In Brief
Tamil Nadu State Marketing Corporation challenged the validity of Section 40(a)(iib) of the Income Tax Act, 1961, arguing it discriminates against state-owned enterprises by disallowing VAT expenses as deductions, contrary to Article 14 of the Constitution. The High Court dismissed the writ petition without deciding the constitutional issue on merits, stating the matter was pending before the tax authority. The Supreme Court held that the High Court erred in not deciding the vires of the statutory provision on its merits. Once a statutory provision is invoked affecting the petitioner, the High Court must decide constitutional challenges regardless of parallel proceedings. The Court allowed the appeal and remanded the matter to the High Court for decision on merits, without expressing any opinion on the constitutional validity itself.
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