2013 (10) TMI 280 - SC - Income Tax

Retrospective effect of section 234D of the Income Tax Act Interest on excess refund - period prior to 1.6.2003 - Held that - Having regard to the legal position which has been clarified by the Parliament by insertion of Explanation (2) in Section 234D of the Act, in the present case, retrospectivity of Section 234D does not arise the view of the High Court in relying upon the decision of the Bombay High Court in M/s Delta Air Lines Inc. (2011 (9) TMI 21 - BOMBAY HIGH COURT) cannot be said to be erroneous - Decided against the Revenue.

Summary

Issues:
Retrospectivity of Section 234D of the Income Tax Act, 1961.

Analysis:
The Supreme Court heard arguments regarding the retrospectivity of Section 234D of the Income Tax Act, 1961. The counsel for the Revenue contended that the Bombay High Court's decision in a specific case has no relevance to the present matter as the question of retrospectivity of Section 234D is at issue. On the other hand, the counsel for the assessee relied on Explanation (2) added to Section 234D by the Finance Act, 2012, effective from 01.06.2003. This explanation clarified that Section 234D would apply to assessment years commencing before 01.06.2003 if the proceedings for such assessment year were completed after that date.

The case in question pertained to the assessment year 1998-99, where the assessment was completed before 01.06.2003. Given the insertion of Explanation (2) in Section 234D by the Parliament, the Court held that in this instance, the retrospectivity of Section 234D did not come into play. Therefore, the High Court's reliance on the Bombay High Court's decision was deemed appropriate in this context, and the appeal was dismissed accordingly.

In conclusion, the Supreme Court dismissed the Special Leave Petition, emphasizing that the insertion of Explanation (2) in Section 234D clarified the application of the section to assessment years completed after 01.06.2003, thereby settling the issue of retrospectivity in the present case.