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2006 (4) TMI 202
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....ution of the Special Bench. Its reasons are extracted below:- "2. The short issue in this appeal is whether the levy of surcharge in terms of the provisions of the Finance Act, 2002, is valid in a block assessment made under section 158BC of the Income-tax Act. The tax has to be charged in a block assessment in terms of section 158BA(2) of the Income-tax Act read with section 113 of the said Act. 1. The undisclosed income of the Block Period is charged to tax at the rate of 60 per cent stipulated under section 113, section 113 of the Act reads as under:- 'The total undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent.' The following proviso to section 113 was inserted only by the Finance Act, 2002, with effect from 1-6-2002:- "Provided that the tax chargeable under this section shall be increased by a surcharge if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A." It may also be observed that there is ....
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....of Surcharge on tax on undisclosed income. Section 113 provides for tax on undisclosed income at the rate of 60 per cent. The Finance Act stipulates that the amount of income-tax shall be increased by a surcharge, as applicable to the assessee. Levy of surcharge on tax on regular income does not pose a problem since the amount of income-tax is determined with reference to a particular assessment year, as specified in the Finance Act. The basis for levy of such tax on regular income is contained in section 4 of the Income-tax Act in which the charge of tax is linked to any Central Act and such a Central Act in this case is the Finance Act. In the case of a block assessment, there are two problems in relation to the levy of surcharge. The first is that section 113 does not mention a Central Act. In the absence of a reference to another Central Act in the charging section, it becomes difficult to justify levy of surcharge. Even if it is assumed that reference in the Finance Act to section 113 is sufficient authority to levy surcharge, the second problem is that the Finance Act levies surcharge on the amount of income-tax of a particular assessment year whereas in the....
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....onal Conference of the Chief Commissioners have no relevance, in the context of statutory interpretation of the provisions, and the Tribunal should not be influenced or bound by extraneous matters like Commissioner's recommendations, remarks of the commentators, etc. 6. We find that there are conflicting decisions of the Tribunal on this issue. The first available decision is that of the Bangalore Bench of the Tribunal in the case of Microland Ltd. v. ACIT (67 ITD 446) Bang. In this case, the Bangalore Bench observed as under:- "38. The learned counsel for the assessee also objects to levy of surcharge separately in addition to tax at the rate of 60 per cent on the undisclosed income. We agree with him that as per the provisions of section 113, separate surcharge cannot be levied in respect of search and seizure assessments made under Chapter-XIV-B. However, in view of the fact that we have held the entire assessment to be liable to cancellation, this particular ground becomes academic in nature." There are two more decisions of the Tribunal in favour of the assessee, which are as under:- (a) Principal Officer, Builcon Towers (P.) Ltd. v. Ass....
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....isions of the Tribunal on the point at issue. "7. The matter is of substantial revenue implication in all search cases. It has wide ramifications, and it required an in depth examination of the position of the annual Finance Acts vis-avis the Income-tax Act, 1961, and also an in depth analysis of the principles of statutory interpretation. For these reasons, and as there are conflicting decisions mi this issue, we are of the view that the appeal in question in a lit and proper appeal to be heard by a Special Bench, so that at the level of Tribunal, there can be uniformity of approach on this issue." 3. Thus and therefore, this Special Bench has been constituted under section 255(3) of the Income-tax Act, 1961, by the Hon'ble the President of the Tribunal on a reference made by the Division Bench at Hyderabad, to answer its following question:- "Whether on the facts and in the circumstances of the case, the levy of surcharge on the tax charged under section 113 in respect of the undisclosed income of the block period from 1-4-1989 to 18-11-1999, which is prior to insertion of proviso to section 113, is valid in law?" 4.1 The learned counsel Shri K.V.S. Bh....
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.... to levy tax on the total income of the previous year determined in the regular assessment and the power to levy surcharge on the tax determined in regular assessment; the power to levy 60 per cent tax as given in section 113 in the case of block assessment does not include the power to levy additional income-tax which is in the nature of surcharge as the Finance Act cannot be made applicable to a block assessment without specific mandate in section 113. (k) The specific mandate to levy additional income-tax found in section 4 is not found in section 113 prior to amendment with effect from 1-6-2002. (l) Earlier to 1-6-2002, the Finance Act had no power to levy surcharge in a block assessment. (m) The National Conference of Chief Commissioners of Income-tax [2001] 252 ITR 49 (Journal) made a suggestion to amend section 113 retrospectively, after recognising the difficulty, but despite the specific recommendation, the amendment was brought into force only with effect from 1-6-2002. 4.2 Referring to the stand of the Revenue that Parliament has legislative power which is derived from Entry 82 in the Union List and Articles 265, 270 and 271 of the Constitut....
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....der section 132(9A) from the authorised officer and initiates action by issue of notice under section 158BC. It could not be the year of initiation of search or the last date of warrant, as the Finance Act, 1995, did not provide for inclusion under Part E of the First Schedule. The problem would arise if the above dates fall in different assessment years. Further if notice under section 158BD is issued at the fag end of time-limit specified in section 158BE(1), then the question is as to whether it would be the year of satisfaction and issue of such notice by the Assessing Officer or the date of search, etc. A question arises posing as to whether there could be different rates in respect of assessments in pursuance of the same search as between cases under sections 158BC and 158BD, though arising out of one search or even with reference to the date of notice or the date of assessment. There is bound to be a time lag involving different assessment years. Reliance is placed on the order of the Calcutta Bench of the Tribunal in the case of Principal Officer, Builcon Towers (P.) Ltd v. Asstt. CIT [2000] 113 Taxman 74, for the proposition that in the definition of 'tax' in secti....
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....ent that harmonious construction has to be adopted as otherwise the provision relating to surcharge has to be declared ultra vires or otiose, which cannot be done by the Tribunal, it was never the argument of the assessee that the provision is unconstitutional. It should be enacted in an appropriate manner consistent with other charging provisions and not by making a provision for levy of surcharge in the Finance Act in a highly incongruous and ambiguous way. The provision simply becomes unworkable and incapable of implementation and for this proposition reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. B.S. Srinivasa Setty [1981] 128 ITR 294, specifically at page 299. A comparative chart of the provisions of the Income-tax Act, 1961, other than Chapter XIVB and the provisions of Chapter XIVB is furnished to bring out the ingredients therein, so as to demonstrate that they operate in different fields. 5.1 The learned counsel Shri Ajay Vohra on behalf of Shri Shiv Nadar and Shri Subroto Bhattacharya, assessee-Interveners submitted that: The legislative intent behind the introduction of special procedure for assessment of undisclosed income ....
