Finance Minister Pranab Mukherjee on Wednesday justified legislative changes in taxation law with retrospective effect, saying this was required in order to protect “the interests of the (tax) department”.
“Sometimes, retrospective effect is to be made in order to protect the interests of the department. Otherwise, instead of collecting taxes, we shall have to refund the amount due from them,” the minister said during debate on the Finance Bill in the Rajya Sabha. He said the government would look into these legal aspects.
The Finance Bill often gives clarifications on tax proposals which have retrospective effect. For instance, Finance Bill 2010 added an explanation to the definition of “commercial training or coaching service” with retrospective effect from July 1, 2003.
This brought all such institutions, non-profit or otherwise, into the ambit of service tax if they were rendering service for a consideration.
It is definitely a good stand taken by the Govt. In future clients shall pursue their financial planners to deliver the good,instead of their desire for a suggestion for taking maximum advantage out of the loopholes in the statute. It will also demotivate the consultants not to make money in the name of “tax planning”by devising flaws out of the statute.
The Hon’ble FM’s stand no doubt was vetted by the Law Ministry and the Solicitor General as well as the Attorney General. But, honestly speaking, is it really so? Can an Act be amended retrospectively to the jeopardy of the tax payers? And, is there no case, in which our top most law officers ever advanced before any High Court or the Supreme Court a plea contrary to this theory?
It would be better if our leading jurists’ opinions are avalable.
The retrospective amendments can be for clarifications but not for increase in the revenue, as it totally disturbs the decisions.
With retrospective amendments, the tax payer can never take any decisions based on the tax regime as he/ it will be always on constant threat to retrospective amendment with such amendments which may be detrimental to the decisions taken earlier.