Court upholds constitutionality of Income-tax Act amendment, rejects promissory estoppel.

The court upheld the constitutional validity of sub-section (1C) of section 54E of the Income-tax Act, 1961, introduced by the Finance Act, 1992. It found the amendment to be non-discriminatory under Article 14 of the Constitution, based on rational criteria. The court rejected the application of the doctrine of promissory estoppel, stating that the amendment was prospective from April 1, 1992, not retrospective. The writ petition was dismissed, and each party was responsible for their own costs.

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Issues Involved:
1. Constitutional validity of sub-section (1C) of section 54E of the Income-tax Act, 1961.
2. Alleged discrimination under Article 14 of the Constitution of India.
3. Applicability of the doctrine of promissory estoppel.
4. Retrospective effect of the Finance Act, 1992.

Detailed Analysis:

1. Constitutional Validity of Sub-section (1C) of Section 54E:
The petitioner challenged the constitutional validity of sub-section (1C) of section 54E of the Income-tax Act, 1961, introduced by the Finance Act, 1992. The petitioner argued that the words and figures "29th day of February, 1992" should be struck down and replaced with "31st day of March, 1992." The Finance Act, 1992, amended section 54E(1) to withdraw the exemption from tax on long-term capital gains from the assessment year 1993-94. The petitioner contended that this amendment was discriminatory and violated Article 14 of the Constitution.

2. Alleged Discrimination Under Article 14:
The petitioner argued that the amendment discriminated against assessees who received and invested advances between March 1, 1992, and March 31, 1992, as compared to those who did so before February 29, 1992. The court found that the provisions of sub-section (1C) are based on rational and intelligible criteria. The Legislature inserted sub-section (1C) to protect assessees who had received advances and invested them in specified assets before February 29, 1992, as they had no notice of the proposed withdrawal of exemption before that date. The court held that this classification was not arbitrary and did not violate Article 14.

3. Applicability of the Doctrine of Promissory Estoppel:
The petitioner claimed that the CBDT Circular No. 359, dated May 10, 1983, created a vested right that could not be taken away by the amendment. The court rejected this argument, stating that the circular merely explained the provisions of section 54E(1) as it existed before the 1992 amendment and did not create any vested rights. The court held that the doctrine of promissory estoppel did not apply, as there was no promise extended by the circular, and the amendment withdrew the exemption from tax on long-term gains with effect from April 1, 1992.

4. Retrospective Effect of the Finance Act, 1992:
The petitioner contended that the Finance Act, 1992, notified on May 14, 1992, could not be made retrospective by restricting the benefit of exemption from capital gains tax up to February 29, 1992. The court held that the amendment of section 54E(1) was prospective, effective from April 1, 1992, and not retrospective. The court further stated that tax legislation is a policy matter for Parliament, which can enact laws with retrospective effect, subject to constitutional limitations. The court referenced several authoritative pronouncements to support this view.

Conclusion:
The court found no merit in the petitioner's contentions. The provisions of sub-section (1C) of section 54E of the Income-tax Act, 1961, were held to be based on rational and intelligible criteria, and the classification did not violate Article 14 of the Constitution. The doctrine of promissory estoppel was not applicable, and the amendment was prospective, not retrospective. The writ petition was dismissed, and parties were left to bear their own costs.

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