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2011 (3) TMI 1382 - HC - Income TaxWhether Sec. 10(26AAB) of the IT Act, 1961 exempts income of Agricultural Market Committees (AMCs) from the levy of income-tax under the Act, inserted by the Finance Act, 2008 w.e.f. 1st April, 2009 is retrospective in operation - assessee availed tax exemption under s. 10(20) of the Act till 1st April, 2002. By reason of insertion of the Explanation thereto, w.e.f. 1st April, 2003, they were denied the exemption and, therefore, s. 10(26AAB) of the Act was enacted providing exemption w.e.f. 1st April, 2009 - presumption against a statute not being retrospective has no application as s. 10(26AAB) of the Act is clarificatory and declaratory in nature - Held that - s. 10(26AAB) of the Act inserted by the Finance Act, 2008 w.e.f. 1st April, 2009 cannot be applied retrospectively w.e.f. 1st April, 2003 and that the cl. (26AAB) in s. 10 of the Act is applicable w.e.f. 1st April, 2009 and shall accordingly apply for the asst. yr. 2009-10 and for the subsequent assessment years, appeals filed by Agricultural Market Committees dismissed
Issues Involved
1. Retrospective application of Section 10(26AAB) of the IT Act, 1961. 2. Exemption eligibility of Agricultural Market Committees (AMCs) under Section 10(26AAB). 3. Interpretation of declaratory statutes. 4. Relevance of the Finance Minister's speech in interpreting legislative intent. Detailed Analysis Retrospective Application of Section 10(26AAB) The primary issue was whether Section 10(26AAB) of the IT Act, 1961, which exempts the income of AMCs from income tax, is retrospective in operation. The provision was inserted by the Finance Act, 2008, effective from 1st April 2009. The Visakhapatnam Bench of the Income-tax Appellate Tribunal held that the provision is retrospective, while the Hyderabad Bench held it is not. Exemption Eligibility of AMCs AMCs were initially exempt under Section 10(20) of the IT Act until 1st April 2002. The insertion of an Explanation to Section 10(20) by the Finance Act, 2002, effective from 1st April 2003, excluded AMCs from the definition of "local authorities," thereby denying them exemption. Section 10(26AAB) was introduced to provide exemption from 1st April 2009. The contention was whether AMCs are eligible for exemption for the assessment years 2003-04 to 2008-09. Interpretation of Declaratory Statutes The judgment explored the nature of declaratory statutes, which are exceptions to the general rule against retrospective operation. Declaratory statutes clarify or declare the law and are presumed to have retrospective effect. The court examined whether Section 10(26AAB) is declaratory and thus retrospective. Relevance of Finance Minister's Speech The court considered whether the Finance Minister's speech while introducing the Finance Bill could be used to interpret the legislative intent. The speech indicated no intention to tax AMCs and aimed to prevent hardship caused unintentionally from the assessment year 2003-04. Judgment Analysis Retrospective Application of Section 10(26AAB) The court concluded that Section 10(26AAB) is not retrospective. A plain reading of the provision and the Finance Act, 2008, shows it is effective from 1st April 2009. The court noted that Parliament did not intend the provision to be retrospective, as evidenced by the clear language of the statute and the Finance Act. Exemption Eligibility of AMCs The court held that AMCs were not eligible for exemption under Section 10(26AAB) for the assessment years 2003-04 to 2008-09. Before 1st April 2003, AMCs were exempt as "local authorities." From 1st April 2003 to 31st March 2009, they could claim exemption under Section 11 if registered under Section 12A/12AA of the Act as institutions for charitable purposes. From 1st April 2009, AMCs were explicitly exempt under Section 10(26AAB). Interpretation of Declaratory Statutes The court determined that Section 10(26AAB) is not declaratory. There was no ambiguity or doubt regarding the exemption status of AMCs before the provision's insertion. The court emphasized that declaratory statutes are intended to clarify existing law or rectify omissions, which was not the case here. Relevance of Finance Minister's Speech While the Finance Minister's speech indicated an intention not to tax AMCs, the court held that the speech alone is not conclusive for interpreting legislative intent. The speech did not explicitly state that Section 10(26AAB) was to be retrospective. The Finance Act, 2008, clearly specified the effective date as 1st April 2009. Conclusion The court held that Section 10(26AAB) of the IT Act, 1961, is not retrospective and applies only from 1st April 2009. Consequently, AMCs are not eligible for exemption under this section for the assessment years 2003-04 to 2008-09. The appeals filed by the Agricultural Market Committees were dismissed, and those filed by the Revenue were allowed. There was no order as to costs.
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