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THE QUESTION OF SUBSTANTIAL QUESTION OF LAW SUBSTANTIATED

By : Saswat Acharya on 03 May 2009 Report Abuse Print Print this
 



 

THE QUESTION OF SUBSTANTIAL QUESTION OF LAW SUBSTANTIATED
 
 
In Hero Vinoth v. Seshammal (AIR 2006 SC 2234), it was laid down that a question of law having a material bearing on the decision of the case (that is, a question, answer to which affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legal principle emerging from binding precedents, and, involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law or binding precedents,
 
In case of Kondiba Dagadu Kadam v. Savitribai Sopan Gujar AIR 1999 SC 2213 it has been explained as to what can be termed as substantial question of law. It was held:-
 
"If the question of law termed as substantial question stands already decided by a larger bench of the High Court concerned or by the Privy Council or by the federal Court or by the Supreme Court, its mere wrong application to facts of the case would not be termed to be a substantial question of law. Where a point of law has not been pleaded or is 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 substantial question of law in second appeal. The mere appreciation of the facts, the documentary evidence or the meaning of entries and the contents of the document cannot be held to be raising a substantial question of law. But where it is found that the first appellate Court has assumed jurisdiction which did not vest in it, the same can be adjudicated in the second appeal, treating it as substantial question of law. Where the first appellate Court is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference in second appeal."
 
Test laid down in Sir Chunilal V. Mehta and Sons Ltd. v Century Spinning and Manufacturing Co. Ltd. (AIR 1962 SC 1314)
 
The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it 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 this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. 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. – But if the question is settled by the Apex Court or the general principles to be applied in determining the question are well-settled, mere application of it to a particular set of facts would not constitute a substantial question of law - Krishan Kumar Aggarwal v. Assessing Officer [2004] 138 Taxman 1/266 ITR 380 (Delhi).
 
In Mahavir Woollen Mills v. CIT (245 ITR 297)
 
A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. But, it is not possible to turn a mere question of fact into a question of law by asking whether as a matter of law the authority came to a correct conclusion upon a matter of fact.
 
TESTS LAID DOWN
(1) whether, directly or indirectly, it affects substantial rights of the parties, or
(2) the question is of general public importance, or
(3) whether it is an open question, in the sense that the issue has not been settled by pronouncement of the Supreme Court or the Privy Council or by the Federal Court, or
(4) the issue is not free from difficulty, or
(5) it calls for a discussion for alternative view.
 
The Supreme Court held in CIT v Anusuya Devi (68 ITR 750) that the High Court may decline to answer any question of law which is purely academic and the answer to which would have no bearing on any actual right or liability of the taxpayer, or if the answer would not dispose of the real questions in issue between the parties, or if the question is unnecessary or irrelevant.
 
In DCIT v. Marudhar Hotels (245 ITR 138)…Para 6…
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 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.
 
So as per the above discussion, it can be safely inferred that the following are the tests to determine whether a question involved is one of fact or law:
 
(1) As the Tribunal is the final fact-finding authority, if it has reached certain findings upon examination of all relevant evidence and materials before it, the existence or otherwise of certain facts at issue is a question of fact.
 
(2) Any inference from certain facts is also a question of fact. If a finding of fact is arrived at by the Tribunal after improperly rejecting evidence, a question of law arises.
 
(3) Where a Court of fact acts on materials partly relevant and partly irrelevant and it is impossible to say to what extent the mind of the adjudicating forum was affected by the irrelevant material used by it in arriving at the finding, it gives rise to a question of law. Such a finding is vitiated because of the use of inadmissible material.
 
(4) When any finding is based on no evidence or material, it involves a question of law. In other words, if the Tribunal acts on irrelevant materials and evidence, a question of law is involved.
 
 

Source : Income Tax Reporter, SCC Online, Manupatra, The Income Tax Act by Chaturvedi & Pithisaria,



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