2003 (9) TMI 34 - HC - Income Tax

Karnataka Agricultural Income Tax Rules 1957 - Petitioner is questioning the retrospective amendment to section 15 of the Karnataka Agricultural Income-tax with a further prayer for declaration that the said amendment is prospective in character - The retrospective amendment takes away the right given to the petitioner. That cannot be done in the guise of curing a non-existing lacuna by the respondents. Held that amendment is not valid - these petitions are allowed

Issues Involved:

1. Retrospective amendment to Section 15 of the Karnataka Agricultural Income-tax Act.
2. Validity of assessment orders based on the retrospective amendment.
3. Legality of notices issued under Section 37 of the Act for withdrawing set-off of losses.
4. Constitutionality of the retrospective amendment in light of previous judgments.

Detailed Analysis:

1. Retrospective Amendment to Section 15 of the Karnataka Agricultural Income-tax Act:

The petitioner challenged the retrospective amendment to Section 15 of the Karnataka Agricultural Income-tax Act, which was amended by the Karnataka Taxation Laws (Amendment) Act, 1990, effective from April 1, 1987. The amendment stipulated that the return of loss must be filed within the period specified in Section 18(1) or within such extended time granted by the Assistant Commissioner or Deputy Commissioner of Agricultural Income-tax. The petitioner argued that this retrospective character given to the amendment is illegal and unsustainable.

2. Validity of Assessment Orders Based on the Retrospective Amendment:

The petitioner filed annual returns for the assessment year 1995-96, claiming a total loss of Rs. 11,78,901.92, including depreciation of Rs. 1,59,146. The assessing authority allowed the carry-forward of the depreciation amount but disallowed the carry-forward of the remaining loss of Rs. 10,19,755.82, citing the amendment. The petitioner sought to quash the assessment orders based on this retrospective amendment.

3. Legality of Notices Issued Under Section 37 of the Act for Withdrawing Set-off of Losses:

In another case, the petitioner filed a return for the assessment year 1997-98, declaring a net loss after claiming set-off of unabsorbed losses from earlier years. The assessing authority initially allowed the set-off but later issued a notice under Section 37 to withdraw the set-off for the assessment year 1996-97 due to belated filing of returns, as per the retrospective amendment. The petitioner challenged the legality of this notice.

4. Constitutionality of the Retrospective Amendment in Light of Previous Judgments:

The respondents justified the retrospective amendment, stating it was necessary in light of the judgment in Ashok Plantations Pvt. Ltd. v. Asst. Commissioner of Commercial Taxes (W.P. No. 149 of 1994). However, the court noted that the previous judgment did not point out any lacuna in the law but merely interpreted the existing provisions in line with the Supreme Court's decision in CIT v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518. The court emphasized that a retrospective amendment should not nullify a judgment where no defect or lacuna was identified in the parent Act.

The court cited the Supreme Court's ruling in D. Cawasji and Co. v. State of Mysore [1984] 150 ITR 648; AIR 1984 SC 1780, which held that a Validating Act must cure the defect or lacuna that led to the invalidation of the law. The retrospective amendment in question did not remedy any defect but sought to nullify the effect of a binding judgment, which is not permissible.

Conclusion:

The court held that the retrospective amendment to Section 15 is contrary to the judgment in W.A. No. 3795 of 1998 (Netley "B" Estate v. Asst. Commr. of Agrl. I.T. [2002] 257 ITR 532 (Karn)) and the Supreme Court's decision in D. Cawasji and Co. v. State of Mysore. Consequently, the impugned orders were set aside, and the respondents were granted liberty to proceed against the petitioner without referring to the amended Act, in a manner known to law and if available to them in law. The petitions were allowed, affirming the petitioners' right against the retrospective amendment.

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