Finance Act Amendment Not Retroactive: High Court Rules in Favor of Appellant

The High Court held that the Finance Act, 1987 amendment regarding the interpretation of the word "transfer" under section 2(47)(v) of the Income Tax Act, 1961 cannot be applied retrospectively to the assessment year 1977-78. The Court ruled in favor of the appellant, quashing the Tribunal's order and allowing the appeal, emphasizing that the amendments would apply from 1-4-1988 onwards.

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Issues: Interpretation of the word "transfer" under section 2(47)(v) of the Income Tax Act, 1961 for the assessment year 1977-78.

In this case, the appellant, a construction company, followed the mercantile system of accounting for the year ending on 30.09.1976. The assessing officer disapproved the accounting method and estimated a 10% profit for the assessment year 1977-78 due to flats being given on hire purchase with ownership conditions. The CIT(A) upheld the addition, leading to an appeal before the ITAT. The Tribunal dismissed the appeal, prompting the appellant to challenge the interpretation of the Finance Act, 1987 amendment regarding the word "transfer" under section 2(47)(v) for the A.Y 1977-78. The appellant argued that the amendment cannot be applied retrospectively to their case. The High Court analyzed the statutory provisions and held that no law can be given retrospective effect, emphasizing that the amendments would apply from 1-4-1988 onwards. The Court found the Tribunal's interpretation erroneous, disagreed with the reliance on a Supreme Court decision, and ruled in favor of the appellant, quashing the Tribunal's order and allowing the appeal.

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