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TMI Blog2012 (8) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is to have retrospective operation, it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the Act was passed. Unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right otherwise than as regards the matters of procedure. See Shah Sadiq and Sons (1987 (4) TMI 2 - SUPREME COURT), Govindas & others vs ITO (1975 (12) TMI 144 - SUPREME COURT) - Decided in favor of assessee Interest on Income Tax Refund - Held that:- It being a statutory obligation would be assessable under the head “ Income from other sources” Interest on excess refund - Section 234D - Held that:- Explanation 2 has been inserted in sec.234D by the Finance Act, 2012 with retrospective effect from 1.6.2003 clarifying that the provisions of sec.234D shall also apply to the assessment year commencing before the first day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. Since proceedings in respect of the said AY 03-04 has been completed on 30.11.2005, we are of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred by the assessee before the Ld. CIT (A) challenging therein inter alia the action of the A.O. in disallowing its claim for set off of brought forward long-term capital loss relating to A.Y. 2001-02 against short-term capital gain for the year under consideration. It was submitted on behalf of the assessee before the Ld. CIT (A) that there was no restriction on the setting off of long-term capital loss against short-term capital gain and vice-versa prior to 2003-04 and such restriction came only from A.Y. 2003-04. It was contended that long-term capital loss of Rs. 42,91,526/- was determined in the case of the assessee for the first time in A.Y. 2001-02 and by virtue of prehttp:// amended provisions of sec.74(1), the assessee had got the right to carry forward and set off the said long-term capital loss against shortterm capital gain of any subsequent year/s. It was contended that the said right had accrued and vested in the assessee as per the provisions of sec.74(1) prevalent at the relevant time and the same could not be taken away by the amendment made subsequently to sec.74(1). In support of this contention, reliance was placed on behalf of the assessee on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Benches on the issue involved in ground no. 2 relating to the assessee s claim for set off of brought forward LTCL relating to A.Y. 2001-02 against STCG for A.Y. 2003-04. In the case of Komaf Financial Services Limited vs. ITO reported in 131 TTJ 359, the Mumbai Bench had taken a view that amended provisions of sec.74(1) will apply to the losses under the head capital gain for any assessment year and not only to the losses relating to the assessment year 2003-04 onwards. A contrary view, however, was taken by another Division Bench at Mumbai in the case of Geetanjali Trading Ltd. vs. ITO (ITA No.5428/Mum/2007 dated December, 2009), wherein it was held that the amended provisions of sec.74(1) will apply only in respect of losses for assessment year 2003- 04 and onwards. Taking note of these two contrary decisions of the co-ordinate Benches as well as for the other reasons given in the referral order, the Division Bench made a reference to the Hon ble President, ITAT for constituting a Special Bench. Accordingly, this Special Bench has been constituted by the Hon ble President, ITAT u/s.255(3) of the Income-tax Act, 1961 to dispose of this appeal as well as to decide the important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch was whether unabsorbed depreciation for AYs 1997-98 to 1999-2000 (when there were restrictions on set off of unabsorbed depreciation) could be set off without any restriction in AY 2003-04 and 2004-05 (when such restrictions were removed). He submitted that the issue involved in the said case thus was of a similar nature as involved in the present case and while deciding the same, it was held by the Special Bench that the liberalized provisions introduced w.e.f. AY 2002-03 applied only to unabsorbed depreciation computed for AY 2002-03 and subsequent years and did not apply to unabsorbed depreciation for the earlier years where there were restrictions on the setting off of unabsorbed depreciation. He submitted that this conclusion was arrived at by the Special Bench on the basis of the wording of Section 32(2) of the Act and drawing support from Section 74 of the Act which is the relevant provision in the present case. 8. Shri Farrokh Irani took us through the relevant portion of the order Special Bench in the case of Time Guaranty Limited (supra) and specifically pointed out the following observations recorded by the Special Bench based on the wording of Section 32(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion respecting the second period also at par with the depreciation for the year u/s 32(1) in third period, then sub section would have been differently worded somewhat like where in the assessment of the assessee full effect could not be given to any allowance or ............ employing the expression could not be akin to that used in the post-substituted sec. 75. Since subsection (2) of sec. 32 has been worded in present and not in past or past prefect tense and this being a deeming provision, the brought forward unabsorbed depreciation of the second period cannot be brought within its purview. 