The Jharkhand High Court has recently clarified the criteria for reviewing judgments in tax appeal cases, particularly regarding decisions based on legal questions.

According to the explanation to Rule 1 of Order 47 of the Code of Civil Procedure, the court stated that if a decision on a legal question forming the basis of a court judgment is later reversed or modified by a higher court in a different case, it cannot be used as grounds for reviewing the original judgment.

The case centered around a tax appeal aimed at contesting an order issued by the Income Tax Appellate Tribunal. The central issue pertains to whether the Samiti qualifies for exemption under section 80-P(2)(a)(i) of the Income Tax Act, 1961 for the interest it receives, and whether the transfer charges it receives are exempt from taxation.

Upon review of the provisions, the writ court concluded that no significant legal questions were raised, leading to the dismissal of the appeal. Subsequently, a civil revision was filed challenging this decision.

The petitioner argued that since the appropriation of the amount only occurs upon the transferee's enrollment as a member, the transfer charges imposed on departing members do not possess characteristics of profit or commerciality. The petitioner drew support from the precedent set in the case of Income Tax Officer, Mumbai v. Venkatesh Premises Cooperative Society Ltd whereby the Supreme Court had laid down the law on the subject and it has been held that the transfer charges payable by the outgoing member does not partake the nature of profit or commerciality as the amount is appropriated only after the transferee is inducted as the member.

Alternatively, the Respondent argued that the review petition's delay was unexplained. Additionally, it was asserted that the order issued by the writ court did not display any evident errors on its face.

The Court, in its observation of the explanation to Rule (1) of Order 47 of the Code of Civil Procedure, emphasized that a decision made on a question of law, based on the court's judgment, should not be subject to review merely because it is reversed or modified by a subsequent decision of a Superior Court in a different case.

Highlighting that the relied-upon explanation was passed after the dismissal of the tax appeal by the Petitioner, the division bench comprising Acting Chief Justice Shree Chandrashekhar and Justice Navneet Kumar expressed its stance, stating, "In the opinion of this Court, if a review petition is entertained ignoring the statutory provisions under Order 47 of the Code of Civil Procedure which are applied in the writ proceedings, that would bring uncertainty and chaos in the system."

Accordingly, the bench dismissed the civil review petition.

Case Title: Adarsh Sahkari Grih Nirman Swawlambi Samiti Limited Vs Commissioner of Income Tax, Jamshedpur

LL Citation: 2024 LiveLaw (Jha) 55

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