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....us year relevant to an assessment year and that undisclosed income computed for the block period in terms of sub-section (2) of section 158BA is required to be taxed at a special rate which is specified in section 113 of the Act. 5.3 On the applicability of Finance Act, reference to the provisions of Finance Act is not found in the self-contained scheme of undisclosed income in Chapter XIVB. Referring to section 4 of the Act, reference to Finance Act is contained in sub-sect ion (1) of section 4. The proviso to section 4(1) carves out an exception to the normal rule in sub-section (1) and that it provides that where under any provisions of the Act, income-tax is charged in respect of income of a period other than the previous year, income-tax shall be charged accordingly. Thus, he argued when p income-tax is specifically charged on the income of a period other than the previous year, notwithstanding the provisions of sub-section (1) of section 4, tax has to be levied as may be specifically provided under such special provisions of the Act. The proviso to section 4(1) introduces a caveat to the applicability of the relevant Finance Act and where the case falls under the proviso, ....
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.... duties or taxes imposed. Reference may be had to the decision of the Hon'ble Supreme Court in the case of CIT v. K. Srinivasan [1972] 83 ITR 346, to emphasise that surcharge is in the nature of additional imposition/enhancement of tax, which has all the characteristics of tax. Unlike section 4(1), section 113 does not speak of additional income-tax and it is not permissible to read such words in section 113. Courts cannot supply any omission in the language of a statute where it is clear and unambiguous. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Elphinstone Spg. & Wvg. Mills Co. Ltd. [1960] 40 ITR 142, specifically at page 150, to appreciate that it is for the Legislature to avoid the anomaly which arises from interpretation of the language employed. The charging provisions of section 158BA, read with section 113 containing the rate of taxation, do not contain a mandate to collect surcharge prior to the amendment by Finance Act, 2002. 5.7 For the proposition that the charging provision, which imposes tax, must be construed strictly, reliance is placed on the following decisions:- (a) CWT v. Ellis Bridge Gymkhana [1998....
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....case of State of Kerala v. Alex George [2004] 271 ITR 290 (SC) for the following propositions:- (a) The Income-tax Act is a permanent Act while the Finance Acts are passed every year; (b) The function of the Finance Act primarily is to prescribe the rate of tax and the manner of calculation of tax; (c) The Finance Act is not intended to incorporate the entire procedural and substantive law relating to tax; (d) The Finance Act has to be read in consonance with the provisions of the charging section. The levy of surcharge for the purpose of section 113 by the relevant Finance Act is de hors the scheme of the Act and that the imposition of such levy does not mesh in with either proviso to section 4(1) or the provisions of section 158BA, read with section 113 of the Act. When the Finance Act seeks to impose any additional liability to tax, there must be a mandate under the charging provisions of the Act and that in the absence of the same, no additional liability can be charged by the Finance Act and further the imposition of surcharge independently with reference to the provisions of the Finance Act is not in consonance with the provisions of sec....
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.... the amendment in section 113 with effect from 1-6-2002 there was inconsistency with regard to levy of surcharge. The question which usually bothered tax authorities was whether surcharge is to be levied with reference to the rates provided for in the Finance Act of: - the year in which search was initiated; or - the year in which the search was concluded; or - the year in which the block assessment proceedings under section 158BC were initiated; or - the year in which the block assessment order was passed. Further complexity regarding the application of the relevant provisions of the Finance Act used to arise in a case where proceedings were initiated under section 158BD of the Act since there was no time-limit for initiation of proceedings under that section. (e) Lastly if it is to be held that the surcharge would even be leviable in respect of search carried out on or before 31-5-2002, the amendment made in section 113 of the Act would be rendered futile/irrelevant, and such a construction would be against the well accepted principles of interpretation of the statutes. For all the aforesaid reasons, imposition of surcharge....
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....n 158BA(2) Finance Act for each of the assessment years has no application. (c) Prior to the insertion of the proviso to section 113 of the Income-tax Act, 1961, the question of levy of surcharge on the tax computed under section 113 of the Income-tax Act, 1961, does not even arise for consideration. (d) There has been no valid levy of surcharge under any Central Act/Finance Act during the period 1-7-1995, the date on which Chapter XIVB was first inserted by the Finance Act, 1995, to 1-6-2002 the date on which the proviso was inserted in section 113 of the Income-tax Act, 1961 authorising levy of surcharge, for the reasons that neither sub-section (8) of section 2 of the Finance Act nor the first proviso refers to Chapter XIVB. (e) The language employed in Chapter II of the Finance Act normally specifies the rates of tax applicable for the income of the previous year relevant to the assessment year commencing on the 1st April of the relevant year and these provisions are not applicable to search cases under Chapter XIVB for which the rates are provided in section 113. (f) The only provision which, if at all, has some relevance to a particular ass....
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....l view of Chapter XIVB might give an impression that it is a self-contained code for assessing the undisclosed income, an in depth study of the provisions of the Act make it clear that it is not so. Chapter XIVB does not even provide for rate of tax leviable on the undisclosed income and section 158BA(2) looks to section 113, which is in Chapter XII, for the purpose of rate of tax, on the undisclosed income. This itself proves that Chapter XIVB is not a self-contained code. 8.2 It is not correct to say that, the induction of theory of block period excludes the concept of assessment year and previous years from the whole scheme of Chapter XIVB since clause (a) of section 158B defines "block period" as meaning certain number of assessment years preceding previous year in which search was conducted. This necessarily demonstrates that the concept of assessment year and the income relatable thereto, is not given a go by altogether in Chapter XIVB. On the other hand, it is only in the context of getting over the possible technical difficulties that g might be arising in fixing taxable assessment year, the Parliament, in its wisdom, has provided for integration of the undisclosed incom....
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....art of the provision. Further, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of State of West Bengal v. Madan Mohan Ghosh [2002] 9 SCC 177 to enlighten that It was held that non obstante clause was intended to confer primacy only to the statutory provisions in existence as on that date and that primacy would not extend to future laws. The non obstante clause figuring in section 158BA(1) is a restrictive one and it cannot be given wider effect as it gives primacy to Chapter XIVB over the other provisions of the Act and, at any rate, does not confer overriding effect over the provisions of the Finance Act. Even if it is to be assumed that surcharge in Finance Act. 1999, is inconsistent with section 158BA(2) read with section 113 Finance Act, 1999, being a subsequent enactment, the same has to be given effect to and the question of Finance Act, 1999, yielding to section 158BA(2) of the Act does not arise. 8.4 Even otherwise, when there is a conflict between prior law and subsequent law, it is the latter that prevails. For this proposition, reliance is placed on the decision of the Hon'ble Supreme Court in Sarwan Singh v. Kasturi Lal AIR 1977 SC....