9. Shri Farrokh Irani submitted that the above observations of the Special bench directly support the assessee s case and, on the basis thereof, it must be held that the restrictive provisions of Section 74 of the Act apply only to LTCL made in AY 2003-04 and subsequent years just as the Special Bench in the above case held that the liberalizing provisions of Section 32(2) of the Act applied only to unabsorbed depreciation for AY 2002-03 and subsequent years. 10. Shri Farrokh Irani also relied on the decision of division bench of this Tribunal in the case of Virendra Kumar Jam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled that a vested right acquired by the assessee cannot be negated except by a clear and specific legislative provision. In this connection, he relied upon the decision of the Madras High Court in the case of CIT Vs. S.S.C. Shoes Ltd., reported in 259 ITR 674 wherein the assessee had claimed deduction under Section 8OHHC of the Act which was allowed only partially on account of the provisions of Section 8OVVA of the Act which placed a limit on the quantum of Chapter VIA deductions which could be claimed by the assessee in any particular assessment year. Section 8OVVA provided that the Chapter VIA deductions not allowed in any particular assessment year could be claimed in a subsequent assessment year. The claim of the assessee for deduction under Section 8OHHC of the Act for AYs 1987- 88 and 1988-89 was limited by virtue of Section 8OVVA of the Act and the disallowed portion of its Section 8OHHC deduction was carried to AY 1989-90 when it was claimed by the assessee. However, Section 8OVVA was deleted w.e.f. 1st April, 1988 and, on the basis of such deletion, the Revenue Authorities denied the assessee its claim for the allowance in AY 1989-90. The Hon ble Tribunal and the Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a well-settled rule of interpretation allowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in volume 36 of the Laws of England (third edition) and reiterated in several decisions of this court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedures or evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only .. 14. Shri Farrokh Irani submitted that the above decision of the Supreme Court has been applied and fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -04. 16. Regarding the adverse decision of the Tribunal in the case of Komaf Financial Services Limited (supra), Shri. Irani submitted that the view taken therein by the division bench, with due respect, is not correct. He submitted that first of all the first proposition now raised by him before this special bench based on the bare interpretation of Section 74 of the Act has not been considered by the Tribunal in the case of Komaf Financial Services Limited. Secondly, Shri Irani submitted that the said decision of the Tribunal proceeds on the principle of vested rights only with reference to Section 6(c) of the General Clauses Act and ignores the fact, as recognized by the Madras High Court in the case of S.S.C. Shoes Ltd. (supra) and by the Supreme Court in the case of Govinddas Ors. (supra) that there is a well recognized legal concept of vested right even de-hors Section 6(c) of the General Clauses Act. He contended that all these relevant and vital aspects however were not brought to the notice of the division bench of this Tribunal in the case of Komaf Financial Services Limited which had no occasion to consider that same. He contended that the decision of the ITAT in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for set off and not for the manner of set off. He contended that similarly clause (b) of section 74(1) provides only for carry forward and it is totally silent regarding set off. He contended that since the case of the assessee falls under clause (b) of section 74(1), there is absolutely no vested right of the assessee of set off as per the provisions of the Act. 20. Shri. Pawan Ved submitted that this issue is squarely covered by the decision of Hon ble Supreme Court in the case of Reliance Jute Industries Ltd. 120 ITR 221. In that case, the assessee had right, in the year in which loss was incurred, to carry forward loss for any number of years. Later on, Law was amended providing for carry forward only for 8 assessment years. Thereafter, the assessee sought set off of loss. In the year in which set off was requested, the period of 8 years had already passed. The plea of the assessee was that such set off should be given because he had vested right of set off for any number of years as per the law of the year in which the loss was incurred. The Hon ble Supreme Court did not agree and it was held that law as on the 1st day of the assessment year should be applied. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 74 itself shows that it speaks not only of carry forward but also of set off. As regards the contention of the learned DR that the law as on the 1st day of April, 2003 is to be applied, Shri. Irani submitted that even if the same is accepted, it does not affect the right of the assessee to set off the LTCL of AY 2001-02 against the STCG of AY 2003-04 because there is nothing in Section 74, as it stood on 1st April, 2003, which denies such right. He contended that a bare interpretation of Section 74, as it stood on 1st April, 2003, clearly shows that it applies only to LTCL made in AY 2003-04 and onwards as already explained by him in detail and does not in any way affect LTCL made in earlier years. 