate Tribunal prior to October 26, 2002,

particularly number of such appeals pending before the High Court of

Kerala, if at all.  In any case, in the other appeals filed, if any, for the tax

demands  negatived  by the  appellate  authorities  prior  to  October  26,

2002, this issue of court fees does not appear to have been kept alive

for grant of any effective relief.  He cited few judgments in support of his

submission  that  this  Court  should  restrain  itself  from  undertaking

academic exercise and deciding the issue in question.

10) We are not inclined to accept the aforesaid plea inasmuch as the

High Court  has decided the issue in categorical  terms.   Therefore,  it

would be appropriate to reflect on the said decision and to find out as to

whether this decision is correct in law.  It is a different matter that after

the legal position is clarified, the same can be applied in respect of those

appeals which are covered thereby.   

11) Hence,  we proceed to  decide the legal  issue involved in  these

appeals.

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12) We may mention at the outset that after referring to the judgments

noted  above  even  the  High  Court  in  the  impugned  judgment  has

accepted that right of appeal is not a matter of procedure and that it is a

substantive right.  It is also recognised that this right gets vested in the

litigants at the commencement of the  lis  and, therefore, such a vested

right cannot be taken away or cannot be impaired or imperilled or made

more  stringent  or  onerous  by  any  subsequent  legislation  unless  the

subsequent  legislation  said  so  either  expressly  or  by  necessary

intendment.  An intention to interfere with or impair or imperil a vested

right cannot be presumed unless such intention be clearly manifested by

express words or by necessary implication.  However, the High Court

has still  dismissed the writ  petition  as it  was of  the opinion that  the

vested  right  of  appeal  conferred  under  Section  260A of  the  IT  Act,

insofar  as  payment  of  court  fee  is  concerned,  is  taken  away  by

necessary implication.  In other words, the provisions of Section 52A of

the 1959 Act inserted by the Amendment Act  of 2003, in that sense,

have retrospective operation thereby effecting the earlier  assessment

also.   This  proposition  is  advanced  with  the  logic  that  prior  to

introduction of Section 260A in the IT Act with effect from October 01,

1998, there was no right of appeal.

13) It is difficult to accept such a logic given by the High Court.  No

doubt, before October 01, 1998, in the absence of any statutory right of

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appeal to the High Court, there was no such vested right.  At the same

time, the moment Section 260A was added to the statute, right to appeal

was recognised statutorily.  Therefore, as already pointed out, in respect

of  those  proceedings  where  assessment  orders  were  passed  after

October 01, 1998, vested right of appeal in the High Court had accrued.

Same was the position qua Department in respect of those cases where

the demand raised by the Department stood negatived by the appellate

authority after October 01, 1998.

14) In the present case, as noted above, when Section 260A of the IT

Act was introduced by way of amendment with effect from October 01,

1998, it contained provision in the form of clause (2) of sub-section (2)

thereof relating to payment of court fee as well.  As per that provision,

fixed court fee of Rs.2,000/- was provided.  This provision was, however,

omitted with effect from June 01, 1999.  The court fee became payable

as per Section 52 of the 1959 Act.  The amendment in question in the

1959 Act, i.e. Section 52A, was made effective from March 06, 2003.

This provision has not been made retrospective.

15) We, therefore, are not able to subscribe to the aforesaid view of

the High Court and set aside the same.  In fine, we hold as under:

(i) Wherever assessee is in appeal in the High Court which is filed

under Section 260A of the IT Act, if the date of assessment is prior

to March 06, 2003, Section 52A of the 1959 Act shall not apply and

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the court fee payable shall be the one which was payable on the

date of such assessment order.

(ii) In  those  cases  where  the  Department  files  appeal  in  the  High

Court  under Section 260A of  the IT Act,  the date on which the

appellate authority set aside the judgment of the Assessing Officer

would  be  the  relevant  date  for  payment  of  court  fee.   If  that

happens to be before March 06, 2003, then the court fee shall not

be payable as per Section 52A of the 1959 Act on such appeals.

16) These appeals stand allowed in the aforesaid terms.

.............................................J. (A.K. SIKRI)

.............................................J. (ASHOK BHUSHAN)

NEW DELHI; AUGUST 10, 2017.