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....f the assessees that surcharge is not leviable for the period anterior to 1-6-2002 cannot be accepted as that would be making the relevant Finance Acts to the extent of levy of surcharge as dead letters and that such an interpretation cannot be termed as a harmonious construction. It amounts to ignoring the relevant piece of legislation, which is found in the statute book, specifically when the assessees have not argued that the said provisions of the relevant Finance Act to the extent of levy of surcharge are ultra vires the Constitution of India and, in law, such an. issue cannot be raised before this Tribunal. If the proviso to section 113 introduced by the Finance Act, 2002, is construed prospectively and is made inapplicable to period before 1-6-2002, it would tantamount to ignoring the provisions in the Finance Acts of 1995, 1996, 1997, 1998, 1999 and 2000, which is not permissible in law. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of CIT v. Hindustan Bulk Carriers [2003] 3 SCC 57 at page 74, paragraphs 14 to 21. The intention to levy surcharge, especially under section 113 of the Income-tax Act, 1961, was made explicit in the Finance Act,....
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....resulted in divesting of certain of the expressions found, viz., "total income", "profits liable to tax", "dividends payable out of such profits" and "an additional income-tax", of " their natural and real meaning. Fully being conscious of the said state of legal position, some of those words may be ignored as being surplusage or a drafting error, and accordingly prayed the Hon'ble Supreme Court to accept Revenue's interpretation, by construing the said expressions as surplusage. This contention of the revenue did not find favour with the Supreme Court. 8.10 The comparison sought to be made between Elphinstone Spg. & Wvg. Mills Co. Ltd.'s case on the one hand and the present case on the other, is not warranted. In Elphinstone Spg. & Wvg. Mills Co. Ltd.'s case specific provision was made under section 3 of the Finance Act, 1963, with a non obstante clause only because the Parliament was levying surcharge on certain items of income, which otherwise were not assessable to income-tax. It is on account of this, a specific provision in section 3 was made with a non obstanle clause. Merely because such a section with similar language has not been found in all these Fina....
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....he relevant charging section for levy of surcharge in a block assessment. 8.13 The proviso to section 113 introduced by the Finance Act, 2002, is a piece of declaratory legislation and is applicable to all assessment years anterior to 1-6-2002. In effect, the said proviso to section 113 is nothing but a proviso to each of the Finance Acts, which introduced levy of surcharge on the income taxable under section 113 of the Act. As seen from the Finance Acts of 1995 to 1997 (in the case of domestic companies) and Finance Acts of 1999 and 2000 (in the case of all assessees), the Parliament provided for levy of surcharge on the incomes assessable under section 113 of the Act, but did not stipulate the rate of surcharge perhaps because the Parliament opined that it was not specifically required to be returned. The assessee's counsel rightly pointed out that since the search is the triggering point for the ensuing assessments under Chapter XIVB, it is the law as on the date of search that should be applied for all aspects including rate of tax and surcharge. Thus, whatever rate of surcharge that substituted as on the date of search would govern the assessees concerned. While admitti....
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....e Finance Act has impliedly levied surcharge, the theory of retrospectivity does not corne to the rescue of the assessee and also that the declaratory legislation can be made by a proviso to avert a possible ambiguity. For this proposition, reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Shelly Products [2003] 261 ITR 367. In that case Hon'ble Supreme Court has held that the real meaning of the original provision in the statute was implicit and the same was made explicit by the declaratory legislation. Extending these principles to the case on hand, the proviso to section 113 is only a declaratory piece of legislation intended to remove obscurity, if any, found in the relevant Finance Acts. 8.16 Regarding the reliance placed by the assessee on the resolutions passed at the Chief Commissioners' Conference, the National Conference of Chief Commissioners of Income-tax cannot be said to have any statutory authority under the Income-tax Act, nor is it vested with any power or jurisdiction to interpret the provisions of the Income-tax Act. There is no provision in the Income-tax Act constituting such a body, much less vesting with it a....
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....ee is not at all challenging the legislative competence in enacting any provision for imposing fresh levy by way of income-tax or by way of a Central Act. (b) It is also not disputed that such imposition can be effected by amendment either in the provisions of the Act or by way of amendment in the Finance Act or any other Central enactment. (c) There is no mandate in the Finance Act to impose surcharge in respect of search conducted prior to 1-6-2002 and that the provisions in the Finance Act do not justify imposition of surcharge. (d) The Revenue has quoted the judgment of the Supreme Court in the case of Madurai District Central Co-operative Bank Ltd. Reliance placed by the Revenue on this judgment is totally out of context. The ratio of the decision should be read in the context of, and with reference to the facts on which such decision was based, and not otherwise. It is well-settled that it is neither desirable nor permissible to pick out a word or a sentence from the judgment, divorced from the context of the question under consideration and treat it to be complete law. In this regard, reliance is placed on the following judgments:- (a) CIT....
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....on'ble Supreme Court in the case of Govind Saran Ganga Saran v. CST [1985] 155 ITR 144 may be seen. The stand of this intervener on the Finance Act is summarized as follows:- (a) The levy of surcharge was totally dependent on the assessee's liability to pay tax on 'undisclosed income' for the 'block period'; (b) The rate for imposition of surcharge was unknown since the relevant date for imposition of surcharge, as admitted by the revenue's standing counsel during the course of hearing, was in doubt. It was not known as to which date was relevant for determining the imposition of surcharge. (c) In the case of proceedings under section 158BD, there was ambiguity insofar as it was not known as to what was the rate of surcharge that was applicable, in addition to the ambiguity that was already existing in the case of proceedings under section 158BD. The ambiguity as to the rate applicable was as follows: (i) The rate applicable for the year in which the search was initiated; or (ii) The rate applicable for the year in which the search was concluded; or (iii) The rate applicable for the year in which the ....
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....the above, prior to amendment in section 113, the provisions of the Finance Act did not impose an independent charge for levying surcharge since the prerequisite components for a valid imposition were non-existent. 9.5 The levy of surcharge prior to amendment in section 113 was not in consonance with the provisions of the Income-tax Act, especially proviso to section 4. The decision in the case of Madurai District Central Co-operative Bank Ltd., relied upon by the revenue, is not applicable to the facts of this case and that, on the other hand, the judgment of the Hon'ble Supreme Court in the case of Elphistone Spg. & Wvg. Mills Co. Ltd. is very much applicable. The judgments of the Tribunal in the cases of Raya R. Govindarajan, Raghunandan Modi and Sri Subhash Kumar Bhunia are distinguishable. They do not lay down the correct position of law. The department was wrong in submitting that the amendment to section 113 would operate retrospectively and that Chapter XIVB is not a sell contained code. 10.1 The learned counsel Shri P. Muralikrishna, on behalf of Shri M. Yugandhar, assessee-intervener in his rejoinder submitted that: The replies of the learned counsel Sri Ajay Vo....
