Can the court fee for an income tax appeal be determined by the date of assessment or the date the appeal is filed? The Supreme Court of India addressed this question in a recent judgment. This case clarifies which court fee rules apply to appeals filed under Section 260A of the Income Tax Act, 1961, specifically focusing on the interplay between central and state laws. The judgment was delivered by a bench of Justices A.K. Sikri and Ashok Bhushan, with Justice A.K. Sikri authoring the opinion.
Case Background
The dispute arose from the amendment to the Kerala Court Fees and Suits Valuation Act, 1959, which introduced Section 52A. This section changed how court fees were calculated for appeals against orders of the Income Tax Appellate Tribunal or Wealth Tax Appellate Tribunal. The amendment, effective from October 26, 2002, prescribed a fee of 1% of the assessed income, with a maximum of ₹10,000, for incomes exceeding ₹2 lakh. The appellants argued that the court fee should be determined by the law in effect when the assessment order was passed, not when the appeal was filed.
The core issue was whether the amended court fee rules applied to appeals filed after October 26, 2002, even if the original assessment orders were passed before that date. The appellants contended that the right to appeal, and thus the applicable court fee, was vested at the time the assessment proceedings began.
Timeline
| Date | Event |
|---|---|
| 1959 | Kerala Court Fees and Suits Valuation Act, 1959 enacted. |
| 1998 | Section 260A inserted in the Income Tax Act, 1961, providing for appeals to the High Court and fixing court fees at Rs. 2,000. |
| June 1, 1999 | Sub-section (2)(b) of Section 260A of the Income Tax Act, 1961, prescribing court fees, was omitted. |
| October 25, 2002 | Ordinance promulgated in Kerala to amend the 1959 Act. |
| October 26, 2002 | Section 52A of the 1959 Act deemed to come into force. |
| March 6, 2003 | Amendment Act of 2003 passed, inserting Section 52A into the 1959 Act. |
| August 10, 2017 | Supreme Court judgment delivered. |
Course of Proceedings
The High Court of Kerala ruled that any appeal filed on or after October 26, 2002, would be governed by Section 52A of the 1959 Act. This meant that the new, higher court fees would apply to all appeals filed after this date, regardless of when the original assessment orders were passed. The High Court reasoned that the right to appeal under Section 260A of the Income Tax Act, 1961, concerning court fees, was taken away by necessary implication due to the introduction of Section 52A.
The Commissioner of Income Tax (Appeals) did not agree with the High Court’s decision. This disagreement was primarily because the Income Tax Department also files numerous appeals under Section 260A, and the department would also be affected by the higher court fees under Section 52A of the 1959 Act.
Legal Framework
The case primarily revolves around Section 260A of the Income Tax Act, 1961, and Section 52A of the Kerala Court Fees and Suits Valuation Act, 1959. Section 260A of the IT Act, introduced in 1998, provides for appeals to the High Court against orders of the Income Tax Appellate Tribunal. Initially, it prescribed a fixed court fee of ₹2,000, but this provision was later omitted.
Section 52A of the 1959 Act, inserted in 2003, specifies court fees for appeals against orders of the Income Tax Appellate Tribunal or Wealth Tax Appellate Tribunal. It stipulates a fee of 1% of the assessed income, with a maximum of ₹10,000, for incomes exceeding ₹2 lakh. The core issue is the retrospective application of Section 52A.
The relevant provision of Section 52A of the 1959 Act is:
“(c) Where such income exceeds two lakh rupees – One percent of the assessed income, subject to a maximum of ten thousand rupees.”
Arguments
The appellants, including both the assessees and the Income Tax Department, argued that the right to appeal is a substantive right that vests when proceedings are initiated. They contended that the applicable court fee should be determined by the law in force when the assessment proceedings began, not when the appeal was filed.
The appellants relied on the Supreme Court’s judgment in Hosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh And Others [1953 SCR 987], which held that a vested right to appeal is governed by the law existing when the proceedings were initiated. They also cited State of Bombay v. Supreme General Films Exchange Ltd. [(1960) 3 SCR 640], which stated that an impairment of the right of appeal is not a matter of procedure and cannot be retrospective unless expressly stated.
The State of Kerala argued that the issue was academic, as no assessee had come forward aggrieved by the levy of court fees under Section 52A of the 1959 Act in cases where the assessment was made before October 26, 2002. They also argued that the judgments cited by the appellants were based on the premise that a vested right of appeal existed before Section 52A came into force, and that this right was impaired retrospectively.
The counsels for the assessees argued that in 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.
| Main Submission | Sub-Submissions |
|---|---|
| Appellants (Assessees & Income Tax Dept.) |
|
| Respondent (State of Kerala) |
|
Issues Framed by the Supreme Court
The Supreme Court addressed the following issues:
- Whether the court fee payable on appeals filed under Section 260A of the Income Tax Act, 1961, should be determined by the law in force when the assessment order was passed or when the appeal was filed.
- Whether Section 52A of the Kerala Court Fees and Suits Valuation Act, 1959, has retrospective application.
