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Accept – Reject of Comparables- When can it constitute a ‘substantial question of law’?
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Ashutosh M Rastogi[/caption]
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Dhruv Seth[/caption]
In a landmark judgment of Softbrands India Pvt Ltd[1], Hon’ble Karnataka High Court ruled that Indian Tax Tribunal is the final fact-finding authority; therefore, issue of comparable selection, application of filters, etc cannot give rise to a ‘substantial question of law’ to maintain an appeal before High Court unless ex-facie ‘perversity’ is demonstrated in the Tribunal Order.
Ground for admissibility of appeal before the HC
Under section 206A of the Income-tax Act, 1961 (‘Act’), an appeal shall lie before the High Court against an order passed by Tax Tribunal only if the Court is satisfied that the case involves a ‘substantial question of law’.[2] The Court can also frame additional ‘substantial questions of law’ at a later stage, if such ‘substantial questions of law’ are involved.
Substantial question of law
Existence of a ‘substantial question of law’ is an essential condition for admission of an appeal to High Court. Following questions can constitute ‘substantial question of law’:
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- A finding of fact may give rise to a ‘substantial question of law’, only if it is perverse[3].
- A question of law having a material bearing on the decision of the case (i.e. something which affects the rights of parties to the suit) will be a ‘substantial question of law’.
- A question not covered by any specific provision, principle or precedents and involves a debatable legal issue.
- A question wherein lower Courts decided the issue ignoring or acting contrary to legal principle.
- Any decision by lower Court wherein material evidence has been ignored or where the Courts have wrongly cast the burden of proof.