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PepsiCo case: SC strikes down provision in tax law limiting extension of stay orders

PepsiCo case: SC strikes down provision in tax law limiting extension of stay orders

Terming it “arbitrary and discriminatory”, the Supreme Court has partially struck down a provision of the income tax law that did not allow further extension of stay on assessment beyond 365 days even if the assessee was not responsible for any delay in hearing of appeals before a tribunal.

While upholding the Delhi High Court’s May 2015 judgment that ruled in favour of assesses, a Bench led by justice RF Nariman said that “…there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India”.
“We have already seen how unequal have been treated equally so far as assessees who are responsible for delaying appellate proceedings and those who are not so responsible, resulting in a violation of Article 14 of the Constitution of India. Also, the expression “permissible” policy of taxation would refer to a policy that is constitutionally permissible. If the policy is itself arbitrary and discriminatory

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