23. We have considered the rival submissions and also perused the relevant material on record. In the year under consideration, the assessee declared the short-term capital gain of Rs. 2,21,91,307/- and the brought forward long-term capital loss relating to AY 2001-02 to the extent of Rs. 42,91,526/- was set off by it against the said shortterm capital gain. The claim of the assessee for such set off was disallowed by the AO as well as by the Ld. CIT (A) relying on the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of sec.74(1) as amended w.e.f. 01.04.2003 apply only to the long-term capital loss made in AY 2003-04 and subsequent years. In support of this contention, he has mainly relied on the decision of Mumbai Special Bench of the ITAT in the case of Time Guarantee Ltd. (supra). 26. In the case of Time Guaranty Ltd. (supra) relied upon by the Ld. Counsel for the assessee, a similar issue arose in the context of amendment made in the provisions of sec.32(2) which was substituted by the Finance Act, 2001 w.e.f. 01.04.2002. The substituted provisions of sec.32(2) read as under: Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm and they alone shall entitled to have the amount of the loss set off and carried forward for set off. The Special Bench held that a conjoint reading of pre-amended provisions of sec.74 made it clear that when the reference was made to unabsorbed loss of firm for a current year getting apportioned between the partners of the firm, the words used were cannot be set off and when the reference was made to such losses of earlier years, the words used were could not be set off . It was held by the special Bench that the words cannot be as used in sec.32(2) thus referred only to the current years depreciation and the brought forward unabsorbed depreciation of the earlier years cannot be included in sec.32(2). It was held that if the intention of the Legislature had been to allow such brought forward unabsorbed depreciation also at par with the deprecation of the current year, then sub-section would have been differently worded using the words could not be given . . 28. In the present case, we are concerned with the provisions of sec.74(1) as substituted w.e.f. 01.04.2003 and as already noted on the basis of highlighted words, the present tense has been used, which, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the year following such succeeding assessment year and shall be set off against income if any under the head capital gain assessable for that assessment year. It appears that the Ld. DR while analysing the provisions of section 74(1), as existed prior to amendment made w.e.f. 01.04.2003, has ignored the important words and so on to contend that the said provisions are silent on set off in so far as the year following the succeeding assessment year is concerned and finding no merit in this contention of the Ld. DR, we reject the same. 31. The first and most elementary rule of construction is that it has to be assumed that the words and phrases of technical legislation should be used in their technical meaning if they have acquired one, and, otherwise, in their ordinary meaning the phrases and sentences are to be construed according to the rules of grammar. It is well settled that fiscal laws must be strictly construed, words must say what they mean, nothing should be presumed or implied. The true test must always be language used. Primarily the language employed is the determining factor of the intention of the legislature. The intention of the legislature must be found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows that the assessee is entitled to claim set off of any brought forward longterm capital loss relating to AY 2001-02 against short-term capital gain. This is because the carry forward and set off long-term capital loss relating to AY 2001-02 would be governed by the provisions of sec.74(1) as existed prior to 01.04.2003. The assessee therefore succeeds as a result of acceptance of the first contention itself on the issue under consideration and it is really not necessary or expedient to consider the other contentions raised by the Ld. Counsel in support of the assessee s case on this issue which have become more of a academic nature. However, keeping in view that we have already heard the elaborate submissions made by both the sides, we may touch upon the remaining aspects also for the sake of completeness. 34. The other contention raised by the Ld. Counsel in support of the assessee s case on this issue is that the assessee was entitled to set off the long-term capital loss relating to AY 2001-02 against income of any subsequent year / years under the head capital gains as per the provisions of sec.74(1) prevalent at the relevant time. He has contended that the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by the assessee that the amendment effected in 1957 was not retrospective in operation. Hon ble Supreme Court did not find any substance in this claim of the assessee observing that there was no question of the assessee possessing any vested right under the law as it stood before the amendment. It was held by the Hon ble Supreme Court that right claimed by the assessee under the law in force in a particular assessment year is ordinarily available only in relation to the proceedings pertaining to that year. It was held by the Hon ble Supreme Court the provisions of sec.24(1) as amended in 1957 would govern the assessment for the assessment year 1960-61 and the unabsorbed loss of the assessment year 1950-51 could not be carried forward for more than 8 years. The Hon ble Supreme Court thus held that the law as prevalent on the 1st day of the relevant assessment year would be applicable to the proceedings pertaining to that year and the assessment for one assessment year cannot, in the absence of a contrary provision, be effected by the law in force in another assessment year. 36. The issue involved in the present case, in our