Law:

Section:

Section 260A, read with section 45, of the Income-tax Act, 1961 - High Court, appeals to - Assessment year 1995-96 - Whether with out insisting on statement of substantial question of law in memorandum of appeal and formulating same at time of admission, High Court is not empowered to generally decide appeal under section 260A without adhering to procedure prescribed under said section - Held, yes - Whether where no substantial question of law was formulated at time of admission of appeal and High Court had formulated questions subsequently after conclusion of arguments for purpose of adjudication, High Court was not justified - Held, yes FACTS The assessees were partners of a firm which was dissolved and the erst while partners continued the business as members of an association of persons. This entity continued till the assets of the firm were sold. The revenue authorities held that the amount received by way of consideration after statutory adjustments amounted to receipt from a slump sale and was, therefore, taxable under the heading 'Capital gain'. The conclusions of the revenue authorities were challenged by the assessees before the Tribunal. The cross appeals before the High Court were disposed of by the common . In the instant appeal to the Supreme Court, the assessee submitted that the arguments raised by them relating to non-applicability of the principle of slump sale were not considered by the High Court and that the questions were formulated by the High Court for adjudicating the appeals after the arguments were concluded for the purpose of rendering the and not when the appeals were admitted. HELD An appeal to the High Court lies only when a substantial question of law is involved. It is essential for the High Court to first formulate question of law and thereafter, proceed in the matter. [Para 12] Without insisting on the statement of substantial question of law in the memorandum of appeal and formulating the same at the time of admission, the High Court is not empowered to generally decide the appeal under section 260A without adhering to the procedure prescribed under section 260A. Further, the High Court must make every effort to distinguish…

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