2014 (1) TMI 658 - SC - Income Tax

Non-consideration of substantial questions of law by High Court - Held that - The High Court shall keep in view the order dated 4.3.2013 passed by this Court in C.I.T.-II Ahmedabad Gujarat vs. M/s. Mastek Ltd 2013 (3) TMI 309 - SUPREME COURT while considering whether or not the two questions of law which the petitioner intends to press for consideration by the High Court need to be framed at the time of hearing of the appeal - The observations made by the High Court in the impugned order do not survive Decided in favour of Petitioner.

Summary

Issues:
1. Interpretation of Section 260A(4) of the Income Tax Act, 1961 regarding framing substantial questions of law for consideration in appeals.
2. Whether the High Court should consider additional questions of law not framed initially in light of the Supreme Court's observations.
3. Justification for denial of deduction under Section 10A of the Income Tax Act, 1961 for foreign exchange fluctuation gain.

Analysis:

Issue 1: The judgment addresses the interpretation of Section 260A(4) of the Income Tax Act, 1961, regarding the framing of substantial questions of law for consideration in appeals. The Court clarifies that the High Court retains the power to frame substantial questions of law other than those admitted initially, subject to certain conditions. The Court emphasizes that the power to frame additional questions remains under Section 260A(4), provided the Court is satisfied that the appeal involves such questions and records reasons for doing so.

Issue 2: The petitioner submits that two questions of law arising from the order of the Income Tax Appellate Tribunal were not framed by the High Court for consideration. The petitioner seeks the High Court's consideration of these questions in light of a previous order of the Supreme Court. The Court notes the petitioner's submission and directs the High Court to consider whether the additional questions raised by the petitioner should be framed at the time of hearing the appeal, in accordance with the Supreme Court's previous observations.

Issue 3: The two questions of law pressed by the petitioner relate to the denial of deduction under Section 10A of the Income Tax Act, 1961, for foreign exchange fluctuation gain. The petitioner questions the justification for not allowing the deduction despite deriving income solely from export activity covered under Section 10A. The Court acknowledges the petitioner's concerns and directs the High Court to consider these questions in light of the Supreme Court's previous order, emphasizing the need for a comprehensive review of the issues raised.

In conclusion, the Supreme Court's judgment provides clarity on the framing of substantial questions of law in appeals under the Income Tax Act, 1961. The Court directs the High Court to consider additional questions raised by the petitioner and emphasizes the importance of reviewing the denial of deductions under Section 10A in a thorough manner. The judgment underscores the need for adherence to legal provisions and previous court orders in addressing complex tax-related issues.