2009 (1) TMI 217 - SC - Income Tax

Court seeks larger Bench to interpret tax law proviso, emphasizes strict interpretation, avoids retroactive effects.

The court acknowledged the need for a larger Bench to review the interpretation of the proviso appended to section 113 of the Income-tax Act, 1961, ... Whether the proviso appended to section 113 is clarificatory and / or curative in nature - As the said proviso was introduced with effect from June 1, 2002, i.e., with prospective effect and by reason thereof, tax chargeable under section 113 of the Income-tax Act is to be increased by surcharge levied by a Central Act, we are of the opinion that keeping in view the principles of law that the taxing statute should be construed strictly and a statute, ordinarily, should not be held to have any retrospective effect, it is necessary that the matter be considered by a larger Bench Issues:1. Interpretation of the proviso appended to section 113 of the Income-tax Act, 1961.2. Retroactive nature of the proviso.3. Requirement of a larger Bench for consideration.Analysis:1. The main issue before the court was the interpretation of the proviso appended to section 113 of the Income-tax Act, 1961, regarding the increase in tax chargeable under this section by a surcharge applicable in the assessment year relevant to the search or requisition made under specific sections.2. The court noted that the search and seizure in the case occurred on October 6, 2001, and a block assessment order was issued for assessment years 1984 to 2003, with the surcharge being levied on June 30, 2003. The petitioner contended that the proviso was retrospective in nature, citing a Division Bench decision to support this argument.3. Referring to the Division Bench decision, the court highlighted that the proviso was seen as clarificatory and not retrospective. The court emphasized the need to strictly interpret taxing statutes and avoid attributing retrospective effects to statutes. Considering the prospective effect of the proviso from June 1, 2002, the court decided that the matter required consideration by a larger Bench to ensure a comprehensive analysis of the legal principles involved.4. In light of the above analysis, the court decided to condone the delay, acknowledged the need for a larger Bench to review the matter, and directed the Registry to present the case before the Chief Justice for the constitution of such a Bench, ensuring a thorough examination of the legal issues surrounding the interpretation and application of the proviso in question.