TaxTMI 
TaxTMI 
TaxTMI 
2009 (4) TMI 502
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....iate that he had no power to set aside the case and on the contrary he should have given a clear finding himself. 3. That the order of the CIT(A) as well as AO is against law and facts of the case." 3. The brief facts of the case in ITA No. 23/Asr/2009 are that the assessees are engaged in the business of export. Further, the asses sees earned income on sale and purchase of shares and mutual funds and dividend income on it. During the assessment year under consideration, the assessees claimed short-term capital loss on the sale and purchase of mutual funds as below: -------------------------------------------------------------------- Sl. Name of mutual Amount Amount and Amount of Amount of No. fund and date date of loss dividend of sale &nb....
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....p; 4,82,521 etc. -------------------------------------------------------------------- 4. HDFC 1,27,71,664 1,25,48,341 -2,23,323 1,36,922 ----------- ----------- 30-4-2004 12-10-2004 1,38,447 etc. -------------------------------------------------------------------- 5. H.S.B.C. Cash 30,00,000 29,97,705 -2.295 Several ----------- ----------- entries of Divn. 15-7-200....
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....; been given at Rs. 25,35,639 &....
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....security transaction tax on the said securities was paid by the assessees and the securities were duly listed with the stock exchange. Hence, 10 per cent tax was to be charged as per s. 111A, but the AO charged the normal rate of 35 per cent on the said income of short-term capital gain. Aggrieved, the assessees went in appeal before the learned CIT(A). The learned CIT(A) principally agreed with the submissions of the assessees, However, he restored the matter to the file of the AO with the direction to verify the conditions of s. 111A and allow relief, if any. Thus, the learned CIT(A) allowed the ground of the assessees for statistical purposes only. According to the assessee, the CIT(A) is not empowered to set aside the matter after 1st June, 2001 to the file of the AO. Against this, the asses sees are in appeal before us. 4. The learned counsel for the assessees submitted that Finance (No. 2) Act, 2004 deleted earlier cl. (b) of s. 94(7), which reads as under: "Sec. 94(7)(b): Such person sells or transfers such securities or unit within a period of three months after such date;" A new clause was inserted by the Finance (No. 2) Act, 2004, w.e.f. 1st April, 2005 to s. 94(7)(b),....
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....vs. CIT (2007) 295 ITR 190 (All), while deciding the applicability of s. 64 w.e.f. 1st April, 1976 held the same was not applicable to asst. yr. 1976-77 as the amendment was carried out on 7th Aug., 1975 when the President gave his assent to Taxation Laws (Amendment) Act, 1975. The High Court held that unless the amending Act provides otherwise either expressly or by necessary implication, the normal presumption would be that any amendment brought about of the nature referred above would apply only to the previous year which is yet to come or after the date on which such amendment is enforced. The CIT(A) wrongly brushed aside this judgment in paras 1-10 of his order and observed that the facts of the case are not applicable firstly because sections involved are different and on the basis of Supreme Court judgment (which he misinterpreted) the first of April of any year has to apply the assessment year beginning on that date. The CIT(A) completely lost his sight on the judgment of Allahabad High Court as the High Court had held that any amendment carried out after the beginning of the financial year which is the exact case of the applicant is not applicable to the relevant assessmen....
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.... the record date; (b) such person is allotted additional units without any payment on the basis of holding of such units on such date; (c) such person sells or transfers all or any of the units referred to in cl. (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in cl. (b), then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in cl. (b) as are held by him on the date of such sale or transfer.' (c) in the Explanation, for cl. (aa), the following clause shall be substituted, namely: '(aa) 'record date' means such date as may be fixed by- (i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or (ii) a mutual fund or the administrator of the specified undertaking or the specified company as referred to in the Explanation to cl. (35) of s. 10....
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....l. (c) seeks to amend cl. (aa) of the Explanation to the aforesaid section so as to provide that 'record date' also includes such date on which a unit-holder is allotted or is entitled to additional units without any payment. This amendment will take effect from 1st April, 2005 and will, accordingly, apply in relation to the asst. yr. 2005-06 and subsequent years." 6.1 The contention of the assessees's counsel is that there is a specific mention that the legislature intended in this sub-section to be effective from 1st April, 2005 and not with retrospective effect. In the absence of retrospective operation having been expressly given, this sub-section cannot be applied retrospectively. On the other hand, the contention of the AO is that the said provision would be a law as it existed on the date of filing of the return. In our opinion, the circumstances under which amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or not. The presumption against retrospective operation is not applicable ....
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....xisting rights, it is deemed to be prospective only. It is not necessary that an express provision be made to make statute retrospective and the presumption against retrospectivity may be rebutted by necessary implication especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole. 6.3 Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the Courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the Courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) ....