opinion, however is different inasmuch as there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mining Firm for assessment years 1950-51 to 1956-57 were reopened after the new Act came into force and reassessments were made enhancing the assessable income of the two firms in accordance with the procedure provided in the new Act. Consequent upon the reassessments, notices were issued to HUF for assessments of its income for assessment years 1950-51 to 1956-57 since it was a partner in these two firms during those years. The Income-tax Officer after following the requisite procedure passed an order of reassessment for each of the assessment years 1950-51 to 1956-57 enhancing the assessable income of the HUF. Consequent to the enhancement of assessable income of the HUF, the ITO determined the several liability of the members of the HUF u/s.171(7) of the New Act by apportioning the tax assessed on the HUF for assessment years 1950-51 to 1956-57. This lead to the filing of the petition by each of the Members of the HUF in the Bombay High Court. The Petitioner did not object to the recovery of tax liability of the HUF from out of the joint family property which had come to their hands on the partial partition. Their argument however was that they were not jointly or severally liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the provisions of sec.297(2)(d) of 1961 Act. The contention of the Ld. DR that the decision in the case of Govinddas Ors. (supra) was decided by the Hon ble Supreme Court on interpretation of provisions of sec.297(2)(d) of 1967 Act thus is devoid of any merit and the same cannot be accepted. As a matter of fact, the issue was decided by the Hon ble Supreme Court on the basis of a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right otherwise than as regards the matters of procedure. After referring this well settled rule on page no.132 of the report, the Hon ble Supreme Court also made a reference to a general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Ed.) and reiterated in several decisions of the Supreme Court as well as English Courts that "all statutes other than those which are merely declaratory or which relate only to the matters of procedure or of evidence are prima facie prospective" and retrospective operation should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntamani Saran Nath vs. State of Bihar Ors. AIR 1999 SC 3609, the Hon ble Supreme Court also referred to Francis Benion's Statutory Interpretation, 2nd Edn. wherein the learned author commented that the essential idea of a legal system is that current law should govern current activities. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow s backward adjustment of it. Such is the nature of law and the true principle is that lex prospicit non respicit which means law looks forward and not back. As Willes, J. said, retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law. 42 In the case of CIT vs. Shah Sadiq and Sons (supra), a similar issue again arose for the consideration of Hon ble Supreme Court. In the said case, the assessee, a partnership firm, had claimed the set off of the speculation losses suffered in the assessment years 1960-61 and 1961-62 against the speculation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court that the principles enunciated therein will have no application to the controversy involved in the case of Shah Sadiq and Sons (supra). 43. It is no doubt true that the decision in the case of Shah Sadiq and Sons (supra) was rendered by the Hon ble Supreme court on the basis of section 6 of the General Clauses Act of 1897 as well as sec.297(2) of the Income-tax Act, 1961 as submitted by the Ld. DR. However, as already noted by us, the decision in the case of Govinddas and Others (supra) which is a decision of the Bench of three Judges of Hon ble Supreme court was rendered on this issue on the basis of well settled rule of interpretation hallowed by time and sanctified by judicial decisions that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or to impose a new liability otherwise than as regards matters of procedure. 44. It is observed that the decision of Hon ble Madras High Court in the case of CIT vs. SSC Shoes Ltd. 259 ITR 674 cited by the Ld. Counsel for the assessee further clinches this issue. In tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no necessity to consider the larger question that sec.6 of General Clauses Act does not apply to the omission of a provision and the omission of a provision is different from repeal as the assessee had acquired a right to carry forward the unabsorbed depreciation deeming the same as deduction of the next following assessment year when sec.80VVA was in existence and in full force, which was not taken away by omission of the provision from statute book. 45. In our opinion, the position in the present case is similar to the one involved in the case of S.S.C. Shoes Ltd. (supra) inasmuch as provisions of sec.74(1) as amended w.e.f. 1.4.2003, going by the language used therein, expressly provide for and deal with carry forward and set off of loss under the head capital gains for assessment year 2003-04 and subsequent years and the right accrued to the assessee by virtue of sec.74(1) as it stood prior to the amendment made w.e.f. 1.4.2003 to set off brought forward long-term capital loss relating to the period prior to AY 2003-04 against shortterm capital gain of subsequent year/s has not been taken away by the provisions of sec.74(1) substituted w.e.f. 1.4.2003. 46. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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