2021 (4) TMI 781 - HC - Income Tax

Tax Court Applies Curative Amendment Retrospectively, Emphasizing Taxpayer Protection

The Court upheld the respondent-assessee's claim for the benefit of the curative amendment made by the Finance Act, 2010, despite filing the return before ... Disallowance u/s 40(a)(ia) - Whether Tribunal was right in holding that the amendment n made to section 40(a)(ia) by Finance Act, 2010 would apply retrospectively, though the amendment is made with effect from 1.4.2010? - HELD THAT:- As relying on Calcutta Export Company [2018 (5) TMI 356 - SUPREME COURT] it is clear that the amendment made by the Finance Act, 2010 was curative in nature and it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its return of income on 17.10.2009, as per the ratio laid down by the Hon'ble Apex Court, the assessee should be allowed to claim the benefit of the amendment made in the Finance Act to the provisions of Section 40(a)(ia) of the Income Tax Act. The learned Senior Standing Counsel appearing for the appellant has not produced any contra judgment in support of the Revenue. We are of the considered view that the ratio laid down by the Hon'ble Supreme Court in the Judgment squarely applies to the facts and circumstances of the present case. - Decided against revenue. Issues:Challenge to order passed by Income Tax Appellate Tribunal for Assessment Year 2008-2009 - Disallowance under section 40(a)(ia) - Retrospective application of amendment made by Finance Act, 2010.Analysis:The appeal was filed by the Revenue challenging the order passed by the Income Tax Appellate Tribunal. The substantial questions of law admitted for consideration were related to the deletion of disallowance under section 40(a)(ia) and the retrospective application of the amendment made by the Finance Act, 2010. The respondent-assessee relied on a Supreme Court judgment which emphasized the curative nature of the amendment and the need for retrospective application to prevent adverse consequences for taxpayers, especially for medium and marginal taxpayers. The judgment highlighted the intention of the legislature to avoid unintended and deleterious consequences for taxpayers.The Court noted that the amendment made by the Finance Act, 2010 was intended to be curative in nature, aiming to address anomalies affecting bona fide taxpayers. It was emphasized that the retrospective operation of the amendment was crucial to prevent adverse consequences for taxpayers, particularly those with low gross product rates facing substantial expenses. The Court referred to previous judgments supporting the retrospective application of amendments to remedy unintended consequences and ensure a reasonable interpretation of the law.Based on the principles laid down by the Supreme Court in previous judgments and the rationale behind the curative nature of the amendment, the Court held that the assessee should be allowed to claim the benefit of the amendment made by the Finance Act, 2010, despite filing the return before the enactment of the amendment. The Court highlighted the need for a liberal and equitable interpretation of the law to prevent unintended hardships for taxpayers. The absence of any contrary judgments presented by the Revenue further supported the Court's decision to dismiss the Tax Case Appeal in favor of the respondent-assessee.In conclusion, the Court applied the principles established by the Supreme Court regarding the retrospective application of curative amendments to tax laws. The judgment emphasized the importance of preventing unintended and deleterious consequences for taxpayers, especially those with lower financial capacities. The Court's decision to dismiss the appeal in favor of the respondent- assessee was based on the equitable interpretation of the law and the absence of contradictory judgments presented by the Revenue.