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....ntendment". This judgment in fact supports the case of the assessee. The judgment of the Hon'ble Supreme Court in the case of CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308 specifically at page 317, has laid down therein that "in interpreting a fiscal statute, the Court cannot proceed to make good deficiencies if there be any; the Court must interpret the statute as it stands and in the case of doubt in a manner favourable to the taxpayer". He relied on the judgment of the Hon'ble Supreme Court in Union of India v. Onkar S. Kanwar [2002] 258 ITR 761, at page 769. It is laid down therein that "where two views are possible then the one which is in favour of the assessee must be adopted". For this proposition, reliance is also placed on the judgments in the cases of CIT v. Quantas Airways Ltd. [2002] 256 ITR 843 (Delhi) and A.P. State Civil Supplies Corpn. Ltd. v. Dy. CIT [2002] 83 ITD 398 (Hyd.), and CWT v. Ellis Bridge Gymkhana [1998] 229 ITR 1 (SC) 1. 11. The learned counsel Shri Ajay Gandhi, on behalf of Unix Electronics and Smt. Priti Bhushan Mehta, assessee-interveners adopted the same arguments as other assessee-interveners above. 12.1 Rival submissions heard a....
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....Act, 1961 by the Finance Act, 2002, that it is retrospective, though the revenue argues that this is retroactive due to necessary implication. (e) The resolution of the National Conference of Chief Commissioners of Income-tax cannot be used as an aid for interpreting the Income-tax Act, nor does it have any-statutory power to make recommendations, and that it is just an opinion expressed in yet another seminar. (f) The Parliament did not stipulate the rate of surcharge applicable, explicitly prior to the introduction of the proviso to section 113 and that this issue is capable of debate, though while stating so the revenue's argument is that the rate of surcharge applicable as on the date of search, should be the rate applicable to the block, as such an interpretation would be harmonious and the proviso to section 113 is as declaratory legislation and this proviso clarifies and reiterates the intention of Legislature as it always was. 12.3 Though the resolution of the National Conference of Chief Commissioners of Income-tax cannot be considered as an aid to interpretation of a statute, nor as a guideline for decision in this case, we find that the resolutio....
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....ear in which the search was conducted." 12.4 The provisions of the Income-tax Act, 1961, which are relevant for deciding the issue before us are as follows:- Section 2(9): '"assessment year' means the period of twelve months commencing on the 1st day of April every year;" Section 2(34): "'previous year' means the previous year as defined in section 3;" Section 2(37A): "'rate or rates in force' or 'rates in force", in relation to an assessment year or financial year, mean- (i) for the purposes of calculating income-tax under the first proviso to sub-section (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 or deducting income-tax under section 192 from income chargeable under the head 'Salaries' or computation of the 'advance tax' payable under Chapter XVII-C in a case not falling under section 115A or section 115B or section 115BB or section 115E or section 164 or section 164A or section 167B, the rates or rate of income-tax specified in this beha....
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....han the previous year, income-tax shall be charged accordingly." Section 5: "5. Scope of total income. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived..." (underlining is provided by us) Thus, total income under section 2(45) is the total income of a previous year defined in section 2(34), as this is mandated by section 5. Section 113: "113. Tax in the case of block assessment of search cases. The total undisclosed income for the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent." The proviso to section 113, introduced by Finance Act, 2002, with effect from 1-6-2002, reads as under: "Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A." Chapter XIVB - "Special Procedure for assessment"- "158B. Definitions. ....
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....he block period shall not include the income assessed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended of the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period." Section 158BB: "158BB. Computation of undisclosed income of the block period. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the bas....
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....rpretation) which are adopted to find out the real meaning of the provisions, including clauses or words incorporated in the statute, having due regard to the object and purpose of the provisions whenever F it became necessary. The elementary and important principles of interpretation laid down demonstrate these: (a) Firstly, (Sarthakya) axiom is that every word and sentence must have the same meaning and purpose; (b) Secondly, (Laghava) axiom is that when one rule or proposition would suffice, more must not be assumed. (c) Thirdly, Arthaikaitva axiom is that to a word or sentence occurring at one and the same place, double meaning should not be given. (d) Fourthly, (Gunapradhana) axiom is that if a word or sentence which on the face of it purports to express a subordinate idea which clashes with the principal idea, the former must be adjusted to the latter or altogether disregarded. (e) Fifthly, (Samanjasya) axiom is that contradiction between words and sentences should be presumed, where it is possible to reconcile them; (f) Sixthly, (Vikalpa) axiom is that where there is a real contradiction, one of the contradictory matters ....
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....explaining provisions in the Finance Bill, 2002, 254 ITR (Statutes) 213, reads as follows:- "It is further proposed to amend section 113 of the Income-tax Act to provide that the tax chargeable on the undisclosed income determined under Chapter XIV-B shall be increased by the amount of surcharge applicable in the previous year in which the search commenced or requisition was made, and to amend clause (a) of sub-section (2) of section 119 of the Income-tax Act to enable the Central Board of Direct Taxes to issue such directions as it deems fit for relaxing the provisions of section 158BFA relating to charging of interest. These amendments will take effect from 1st June, 2002." (Emphasis supplied) The amendment in question has vested in the assessing authority a power to enhance the amount of tax computed under section 113 by the amount of surcharge. So, what is aimed at by the amendment is not a change in procedure, but a substantial levy. Such an amendment cannot be termed as a mere procedural one, so as to retrospective and applicable to all pending matters, but has to be deemed to be a substantive one effective only from the date specified in the Act....
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....TO [2002] 254 ITR 772 examining the retrospective or otherwise nature of the amendment to the provisions of section 150(1) with effect from 1-4-1989, held as per head note (773-774) as under- "Held, reversing the decision of the High Court, that the provisions of section 150(1) as amended with effect from 1-4-1989, did not enable the authorities to reopen assessments which had become final due to the bar of limitation prior to 1-4-1989, and this position was equally applicable to limitation proposed on the basis of order passed under the Income-tax Act or under any other law. The provision of a fiscal statute, more particularly one regulating the period of limitation, must receive a strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation of litigants for an indefinite period on future unforeseen events. Proceedings which had attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings which had already concluded and attained....