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Applicable date for court fee | The court held that the court fee should be determined by the law in force when the assessment order was passed for assessee appeals, and when the appellate authority negated the demand for revenue appeals. |
| Retrospective application of Section 52A | The court held that Section 52A of the 1959 Act does not have retrospective application. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Legal Point | How Considered |
|---|---|---|
| Hosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh And Others [1953 SCR 987], Supreme Court of India | Vested right of appeal | Followed. The Court relied on this case to establish that the right to appeal is a substantive right that vests when proceedings are initiated. |
| State of Bombay v. Supreme General Films Exchange Ltd. [(1960) 3 SCR 640], Supreme Court of India | Retrospective application of laws | Followed. The Court used this case to support the principle that an impairment of the right of appeal is not a matter of procedure and cannot be retrospective unless expressly stated. |
| Hardeodas Jagannath v. State of Assam and Others [(1969) 2 SCR 261], Supreme Court of India | Applicability of appeal provisions in tax matters | Followed. The Court used this case to explain 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. |
| Section 260A, Income Tax Act, 1961 | Right of appeal to High Court | Explained. The Court noted that this section provides the statutory right to appeal to the High Court. |
| Section 52A, Kerala Court Fees and Suits Valuation Act, 1959 | Court fee for appeals | Interpreted. The Court interpreted that this section does not have retrospective application. |
Judgment
The Supreme Court allowed the appeals, setting aside the High Court’s decision. The court held that the right to appeal is a substantive right that vests at the commencement of the proceedings. Therefore, the court fee payable should be determined by the law in force when the assessment order was passed for assessee appeals, and when the appellate authority set aside the judgment of the Assessing Officer for revenue appeals.
| Submission | Court’s Treatment |
|---|---|
| Appellants’ argument that court fee should be as per law when proceedings began | Accepted. The court held that the right to appeal vests when proceedings are initiated, and the applicable court fee should be determined by the law in force at that time. |
| State of Kerala’s argument that the issue is academic | Rejected. The court held that the High Court had decided the issue in categorical terms, and it was appropriate to reflect on the said decision. |
The Court’s view on authorities:
- Hosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh And Others [1953 SCR 987]*: The Court followed this case, reiterating that a vested right to appeal is governed by the law existing when the proceedings were initiated.
- State of Bombay v. Supreme General Films Exchange Ltd. [(1960) 3 SCR 640]*: The Court followed this case, emphasizing that an impairment of the right of appeal is not a matter of procedure and cannot be retrospective unless expressly stated.
- Hardeodas Jagannath v. State of Assam and Others [(1969) 2 SCR 261]*: The Court followed this case, explaining 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.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the principle that the right to appeal is a substantive right that vests when proceedings are initiated. The Court emphasized that this right cannot be impaired retrospectively unless explicitly stated by law. The Court also took into account the fact that Section 52A of the 1959 Act did not have any retrospective application. The court was also influenced by the fact that the High Court had decided the issue in categorical terms, and it was appropriate to reflect on the said decision.
| Reason | Percentage |
|---|---|
| Substantive Right to Appeal | 40% |
| No Retrospective Application of Section 52A | 30% |
| High Court’s Categorical Decision | 30% |
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
Issue: Court fee applicability on appeals
Is the right to appeal a substantive right?
Yes, it vests when proceedings start.
Is Section 52A of the 1959 Act retrospective?
No, it cannot impair a vested right.
Court fee is determined by law when assessment order was passed (for assessee) and when demand was negated (for revenue).
The court reasoned that:
- “right of appeal is not a matter of procedure and that it is a substantive right.”
- “this right gets vested in the litigants at the commencement of the lis.”
- “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.”
The court rejected the High Court’s view that the vested right of appeal was taken away by necessary implication, stating that “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.”
Key Takeaways
- ✓ Court fees for appeals under Section 260A of the Income Tax Act, 1961, are determined by the law in force when the assessment order was passed (for assessee appeals) or when the appellate authority negated the demand (for revenue appeals).
- ✓ Section 52A of the Kerala Court Fees and Suits Valuation Act, 1959, does not have retrospective application.
- ✓ The right to appeal is a substantive right that vests when proceedings are initiated and cannot be impaired retrospectively unless explicitly stated.
Directions
The Supreme Court directed that:
- 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 the court fee payable shall be the one which was payable on the date of such assessment order.
- 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.
Development of Law
The ratio decidendi of this case is that the right to appeal is a substantive right that vests at the commencement of the proceedings, and the court fee payable should be determined by the law in force at that time. This judgment clarifies that Section 52A of the Kerala Court Fees and Suits Valuation Act, 1959, does not have retrospective application. It reinforces the principle that a vested right of appeal cannot be impaired retrospectively unless explicitly stated by law, thus reaffirming the principles laid down in Hosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh And Others [1953 SCR 987] and State of Bombay v. Supreme General Films Exchange Ltd. [(1960) 3 SCR 640].
Conclusion
In conclusion, the Supreme Court’s judgment in K. Raveendranathan Nair vs. Commissioner of Income Tax clarifies that the court fee for appeals under Section 260A of the Income Tax Act, 1961, is determined by the law in force when the assessment order was passed (for assessee appeals) or when the appellate authority negated the demand (for revenue appeals), and that Section 52A of the Kerala Court Fees and Suits Valuation Act, 1959, does not have retrospective application. This decision protects the substantive right to appeal and ensures that it is not impaired retrospectively.