CIT Vs Vummudi Amarendran (Madras High Court)
In the case CIT vs. Vummudi Amarendran, the Madras High Court addressed the issue of whether the amendment to Section 50C of the Income Tax Act, 1961, introduced in 2016, should be applied retrospectively or prospectively. The Court ultimately ruled that the amendment, which was intended to mitigate undue hardship to taxpayers, has retrospective effect, even though the language of the amendment suggests it applies only from Assessment Year (AY) 2017-18 onwards.
The assessee, Vummudi Amarendran, had entered into an agreement to sell land in Neelankarai Village on August 4, 2012, for ₹19 crore. An advance of ₹6 crore was received through a bank cheque. However, the sale deed was registered on May 2, 2013, when the guideline value of the property was ₹27 crore. The Assessing Officer (AO) recalculated the capital gains based on this higher value, rejecting the assessee’s contention that the sale agreement, dated prior to the amendment’s introduction, should govern the transaction.
The Revenue argued that the amendment to Section 50C, introduced by the Finance Act of 2016, explicitly applies prospectively from AY 2017-18, citing the maxim “lex prospicit non respicit,” which means the law looks forward, not backward. The Revenue also referred to Circular No. 3/2017 issued by the Central Board of Direct Taxes (CBDT), which clarified that the amendment would take effect from April 1, 2017.
