2018 (1) TMI 608 - HC - Income Tax

Retrospective amendment to Sections 28 and 80 HHC and the validity of CBDT Circular dated 17.1.2006 (no. 2 of 2006) made in the light of the amendments questioned - Held that - Supreme Court in Commissioner of Income-tax vs. Avani Exports (2015 (4) TMI 193 - SUPREME COURT) which affirmed the declaration and held that the retrospectivity ascribed to the amendments was unconstitutional. Consequently the amendments became in effect prospective in nature. This Court notices that in the meanwhile a Division Bench of this Court in Pawan Kumar Jain vs. Union of India (2014 (8) TMI 32 - DELHI HIGH COURT) had also concluded that the amendment could not be treated as retrospective and directed further relief. In the light of these developments the Court is of the opinion that the provisions are to be treated as prospective and not retrospective; the reliefs in these proceedings are therefore to be granted. Writ petitions are allowed in terms of the declaration of law in Avani Exports; any demands made or benefits sought to be curtailed or withdrawn are declared as illegal.

Summary

Issues:
Retrospective amendment to Sections 28 and 80 HHC of the Income Tax Act 1961, validity of CBDT Circular dated 17.1.2006, consequential relief sought by petitioner, constitutionality of amendments, prospective vs. retrospective nature of amendments.

Analysis:

The High Court considered the retrospective amendment to Sections 28 and 80 HHC of the Income Tax Act 1961 and the validity of the CBDT Circular dated 17.1.2006 in question. The petitioner sought consequential relief by quashing orders giving effect to the retrospective amendments and the circular. The Court noted that the Gujarat High Court had held the amendments unconstitutional in 'Avani Exports and others vs. Commissioner of Income-tax and others' and the Supreme Court affirmed this in 'Commissioner of Income-tax vs. Avani Exports'. Consequently, the amendments were deemed prospective. A Division Bench of the High Court in 'Pawan Kumar Jain vs. Union of India' also concluded that the amendments were not retrospective. In light of these judgments, the Court held that the provisions were to be treated as prospective, not retrospective, and granted relief by declaring any demands made or benefits sought to be curtailed as illegal. The writ petitions were allowed in accordance with the law established in 'Avani Exports'.

The Court's decision was based on the interpretation of the law regarding the retrospective amendments and the CBDT Circular. By considering the judgments of the Gujarat High Court, the Supreme Court, and a Division Bench of the same High Court, the Court concluded that the amendments should be treated as prospective, leading to the grant of relief to the petitioner. The Court emphasized the importance of legal precedent in determining the constitutionality and application of tax laws. The judgment highlighted the significance of upholding the rule of law and ensuring that demands made or benefits sought to be curtailed unlawfully are declared as such, thereby providing justice to the concerned parties. The ruling clarified the legal position on the retrospective nature of the amendments and the circular, setting a precedent for future cases involving similar issues.