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....mplication, clearly so indicated, that vested right will continue in spite of the change of jurisdiction of the different Tribunals or forums." 12.14 We may now refer to the decision of the Apex Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548, wherein the court was concerned with the nature of amendment made to the provisions of section 80P(2)(a)(iii). Facts before the Apex Court in that case are that section 80P(2)(a)(iii) of the Income-tax Act, 1961 as originally inserted provided that in the case of a Co-operative Society engaged in "(iii) the marketing of the agricultural produce of its members" the whole of the amount of profits and gains of business attributable to such activity would be deducted from the gross total income. The Supreme Court in Assam Co-operative Apex Marketing Society Ltd. v. CIT [1993] 201 ITR 338 rendered under the corresponding earlier proviso, section 81, held that the phrase "produce of its members" must refer to agricultural produce actually "produced by its members." In a later decision, Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231 ITR 814 (SC), a larger B....
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.... "If a provision is introduced with a view to confer, a benefit, which had not been conferred before such introduction, even though the provision to which the amendment was incorporated is a beneficial provision, that does not necessarily imply that the amendment is to be given retrospective effect even without a declaration to that effect from the Legislature. Where the intention of the Legislature is clearly conveyed and wherever the language is clear the intention of the Legislature is to be gathered from the language used. A construction which requires for its support, addition or substitution of words or which results in rejection of words has to be avoided. The court is to pronounce the judgment and not to make law." (Emphasis supplied) In the instant case there is a pronouncement by the Legislature itself that the amendment is effective from 1-6-2002. Therefore, in view of the ratio of the Madras High Court noted above, there cannot be retrospectivity against the intention of the Legislature. 12.16 Similarly, in the case of M.G. Pictures (Madras) Ltd. v. Asstt. CIT [2003] 263 ITR 832 (Mad.), examining the issue with regard to retrospective or otherwise nature ....
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....ht of the judgment of the Apex Court in CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 and held that retrospective amendment of a provision must not be, only for the purpose of nullifying a judgment where there was no lacuna or defect pointed out in the parent Act. It was also observed that the retrospective amendment takes away the right given to the petitioner and that cannot be done in the guise of curing a non-existing lacuna by the respondents. 12.18 Similarly, in the case of Gem Granites v. CIT [2004] 271 ITR 322, the Apex Court, examining the retrospective or otherwise nature of the amendment to the provisions of section 80HHC by the Finance Act, 1991, whereby the benefit of section 80HHC has been extended to a specific kind of mineral, held that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. It was also held therein that subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provision as it stood earlier. In this case, the Hon'ble Supreme Court has also approved the view taken by the Hon'ble Madras High Court in CIT v. Po....
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.... India [1999] 6 SCC 418 was solely on the basis that there was conflict between each of sections 65, 66, 68(1A) and 71 of the Finance Act, 1994, as amended in 1997 on the one hand and clauses (xii) and (xviii) of Rule 2(1)(d) of the Service-tax Rules, 1994, on the other. There was no question of Parliament overruling the decision of the Supreme Court by passing Finance Act, 2000, and the Finance Act, 2003, to amend the provisions retrospectively. It was held in that context that a Legislature is competent to remove infirmities retrospectively and make any imposition of tax declared invalid, valid. 12.22 In the case of Kanmarlapudi Lakshminarayana Chetty v. First Addl. ITO AIR 1957 AP 159, Hon'ble A.P. High Court examining the retrospective or otherwise nature of the amendment to the Income-tax Act, by way of insertion of sub-section (5) to section 35 by the Income-tax (Amendment) Act, 1953, observed that the said sub-section (5) is not declaratory of a preexisting law but it clearly affects vested rights which have accrued to the assessee, and as such the well-settled rule of construction precludes the Court from construing the section as retrospective. It was held in that c....
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....rhaps no rule of construction is more firmly established than this-that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation otherwise than as regards matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation it ought to be construed as prospective only." (Emphasis supplied) 12.26 Further, in the case of J.P. Jani v. Induprasad Devshankar Bhatt AIR 1969 SC 778, Hon'ble Supreme Court, examining the scope of section 297(2)(d)(ii) of the new Act, i.e., Income-tax Act, 1961, held as follows- "On a proper construction of section 297(2)(d)(ii) of the New Act, the Income Tax Officer cannot issue a notice under section 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force. The principle is based on the well-known rule of interpretation that unless the terms of the statute expressly so provide or unless there is a necessary implication, r....
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.... the tax leviable under section 113 by the amount of surcharge. That being so, in view of the above ratio decidendi, one has to assume that the levy of surcharge is not permissible in respect of tax determined on the block assessments made prior to 1-6-2002. 12.29 Similarly in the case of STO v. Oriental Coal Corpn. AIR 1988 SC 648 considering retrospective or otherwise nature of a provision in the Amending Act, the Hon'ble Supreme Court observed that where the statute thus, on its face, clearly indicates retrospective effect where intended, there can be no justification to read retrospectivity into the amendment made by clause (a) of section 6 of the Amending Act which does not contain any word to that effect. 12.30 Further, in the case of Govinddas v. ITO AIR 1977 SC 552, the Hon'ble Supreme Court examining retrospective or otherwise nature of the provisions of section 171(6), held that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or imply an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. ....
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....effect from 1-6-2001 retrospectively. One cannot read the language as if the word retrospectively has been introduced into it as interpreted by the department when it had not been done so by the Parliament. In the instant case, where stay had been granted by the Tribunal already. i.e., prior to 1-6-2001. i.e., the date of coming into force of the aforesaid amendment by inserting the proviso to section 254(2A), right had accrued in favour of the assessee and against the department by virtue of the Tribunal's order staying recovery proceedings on the assessee for collection of the demand in dispute. Such a right accrued to the assessee by virtue of the Tribunal's order coming into effect, could get impaired if the proviso to section 254(2A) is read as retrospective when it has been actually not effectuated so but only with effect from 1-6-2001 by the Finance Act, 2001. If at all, the said insertion of the proviso might be applicable only to stay petition which had been filed prior to the said date of 1-6-2001 but which has not come up for hearing until the said date of 1-6-2001 but in the instant stay petitions except for the assessment year 1997-98, orders had been ....
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....ive. Mere absence of use of the word "declaration" in an Act explaining what was the law before may not appear to be a declaratory Act but if the court finds an Act as declaratory or explanatory, it has to be construed as retrospective. Conversely where a statute uses the word "declaratory", the words so used may not be sufficient to hold that the statute is a declaratory Act as words may be used in order to bring into effect new law. 40. Craize on Statute Law, 7th Edn. stated the statement of law thus: 'If a doubt is felt as to what the common law is on some particular subject, and an Act is passed to explain and declare the common law, such an Act is called a declaratory Act.' 41. G.P. Singh on Principles of Statutory Interpretation quoting Carize stated thus: 'For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of sta....
