Case Law Details
Maruthi Babu Rao Jadav Vs ACIT (Kerala High Court)
The writ petition sought for a declaration that the amendments made by the Taxation Laws (Second Amendment) Act, 2016, to Section 115BBE of the Income Tax Act, 1961 enhancing the rate of income tax, for specified incomes which are unexplained, to 60% and the surcharge provided in the Finance Act, 2016 to 25% for income covered under Section 69A, to be prospective. The above referred enactments are herein after referred to as the ‘2nd Amendment Act’, ‘IT Act’ and the ‘Finance Act’. The 2nd Amendment Act was dated 15.12.2016 and the amendment to Section 115BBE was specified to be effective from 01.04.2017. The amendment enhancing the rate of tax was incorporated in the I T Act and that of surcharge in the Finance Act. On declaration, consequential relief is sought against Ext.P2 assessment order levying tax at the enhanced rate of 60% and surcharge @25% on the ‘advance tax’. The learned Single Judge rejected the writ petition by a cryptic judgment relying on Commissioner of Income Tax v. S.A.Wahab.((1990) 182 ITR 464 (KER)).
2. The learned Counsel Sri.Vishnu S Arikkattil appearing for the appellant would contend that even going by the decision in Karimtharuvi Tea Estate ltd. v. State of Kerala (AIR (1966) SC 1385) an amendment made on the 1st day of April of any financial year would apply to the assessments of that year. That is, if an amendment is brought into force on 01.04.2017, as is the case here, it can only apply to the assessment made in 2018-2019 (Assessment Year) of the income accrued for the previous financial year; which is 2017-2018. The learned Counsel would seek to draw a distinction insofar as a modification of the rate as brought out in the Finance Act and a substantive provision altering accrued rights or creating new liabilities, on the 1st of April of an year. In the former, it could apply to the assessments of the previous year, made in that financial year, but a substantive amendment not relating to the rates, could only be applied to the assessments of that financial year and not of the previous year. Reliance is placed on the Constitution Bench decision of the Hon’ble Supreme Court in C.I.T Vs. Vatika Township Private Ltd. (2015) 1 SCC 1. The learned Counsel would also place before us a number of decisions of the Hon’ble Supreme Court in Kesoram Industries v. Commissioner of Wealth Tax, [AIR 1966 SC 13851, Guffic Chem P. Ltd v. C.I.T [2011(4) SCC 2451, C.I.T v. Sarkar Builders [(2015) 375 ITR 392 (SC)1, Shiv Raj Gupta v. C.I.T [(2020) 425 ITR 420(SC)1 and State of Kerala v. Alex George [(2004) 271 ITR 290(SC), to further buttress his arguments. Reliance is also placed on the Full Bench decision of the Patna High Court in Loknath Goenka v. C.I.T[2019 417 ITR 521(Patna)1.
3. Sri. Jose Joseph, learned Standing Counsel, Government of India(Taxes) would submit that the position has been clearly established from the 1960’s and it requires no further consideration. Considering the specific arguments put forth by the learned Counsel, we are of the opinion that it warrants some elucidation of the law on the point; especially since the distinction drawn appeals to us, at first blush. We hence first look at the various decisions placed before us dealing with the amendments brought into force on the 1st of April of a particular year; which under the IT Act is the assessment year (AY) for the previous financial year.
4. Karimtharuvi Tea Estate dealt with Kerala Agricultural Income Tax Act 1950, wherein the assessment made in an year is of the previous year. A surcharge @ 5% was levied by virtue of Kerala Surcharge on Taxes Act, 1957 which came into force from 01.09.1957. The question raised was whether the surcharge would be applicable for the assessments made in the assessment year 1957-58, which is of the previous year 1956-57. It was held that since the Surcharge Act came into force in September of 1957 and not as on the 1st of April of that year it could not be regarded as the law in force at the commencement of the assessment year. A Division Bench of this Court in A Wahab followed the above Constitution Bench. A.Wahab in the assessment year 1980-81 claimed 40% depreciation on motor vehicles as per the amendment which came into effect on 24.07.1980. Prior to the amendment such depreciation was allowable only at 30%. The Division Bench found that the depreciation allowable in the subject assessment year relating to the assessments of the previous year was that allowable as on 01.04.1980.
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