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.... the law in force and unless otherwise stated or implied. The Hon'ble Supreme Court in the case of Reliance Jute & Industries Ltd. vs. CIT reiterated that it was a cardinal principle of tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. 6.6 The Hon'ble Supreme Court in the case of Union of India vs. Madan Gopa Kabra (1954) 25 ITR 58 (SC) was considering the applicability of Finance Act, 1950 to 'United States of Rajasthan' for the asst. yr. 1950-51 and they observed, that the income for the asst. yr. 1950-51 became assessable to Indian income-tax in respect of the previous year 1949-50, They rejected the contention that as the Constitution of India had, come into force only on 26th Jan., 1950, the income of the previous year before 26th Jan., 1950 was not taxable to Indian income-tax. At p. 70, they observed that "The case is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian IT law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive ....
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....ssessment year upto and including the asst. yr. 1939-40. (ii) that the asst. yr. 1939-40 was not an assessment year which ended prior to the 1st of April, 1939, because it ended on the 31st March, 1940, and, therefore, the unabsorbed depreciation for the year 1939-40 could be carried forward into the accounts of the asst. yrs. 1941-42, 1942-43 and 1943-44." 6.9 In Karimtharuvi Tea Estate Ltd. us. State of Kerala, their Lordships of the Supreme Court considered whether the Kerala Surcharge on Taxes Act, 1957, which came into force w.e.f. 1st Sept., 1957, could be applied to the asst. yr. 1957-58. While holding that the law which was not in force on 1st April, 1957, could not be applied to the asst. yr. 1957-58, the Supreme Court laid down the following proposition: "Now, it is well-settled that the IT Act, as it stands amended on the 1st 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." 6.10 In M.K. Venkatachalam, ITO & Anr. vs.....
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....60-61. 6.12 The Hon'ble Supreme Court in the case of CIT vs. Gold Coin Health Food (P) Ltd. (2008) 218 CTR (SC) 359 : (2008) 304 ITR 308 (SC) held that: "Law is well-settled that the applicable provision would be the law as it existed on the date of the filing of the return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the concerned previous year. It may also include carried forward loss which is required to be set up against future income under s. 72 of the Act. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting year. In CST vs. Yuvraj Amrinder Singh 4 SCC 609, the relevance of the Notes on Clauses was highlighted. Para 15 reads as follows: '15. The proviso to sub-cl. (vi) has been reproduced above. It has the effect of cutting down the exemption contained in the sub-clause to some extent. It commences with the words 'provided that in the case of a policy of insurance the premium or other payment whereon is payable during a period of less than 10 years' and the argument is that the italicised words suggest that the expression 'any po....
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....lend support to the view which we have just expressed. The relevant portion of 'Notes on Clauses' states that, under this amendment (the insertion of proviso) the value of the taxpayer's right or interest in a policy of insurance will be exempt from tax only if the premia are payable over a period of ten years or more. In cases where premia are payable over a period of less than ten years, only a proportionate amount of the value of the taxpayer's right or interest in the policy of insurance will be exempt from wealth-tax. The Finance Minister's Speech, though strictly not relevant as an aid to construction, substantially reiterates what has been stated in the 'Notes on Clauses' accompanying the Bill. On this account, therefore, there is no warrant to put a narrow construction on the expression 'any policy of insurance' occurring in sub-cl. (vi) of s. 5(1).' 'As noted by this Court in CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67 : 5 SCC 482, the circumstances under which the amendment was brought into existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature ....
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....ITR 772 (SC) held as under: "A taxing provision imposing liability is governed by the normal presumption that it is not retrospective and the settled principal of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot, in the absence of clear contrary intendment expressed therein, the given greater retrospectively than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to reopen liabilities which have become barred by lapse of time." 6.14. In the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala, the question was that whether the Kerala Surcharge Act, 1957, which came into force on 1st Sept., 1957, would not apply to the period when it was not in force. It was held that amendment to IT Act, which was not in force on the 1st day of April of any financial year, would not apply to the assessment for that year. That principle cannot be applied in the present case. In that case, their Lordships were dealing with the substantive provisions i.e., charging provisions and the amendment became effective in Septem....
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.... ending on 31st March, 2006 i.e., asst. yr. 2005-06. Accordingly, the amendment is applicable to the assessment year under consideration. 6.19. In the case of Krishna Mohan Agrawal vs. CIT, the Hon'ble Allahabad High Court held that amendment to s. 64(1) of the IT Act, w.e.f. 1st April, 1976 not applicable to the previous year 1975-76 relevant to the asst. yr. 1976-77. However, in the present case, when the amendment made by Finance Act, 2004 to s. 94(7)(b) for which assent was given by the President on 10th Sept., 2004 there was specifically provided in the Act that it is applicable w.e.f. 1st April, 2004 (sic-2005) for the asst. yr. 2004-05 (sic-2005-06). Hence, in view of the express implication by the Act in itself, the same to be construed as applicable for the asst. yr. 2005-06. 6.20. The learned counsel for the assessee has relied on the following judgments: (i) CIT vs. Isthmian Steamship Lines; (ii) Reliance Jute & Industries Ltd. vs. CIT; (iii) Karimtharuvi Tea Estate Ltd. vs. State of Kerala; (iv) Tribunal, Delhi Bench in the case of Dy. CIT vs. Ghanshyam Dass Seth. We have carefully gone through these judgments and find that these judgments support the claim of th....