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....he function of a declaratory or explanatory Act is to supply an obvious omission or to clear up doubts as to meaning of the previous Act and such Act comes into effect from the date of passing of the previous Act. Learned counsel for the appellants strongly relied upon a decision of a two-Judge Bench of this Court in Mithilesh Kumari v. Prem Behari Khare [1989] 2 SCC 95 in support of his argument. In the said decision, it was held by this Court that the Benami Transactions (Prohibition) Act, 1988 being a declaratory Act, the provisions of section 4 of the Act have retroactive operation. The reliance on this decision by the appellants' counsel is totally misplaced as this decision was overruled in R. Rajagopal Reddy v. Padmini Chandrasekharan [1995] 2 SCC 630 wherein it was held that the Act was not passed to clear any doubt that existed as to the common law or the meaning or effect of any statute and it was, therefore, not a declaratory Act. Thus, it is well-settled that a tax provision imposing a liability is governed by the normal presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force in the assessm....
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....arify the confusion on the rate of surcharge that has to be applied, is not supported by a plain reading of the section. Nothing is mentioned about preexisting legal position. The proviso does not have a prefix "for removal of doubts" as in all retrospective or declaratory legislations. Thus, we have no difficulty in holding that the proviso inserted to section 113 of the Income-tax Act, 1961, by Finance Act, 2002, with effect from 1-6-2002 is neither retrospective nor declaratory or clarificatory having retroactive operation. In fact, the Memorandum Explaining the Provisions as well as the Notes on Clauses indicate and make it clear to us to come to a conclusion that surcharge was not leviable earlier and thus a fresh amendment is brought about to levy surcharge from 1-6-2002. None of the ingredients necessary for treating this piece of legislation as retroactive/declaratory is present in this case. Thus, we are not persuaded by this argument of learned Standing Counsel for the Revenue. 12.36 In view of the foregoing discussion and considering the ratio decidendi laid down in the case-laws not only those which are cited before us, but also others being fortifying our view taken....
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.... in cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1A) of section 161 of section 164 or section 164A or section 167B of the Income tax Act apply, "advance tax" shall be computed with reference to the rates imposed by this Sub-section or the rates as specified in that Chapter or section, as the case may be: Provided further that the amount of income-tax computed in accordance with the provisions of sections 112 and 113 of the Income-tax Act shall be increased by a surcharge for purposes of the Union or surcharge as provided in Paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule." (Emphasis ours) 12.39 The case of the Revenue is that it is evident that Parliament has specifically provided for charging of surcharge in respect of the advance tax payable for the year 1999. The corresponding Part-III of the First Schedule provided for surcharge. The relevant provision reads as follows: Paragraph A In the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, every artificial juridical person referred to in sub-clause (vii)....
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....dispute that the said provision has got to be taken into account for the purpose of computation of "advance tax", for the financial year commencing from 1-4-1999, in respect of undisclosed income also. The aforesaid provisions which arc found in Part III of Finance Act, 1999, have also been correspondingly introduced in the Finance Act, 2000 in Part 1 so as to make it applicable for the assessment year 2000-01, the corresponding previous year being 1999-2000. It was thus submitted that in view of the specific incorporation of the provisions in the Finance Act, 1999 and due provision being made for levy of surcharge by the Finance Act, 2000, it is inescapable to conclude that the surcharge is leviable on undisclosed income of all assesses from the assessment year 2000-01 (previous year 1-4-1999 to 31-3-2000); of course, domestic companies were liable for surcharge in respect of their undisclosed income for the anterior period also, in view of the relevant Finance Acts of 1995, 1996 and 1997. 12.41 Before we examine the contentions, a cogent reading of the Income-tax Act on the definitions under section 2(9), i.e., 'assessment year', section 2(34) 'previous year', ....
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....s not in any way exclude the applicability of the concepts of 'assessment year' and 'previous year' to block assessment under Chapter XIVB and that it is a restrictive one and that, at any rate, it cannot give overriding effect to the Finance Act. 12.43 In the case of N.M. Veerappa, Hon'ble Supreme Court held as follows:- "It is now well-settled that scope and width of the non obstante clause is to be decided on the basis of what is contained in the enacting part of the provision." 12.44 Further reliance was placed on the judgment of the Hon'ble Supreme Court in the case of State of West Bengal v. Madan Mohan Ghosh [2002] 9 SCC 177, wherein it was held: "6........... Learned counsel further contended that the non obstante clause in rule 17 refers only to rules which were in existence at the time when the said rule was brought into force and the same could not be construed as having an overriding effect for all times to come. 7. xxxxxxxxxxxxx 8. Having heard the learned counsel, we are of the opinion that we need not dilate very much on the finding arrived at by the High Court in regard to the overriding power of rule....
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....tion 158BA are special provisions in search matters. It is settled in jurisprudence that special provisions override the general provisions as per Latin Maxim 'Generalia specialibus non derogant' vide Broom's Legal Maxim, 10th Edn. 2001, pg. 348. The Tribunal observed: "37. The above discussion reveals that the Legislature has made independent substantive provisions regarding the power to proceed to make assessment under section 143(2) as well as under section 158BC. Section 158BC, read with section 158BA, being special provisions for proceeding to assess the undisclosed income of the assessee in search matters, would override the provisions of section 143(2) as far as power/jurisdiction to proceed to make assessment is concerned inasmuch as it is the settled legal position that special provisions override the general provisions........." (emphasis supplied) 12.47 Chapter XIV-B was, thus, introduced as a self-contained Chapter consisting of sections 158B to 158BH of the Act containing provisions which are in the realm of substantive law seeking to levy tax on the undisclosed income of the block period at the rate of 60 per cent. In addition, the Cha....
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....losed income to different assessment years. Further, Explanation to section 158BA(2) specifically declares, 'for the removal of doubts', that the assessment under Chapter XIVB (containing sections 158B to 158BH) shall be "in addition to the regular assessment in respect of each previous year included in the block period". From the above, it transpires that the said clause (a) segregates the gamut of the block assessment from that of regular assessment which relates to total income of a previous year so as to keep each one of them having independent and distinct identity. Thus, we hold that Chapter XIVB is a self-contained code and undisclosed income of a block period is district from total income computed with reference to a previous year. In other words, we hold that the concept of computing total income of a previous year for being assessed in an assessment year as contemplated by section 5 has been given a go-by in the concept of "block assessment". Statutory forms could be used as an aid to interpretation, but they do not override the Act. When the Act provides that the concept of "Previous year" and "Assessment year" do not apply to Chapter XIVB, the statutory forms ca....
