Commissioner of Income Tax vs Indradaman Amratlal

B.K. Mehta, J.—At the instance of the Commissioner of Income Tax, Gujarat, the following question has been referred to us for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest of Rs. 35,456 paid to Shri Amratlal Hargovandas, Hindu undivided family account account, by the individual capacity could not be disallowed u/s 40(b) of the Income Tax Act, 1961 ?"

Since this question is covered by the decision of Full Bench of this court in Chhotalal and Co. Vs. Commissioner of Income Tax, Gujarat, , this and other companion matters have been placed for disposal before us. A short but interesting question has been raised as to what is the effect of the decision of the Supreme Court rejecting SLP to Appeal (Civil) No. 7736\\81 preferred by the Commissioner, against the decision of this court in CIT v. Sajjanraj Divanchand [1980] 126 ITR 654. which in the opinion of the Division Bench of this court consisting of Thakkar C.J. Bench directed the reference made in Chhotalal and Co. Vs. Commissioner of Income Tax, Gujarat, , being Income Tax Reference No. 313\\76, to a Larger Bench, which ultimately overruled the decision in Sajjanraj Divanchand''s case [1980] 126 ITR 654. The decision of the Full Bench in Chhotalal and Co. Vs. Commissioner of Income Tax, Gujarat, . The question which has been raised is that the Supreme Court has rejected the SLP preferred by the Commissioner, against the decision of this court in Sajjanraj Divanchand''s case [1980] 126 ITR 654, on merits and, therefore, it is tantamount to confirming the decision of this court in Sajjanraj Divanchand''s case [1980] 126 ITR 654, and, therefore, the Full Bench could not have overruled it. We do not think that this contention is well founded. The reasons are obvious. A party moving the Supreme Court for leave to appeal under article 136 of the Constitution has no right as a matter of course to get the leave. The general principle for grant of special leave is, in exceptional cases, where substantial and grave injustice is shown to have been done or where the case presents features of special gravity. In other words, the grant of special leave depends on as to whether there is a substantial question of law of public interest (see Mundrika Prasad Singh Vs. State of Bihar, . The Supreme Court has adopted the principles which were followed by the Judicial Committee of the Privy Council in granting special leave to appeal. Such special leave will, therefore, be granted only sparingly and in exceptional cases (see The Bharat Bank Ltd., Delhi Vs. Employees of the Bharat Bank Ltd., Delhi and The Bharat Bank Employees'' Union, Delhi, , and Madhav Hayawadanrao Hoskot Vs. State of Maharashtra, . If, therefore, the Supreme Court refuse to grant leave to an appeal, it does not mean ipso facto that the judgment sought to be appealed against is confirmed as to its ratio and\\or the conclusions, particularly when there is no speaking order. Even after hearing on merits, if the Supreme Court is satisfied that there has been no failure of justice, it may dismiss the appeal without deciding the main question sought to be raised in appeal (see Central Bank of India v. Their Workmen [1959] 29 Comp Cas 357 : 17 FJR 57). The only effect of not granting special leave is that the legal position enunciated by the judgment of the court sought to be appealed against is one where the Supreme Court for valid reasons declines to interfere (see Addl. Commissioner of Income Tax, Gujarat Vs. New Jehangir Vakil Mills Co. Ltd., . In any case, it would be unsafe to say that the effect of not granting the special leave, even where the court has in its order refusing to grant the leave stared the SLP was dismissed on merits, since there is no practice to state the reasons while refusing the leave that it would be tantamouth to confirming the judgment sought to be appealed against on the matter of the principle involved and\\or the conclusion reached therein. This contention has not commended itself to us because otherwise it would amount to saying that the decision is binding impliedly without having the benefit of the detailed consideration being stated by the Supreme Court. The contention should, therefore, be rejected and we should proceed on the basis that decision in Sajjanraj Divanchand''s case [1980] 126 ITR 654 stands overruled, as clearly directed by the Full Bench in Chhotalal and Co. Vs. Commissioner of Income Tax, Gujarat, . It is in the light of the decision of the Full Bench that we shall have to answer the question referred to us in this reference in the affirmative, i.e., in favour of the assessee and against the Revenue. There would be no order as to costs.