Case Law Details
Sanjeev Goyal Vs Union of India (Delhi High Court)
In the case of Sanjeev Goyal v. Union of India, the Delhi High Court addressed the constitutional validity of Section 31 of the Finance Act, 2017, specifically focusing on the insertion of sub-section (3A) to Section 71 of the Income Tax Act, 1961 (the Act). This amendment restricted the set-off of losses under the head “Income from house property” against income from other heads to a maximum of ₹2 lakh for any particular Assessment Year (AY) starting from AY 2018-19 onwards. The petitioner, a government employee who had constructed a house financed through loans, challenged this amendment primarily on grounds of its retrospective applicability and alleged violation of constitutional provisions.
Sanjeev Goyal had constructed his house in April 2014, funded partly through a housing loan from IDBI Bank and partly from his father. The construction led to an annual rent income of ₹1,20,000 in FY 2016-17. Under the previous provisions of the Income Tax Act, interest payable on borrowed capital for such construction was deductible under Section 24, and this deduction was eligible for set-off under Section 71 against other heads of income, such as salary.
The Finance Act, 2017 introduced Section 31, amending Section 71 to add sub-section (3A), which capped the set-off of losses from house property against other income to ₹2 lakh per AY from 01.04.2018 onwards. The petitioner argued that this amendment violated his vested rights acquired under the previous tax regime, thereby invoking constitutional principles.
The petitioner’s counsel contended that the retrospective application of the amendment was unfair and burdensome. It was argued that the petitioner had planned his financial affairs under the belief of availing full deductions as per the old provisions, and the sudden imposition of a cap after his financial commitments were made amounted to a violation of Article 14 (equality before law) and Article 19(1)(g) (freedom to practice any profession or occupation) of the Constitution.
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