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....we find that for the period under consideration, the Income-tax Act prescribes only 60 per cent rate of tax on block assessments, but it does not authorise levy of surcharge. As there is no reference to the Central Act either in section 158BA(2) or in the proviso to section 4(1), the question of any Central Act prescribing the levy of surcharge under these charging provisions does not arise. The Finance Act has to be examined de hors these two charging sections of the Income-tax Act, to find out as to whether it levies independently surcharge on undisclosed income of a block period by having an independent and distinct charging section. The charging section in the Finance Act does not authorise the levy in the Finance Act. 12.53 We examine the issue as to whether the Finance Act has levied a separate and independent charge de hors the provisions of the Income- tax Act, 1961. At this stage, we once again reiterate that none of the counsels for the assessees has canvassed a proposition before us that the Finance Act cannot bring about an independent charge. The assessees' counsels base their arguments on first principles and argue that there is no charging section in the Finan....
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....e Spg. & Wvg. Mills Co. Ltd.'s case was decided by a Division Bench of two Judges, the case of Madurai District Central Co-operative Bank Ltd. was decided by a Bench consisting of three Judges. This is factually wrong. The judgment in the case of Elphinstone Spg. & Wvg. Mills Co. Ltd. was delivered by a Bench consisting of three Judges as in the case of Madurai District Central Co-operative Bank Ltd. 12.55 In the case of Elphinstone Spg. & Wvg. Mills Co. Ltd. v. CIT [1955] 28 ITR 811 (Bom.), judgment rendered by the Hon'ble Bombay High Court, was upheld by the Hon'ble Supreme Court in CIT v. Elphinstone Spg. & Wvg. Mills Co. Ltd. [1960] 40 ITR 142. The facts of that case were that the assessee had no taxable income for the assessment year 1951-52. In that very year, the assessee-company declared dividends amounting to Rs. 3,29,062 in respect of the year 1950. The contention of the assessee-company was that it had no income at all and thus the question of assessing income at a particular rate would not arise. It was argued that only when there is income which constitutes 'total income' within the meaning of the Income-tax Act, the question has to be considered....
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....nder a fiscal statute are equally important, if not more important than giving effect to the object of the Legislature, and if the Legislature uses inappropriate language and fails to bring some income to tax, we must come to the conclusion that the Department is not justified in taxing the subject." In a separate, but concurring judgment, Tendulkar J., at page 825 of the reported judgment, observed as follows:- "But although there may be no logical reason for this distinction, the function of this Court is to interpret the statute as it stands. It may be a case where the Legislature has not succeeded in giving effect to its intentions; and in any event it appears to me that if the Legislature intended that in the case of a company which has no total income which attracts tax a tax should be levied within the framework of the Income-tax Act as it exists, such an object could only be achieved by providing that the company shall be deemed to have a total income and proceeding to tax such total income." 12.56 Upholding this judgment of the Hon'ble Bombay High Court, Hon'ble Supreme Court, at page 147 of 40 ITR, held: 'Where there is a total income a....
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....r than what it is intended for; it cannot be used to make these profits to take the place of total income. 12.57 The contention of the Revenue that the judgment in the case of Madurai District Central Co-operative Bank Ltd. overrules the judgment in the case of Elphinstone Spg. & Wvg. Mills Co. Ltd. is not correct. In the case of CIT v. Khatau Makanji Spg. & Wvg. Mills Co. Ltd. [1960] 40 ITR 189 (SC), a case which was similar to Elphinstone Spg. & Wvg. Mills Co. Ltd.'s case was considered by the Hon'ble Supreme Court. In that case also, it was held (as per Head note) as follows:- "Under section 3 of the Income-tax Act [Indian Income-tax Act, 1922], income-tax is a tax on the income of the previous year and it would not cover something which is not the income of the previous year, or made fictionally so. The Finance Act, 1951, failed in its purpose: the additional tax was not properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year. The Finance Act did not lay down that it should be taxed as part of the total income." In that case, the argument that it was not necessary to look only to sectio....
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....dian Income-tax Act, 1922, income-tax was levied on the income of the previous year and not on something which was not the income of the previous year, or made fictionally so,. The excess dividend in that case, which was subjected to the additional tax, was not shown or not deemed by the particular Finance Act to be part of the total income of the previous year. In such circumstances, the Supreme Court agreed with the High Court of Bombay that the Finance Act had misfired, because it did not resort to legislation which would have conformed to the subject for which the Finance Act was passed every year. Observed the Supreme Court: "This fiction, as we have already pointed out, provides only that the dividends shall be deemed to be out of the profits not of the previous year under assessment but of some other years. What the Finance Act fails to do is to make them 'total income', so as to take in the rate which is prescribed for the total income in the proviso. Unless the Finance Act stated that after the working out of the fiction the profits of the back year or years shall be deemed to be a part of the total income of the previous year under assessment, the purpose....
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....in the First Schedule. (b) Clause (c) of Paragraph A prescribes the manner in which the additional surcharge is to be calculated. It was held that clause (c) provides that additional surcharge for purposes of the Union shall be calculated "on the amount of the residual income" at the rates mentioned in that clause. (c) Thus, both the purpose and concept of the additional surcharge are different from those of income-tax. The additional surcharge is leviable exclusively for purposes of the Union so that the entire proceeds of such surcharge may, under article 271 of the Constitution, form part of the Consolidated Fund of India. (d) The additional surcharge levied for purposes of the Union is to be calculated not on the total income like the income-tax but it is to be calculated on the residual income, which was in fact part of the total income. (e) Section 2(8) of the Finance Act, 1963, defines residual income and introduces the concept of residual income on which alone the additional surcharge is payable. (f) The residual income is not the same as the business income of a co-operative bank, which is exempt under section 81(i)(a) from inco....
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....tanding Counsel of the Revenue, at page 8 of the written submissions, after reproducing the provision, it is stated as follows:- "From the above, it is evident that Parliament has specifically provided for charging of surcharge in respect of the advance tax payable for the year 1999." Thereafter, Part-III of the First Schedule was extracted. We find that section 2 of the Finance Act is only in relation to "total income" of an "assessment year" and that there is not even a remote reference to "undisclosed income" computed for a "block period". In fact, in Part-III of the First Schedule under Paragraph 'A', surcharge on income-tax, clause (i) in case of individuals or HUF's or AOP's or BOFs, the surcharge is not applicable to persons having 'total income' below Rs. 60,000 and rebate of income-tax under Chapter-VIIIA is specified. Such rebate under Chapter-VIII-A and 'total income' below Rs. 60,000 is contrary to provisions of Chapter-XIVB, as they are not contemplated in Chapter-XIVB. Thus, we have to conclude that there is no independent and separate charge brought about by the Finance Act for levying surcharge on "undisclosed income" of a....
