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TMI Blog1982 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1975-76. The point for consideration is whether for purposes of computation of the capital base under section 80J of the Act, borrowed capital, both secured and unsecured, requires to be deducted from the value of the assets. That the assessee was entitled to the benefit of section 80J of the Act was not in dispute; bat its quantification was. It is common ground that if effect is given to the provisions of rule 19A(2)(iii) of the Income-tax Rules, 1962 (" Rules " for short), the view taken by the authorities under the Act " that the borrowed capital should be deducted in computing the capital base for purposes of relief under section 80J " would be right. But the assessee contended before the authorities that the said rule 19A(2)(iii) was itself ultra vires the provisions of the parent Act and that, therefore, its provisions should not guide the matter and that the computation be done untramelled by the provisions of the said rule 19A(2)(iii). The Tribunal declined to entertain this argument. It held that being an authority constituted under the Act, it could not go into and pronounce on the validity of the very provisions of the Act or the Rules made thereunder. Thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Act or a rule or order or notification made thereunder is not a sound one and that the correct view to take would be that the authorities under the Act and the Tribunal cannot pronounce on the constitutional validity or vires of merely those provisions under which they are appointed or constituted or from which their powers and functions are derived and that they are not debarred from examining the validity or vires of the other provisions of the Act or the rules and notifications issued thereunder which do not touch upon their constitution or powers.Sri Sarangan, apart from relying upon a statement contained at pages 1155 and 1156 in the " Law and Practice of Income Tax " (Kanga and Palkhivala), seventh edn., Vol. 1, also sought to rely upon the decision of the Supreme Court in Navinchandra Mafatlal v. CIT [1954] 26 ITR 758 and of the Privy Council in Wallace Brothers and Co. Ltd. v. CIT [1948] 16 ITR 240. Sri Sarangan contends that, in any view of the matter, the authorities under the Act as also the High Court in reference proceedings have jurisdiction to decide the question of vires of the rules made under the Act. In regard to this later proposition, he relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f certain provisions of the Indian Income-tax Act, 1922, by virtue of which some income arising outside British India became includible in the income liable to tax under that Act. The Privy Council did deal with and examine that question on merits. Relying upon these two pronouncements, Sri Sarangan contends that the proposition that courts, in matters arising out of references under the Income-tax Act, could go into and pronounce on the constitutional validity of provisions of the Act or Rules is not an unfamiliar one and that the proposition that the Tribunal in appeal or the High Court in the reference jurisdiction cannot pronounce on the vires of the statutory provisions must be held to be proposition too broadly stated. Sri Sarangan further commended for acceptance as a correct statement of law, a passage occurring in pages 1155 and 1156 in Kanga and Palkhivala's treatise. It appears to us that the question whether in exercise of the reference jurisdiction under the Income-tax Act, the High Court can go into and pronounce on the constitutional validity of the statutory provisions was not, in that form, posed in the two cases referred to by Sri Sarangan and, if we may say s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Act is ultra vires the Legislature arises out of the Tribunal's order? As the Tribunal is a creature of the statute, it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act. The question of ultra vires is foreign to the scope of its jurisdiction. If an assessee raises such a question, the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the said objection or decide on it. As no such question can be raised or can arise on the Tribunal's order, the High Court cannot possibly give any decision on the question of the ultra vires of a provision. " The limit on the jurisdiction of the Tribunal and consequently that of the High Court in a reference, to go into the question of the vires of a provision of law, is not confined to the provision of the Act alone but extends to statutory rules and notifications issued under the Act. In Kanpur Vanaspati Stores v. CST [1973] 32 STC 655, the Supreme Court held (at page 660); " Further, it is now well settled by the decision of this court that no one can challenge the validity of provision of an Act or rule made thereunder or even a notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal's order, the High Court cannot possibly give any decision on the question of the vires of a provision. " In B. Shankara Rao v. State of Mysore, AIR 1969 SC 453, the Supreme Court observed that the constitutional validity of the Mysore (Personal and Miscellaneous) Inams Abolition Act could not be challenged in the statutory appeals. In view of the clear and authoritative pronouncements of the Supreme Court on the point, we are unable to accept the contention of Sri Sarangan that the Tribunal can go into the question of vires of the statutory provisions, and accordingly it follows that this court cannot also go into that question. We may now advert to the passage in Kanga and Palkhivala's treatise 7th edition (pages 1155, 1156). The learned authors, after referring, inter alia, to the propositions emerging from the decisions of the Supreme Court in K. S. Venkataraman Company's case [1966] 60 ITR 112 and in Senthilnathan Chettiar's case [1968] 67 ITR 102, observed: " 'It is submitted that the above propositions require reconsideration. The correct principle is that a creature of a statute cannot go into the question of the validity or vires of the statutory provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imately right rather than to be consistently wrong. Stare decisis is not ritual of convenience but a rule with limited exceptions. Pronouncements by Constitution Benches should not be treated so cavalierly as to be revised frequently. We cannot devalue the decisions of this court to brief ephemerality which recalls the opinion expressed by Roberts J. of the U.S. Supreme Court in Smith v. Allwright [1944] 321 US 649 at p. 669, that adjudications of the court were rapidly gravitating into the same class as a restricted railroad ticket, good for this day and train only."' The effect of the retrospective amendment of section 80J has to be taken into account in disposing of the reference. In view of this amendment, the relevance of rule 19A(2)(iii) hardly survives and as observed by the Supreme Court in CIT v. Smt. Anusuya Devi [1968] 68 ITR 750, when a question becomes academic and is unnecessary, this court is not bound either to call for a statement of the case or to answer such a question. For the foregoing reasons, we decline to call for a statement of the case. The petition is dismissed. Sri K. Srinivasan, learned counsel for the Revenue, is permitted to file his memo of app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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