Prospective application of section 115BBE kept surrendered business income taxable at normal rates for an earlier year.

Surrendered income offered during survey for assessment year 2017-18 was held not liable to the enhanced tax rate under section 115BBE. The Tribunal treated the amount as business income already taxed at normal rates and applied the view that the amended enhanced rate operated prospectively from 01.04.2017, i.e. from assessment year 2018-19 onwards. Accordingly, the surrendered income for the earlier year could not be taxed at the higher rate and remained taxable at normal rates.

---

---

Issues: Whether the surrendered income offered during survey for assessment year 2017-18 could be subjected to the enhanced tax rate under section 115BBE of the Income-tax Act, 1961, or was taxable at normal rates as business income.

Analysis: The surrendered sum had been offered by the assessee and tax at normal rates had already been paid by treating it as business income. The enhanced rate under section 115BBE was invoked by the Assessing Officer and sustained in appeal, but the Tribunal followed the view that the enhanced rate became applicable only from 01.04.2017, corresponding to assessment year 2018-19 onwards, and not to earlier years. On that basis, the surrendered amount for assessment year 2017-18 could not be brought to tax at the enhanced rate.

Conclusion: The enhanced tax rate under section 115BBE could not be applied to the surrendered income for assessment year 2017-18, and the amount was liable to be taxed at normal rates. The issue was decided in favour of the assessee.

Ratio Decidendi: The enhanced rate of tax under section 115BBE of the Income-tax Act, 1961 applies prospectively from assessment year 2018-19 onwards and cannot be applied to surrendered income pertaining to earlier assessment years.

---