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.... of the Finance Act, 1999, reads as under:- "2. (1) Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 1999, income-tax shall be charged at the rates specified in Part-I of the First Schedule." [Emphasis ours] Even section 2(8) refers to the liability of an assessee in respect of total income of a previous year and not to undisclosed income in a block period. Thus, both section 2(1) and section 2(8) of the Finance Act, which refer to an assessment year commencing from a particular date, or the previous year relevant to that assessment year, do not provide for a separate and independent levy of a separate tax on "undisclosed income of a block period". On the contrary a proposal to levy surcharge on advance tax on undisclosed income is in direct conflict with the very concept of 'block assessment' and 'undisclosed income' contemplated under Chapter-XIVB. It would be ridiculous to take a view that a person would pay advance tax and surcharge thereon, in anticipation of a search taking place at his residence, and that such income which suffered tax would be treated as undisclosed income....
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....f that was the legal position before the 1956 amendment, the argument proceeded, the same position would continue thereafter, as Parliament retained section 34(1A), along with its provisos, as it stood before the amendment and amended only section 34(1)(a). The lifting of the bar of limitation, therefore, should, on the basis of the said doctrine, be confined to the field covered by section 34(1)(a) before the amendment. If Parliament intended to do away with the period of limitation in respect of the escaped incomes during the war period, it would not have retained section 34(1A) on the statute book; for, in that event, it would serve no purpose. It would be wrong to say that it ceased to be operative after April 1, 1956, for the period of limitation would still apply to proceedings in respect of escaped incomes of the war years. Sub-section (4) added in section 34 in the year 1959 and section 34(1B), as amended in 1956, would not throw any light on the question, but in a way would support the view that they were concerned only with the escaped incomes covered by section 34(1)(a), excluding therefrom those covered by section 34(1A). The argument based on the alleged anomaly led no....
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....parts of the statute to which it may properly apply". But this rule of construction is not of universal application. It is subject to the condition that there is nothing in the general provision expressed or implied, indicating an intention to the contrary: see Maxwell on the Interpretation of Statutes, 11th edition, at pages 168-169. When the words of a section are clear, but its scope is sought to be curtailed by construction, the approach suggested by Lord Coke in Heydon's case [1584] 3 Rep. 7b yields better results. "To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider according to Lord Coke; 1. What was the law before the Act was passed; 2. What was the mischief or del eel for which the law had not provided; 3. What remedy Parliament has appointed; and 4. The reason of the remedy." 12.66 In the case of Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821, at 826, Hon'ble Supreme Court held as follows:- "It is settled principle in law that the courts while construing revenue Acts have to give a fair and reasonable construction to the language of a statute w....
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.... Ganga Saran, the levy cannot be upheld. 12.68 The Revenue relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Hindustan Bulk Carriers [2003] 3 SCC 57 at page 74, paragraphs 14 to 21, wherein it was stated as follows:- "14. A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim utres magis valeat quam pereat i.e., a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties [See Broom's Legal Maxims (10th Edn.), p. 361, Craies on Statutes (7th Edn.), p. 95 and Maxwell on Statutes (11th Edn.), p. 221. 15. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object unless crucial omission or clear direction makes that end unattainable. 16. The courts will have to reject the construction which will defeat the plain intention of the Legislature even though there may be some inexactitude in the language used. 17. If the cho....
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....otiose." 12.70 It is true that a construction which reduces a statute to a futility, has to be avoided. But, if the taxing statute fails in reflecting its intendment clearly, courts cannot help the draftsmen by a favourable construction, as observed by the Apex Court in the case of Elphinstone Spg. & Wvg. Mills Co. Ltd. In the instant case, the language in the Finance Act, 1999, unhesitatingly goes to show that it was a drafting error and levy of surcharge on undisclosed income of a block period was not levied by a charging section and even if it is held otherwise the levy is not workable. As explained in the earlier paragraphs, the concept of "undisclosed income" of a block period was intended to be applicable to persons who have never intended to disclose either whole or a part of their taxable income and such persons would have obviously not paid advance tax or deducted tax at source. If the plain language of the Finance Act has to be given effect to, it has to be assumed that the Legislature intended such assessees to pay advance tax on which surcharge is also payable, but such interpretation would affect the very purpose of Chapter XIVB. The crucial omission in the charging....
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....that Chapter XIVB of the Income-tax Act, 1961, was introduced and it is in the same Finance Act, under section 2(7) reference to section 113 has appeared for the purpose of payment of advance tax as well as deduction of tax at source. Thus, the Finance Act though a subsequent legislation, it does not have an independent charging sections and thus the argument that subsequent legislation overrides earlier legislation does not hold water. No doubt the Income-tax Act does not override the Finance Act. Even otherwise, we have found that there is no distinct charge in the Finance Act for levy of the impugned surcharge. Thus, the argument that the interpretation which holds that the levy of surcharge prior to 1-6-2002 amounts to ignoring a relevant piece of legislation which is admittedly found in the statute book, does not hold water. There is no such valid levy in the statute book. In fact, the Revenue, in its written submissions, at page 12 paragraph 19, stated as follows:- "19. In Elphinstone's case, the Hon'ble Supreme Court construed the relevant provision as amounting to not creating a charge. There is no controversy with regard to proposition that if the charge f....
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....ates was relevant or rate applicable on the date of initiation of the proceedings under that section or on the date on which block assessment order was passed under that section was relevant. Since the relevant date for imposition of surcharge was in doubt, the relevant rate for imposition of surcharge was also in doubt prior to amendment in section 113 of the Act. (c) There was contradiction in basis in the provisions of the Finance Act(s) inasmuch as both Part I of First Schedule and Part III of First Schedule referred to levy of surcharge. 12.73 The applicability of either of the rates would have resulted in absurdity as explained hereunder: A Finance Act contains proposals for the following financial year e.g. Finance Act, 2001 contains the proposals for the Finance year 2001-02. Every Finance Act has First Schedule, which comprises of three parts as under: - Part I of the First Schedule refers to rate of taxation for the assessment year beginning on 1st April and preceding the year in respect of which proposals are introduced. So Part I of the Finance Act, 2001 contains rates for the assessment year 2001-02; - Part II of First Schedule refers/c....
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....ny was assessed to agricultural income-tax under the Kerala Agricultural Income-tax Act, 1950, for the assessment year 1957-58. In the assessment, a surcharge at the rate of 5 per cent on the agricultural income-tax and super-tax was also levied and collected from the company under the provisions of the Kerala Surcharge on Taxes Act, 1957 (XI of 1957). The company objected to the imposition of surcharge on the ground that the law in force on April 1, 1957, should be the law applicable to the assessment for 1957-58. The Surcharge on Taxes Act came into force only from 1-9-1957, and did not have any retrospective effect. Their Lordships of the Supreme Court observed as under: "Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. ....... ....... ....... In the instant case, there is no escape from the conclusion that the Surcharge....