IMPORTANT POINTS
(1) Challenges to tax statutes made under Article 14 of Constitution of India can be on grounds relatable to discrimination as well as grounds relatable to manifest arbitrariness.
(2) Third proviso to Section 254(2A) of Income Tax Act, introduced by Finance Act, 2008, would be both arbitrary and discriminatory and liable to be struck down as offending Article 14 of Constitution of India.

JUDGMENT :

R.F. NARIMAN, J.

1. Delay condoned. Leave granted.

2. The appeals before us raise an important question as to the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, 1961 (hereinafter referred to as “Income Tax Act”).

3. The facts in Deputy Commissioner of Income Tax & Anr. v. M/s Pepsi Foods Ltd. [now Pepsico India Holdings Pvt. Ltd] (Civil Appeal arising out of Special Leave Petition (C) No.30284 of 2015) may be set out as being illustrative of the facts in all the appeals before us. The Respondent-assessee is an Indian company incorporated on 24.02.1989 and is engaged in the business of manufacture and sale of concentrates, fruit juices, processing of rice and trading of goods for exports. The assessee is a group company of the multi-national Pepsico Inc., a company incorporated and registered in the United States of America. The assessee-company merged with Pepsico India Holdings Pvt. Ltd. w.e.f. 01.04.2010, in terms of a scheme of arrangement duly approved by the Hon’ble Punjab and Haryana High Court. On 30.09.2008, a return of income was filed for the assessment year 2008-2009 declaring a total income of INR 92,54,89,822. A final assessment order was passed on 19.10.2012 which was adverse to the assessee. Aggrieved by the aforesaid order, the assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as “Tribunal”) on 29.04.2013. On 31.05.2013, a stay of the operation of the order of the assessing officer was granted by the Tribunal for a period of six months. This stay was extended till 08.01.2014 and continued being extended until 28.05.2014. Since the period of 365 days as provided in Section 254(2A) of the Income Tax Act was to end on 30.05.2014 beyond which no further extension could be granted, the assessee, apprehending coercive action from the Revenue, filed a writ petition before the Delhi High Court on 21.05.2014 challenging the constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act. By a judgment dated 19.05.2015, the Delhi High Court struck down that part of the third proviso to Section 254(2A) of the Income Tax Act which did not permit the extension of a stay order beyond 365 days even if the assessee was not responsible for delay in hearing the appeal. It is this judgment and several other judgments from various High Courts that have been challenged by the revenue in these appeals.

4. Shri Vikramjit Banerjee, learned ASG, assailed the impugned judgment of the Delhi High Court and other judgments following it, arguing that there is no right to stay of a judgment in an appellate proceeding as such stay is dependent upon the discretion of the Appellate Court. The discretion having been exercised once would not mean that automatic extensions of the same could be granted despite a reasonable period having gone-by. He also argued that the discretionary remedy of a stay is part and parcel of the right to appeal which itself is a statutory right, and can be taken away by the legislature. He then argued that Article 14 of the Constitution of India is not to be applied mechanically as a far greater freedom in the joints is given qua tax legislation and so long as the State has laid down a valid policy which it has followed without singling out anybody, no discrimination can possibly ensue. He also argued that equitable considerations and arguments based on hardship are out of place when it comes to tax statutes, which must be read literally. For all these propositions, he cited case law which will be dealt with later in this judgment.

5. Shri Ajay Vohra, learned Senior Advocate, Shri Himanshu S. Sinha, Shri Deepak Chopra and Shri Sachit Jolly, learned Advocates, appearing for the assessees, countered each of the submissions of Shri Banerjee, learned ASG. They relied strongly upon the reasoning of the impugned judgment of the Delhi High Court and argued that once discretionary relief has been granted based upon a str