TMI Blog2009 (4) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognised provident fund - Power of the CIT(A) - Held that: - CIT(A) has not poer to set aide the issue and restore the matter to AO - The learned CIT(A) should have decided this issue himself instead of setting aside the issue. This is a irregularity, which can be cured by us otherwise it will lead to miscarriage of justice. Hence, we direct, the learned CIT(A) to decide this issue himself instead of setting aside to the AO. This issue is accordingly set aside to the file of the CIT(A) for deciding afresh after affording an opportunity to the assessee. - IT APPEAL NOS. 22 AND 23 (ASR.) OF 2009 - - - Dated:- 28-4-2009 - Member(s) : H. S. SIDHU., CHANDRA POOJARI. ORDER-CHANDRA POOJARI, A.M.: These two appeals by different assessees are directed against the different orders of CIT(A), Jalandhar, dt. 28th Nov., 2008 for the asst. yr. 2005-06. Since the issues involved in both the appeals are common, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. The assessees have raised following common grounds of appeal: "1. That the CIT(A) was not justified in sustaining the disallowance of Rs. 43,83,466 (Rs. 38,45,27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------- 5. H.S.B.C. Cash 30,00,000 29,97,705 -2.295 Several ----------- ----------- entries of Divn. 15-7-2004 22-9-2004 daily dividend -------------------------------------------------------------------- 6. Reliance 1,47,67,333 1,25,57,493 -22,09,840 9,88,707 Growth Fund ----------- ----------- Dividend 24-12-2004 30-3-2005 -------------------------------------------------------------------- 7. Kotak Liquid 1,50,05,085 1,47,86,806 -2,18,279 Dividend Ins.-6 received from Kotak on various schemes has been given at Rs. 25,35,639 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the learned CIT(A). The learned CIT(A) principally agreed with the submissions of the assessees, However, he restored the matter to the file of the AO with the direction to verify the conditions of s. 111A and allow relief, if any. Thus, the learned CIT(A) allowed the ground of the assessees for statistical purposes only. According to the assessee, the CIT(A) is not empowered to set aside the matter after 1st June, 2001 to the file of the AO. Against this, the asses sees are in appeal before us. 4. The learned counsel for the assessees submitted that Finance (No. 2) Act, 2004 deleted earlier cl. (b) of s. 94(7), which reads as under: "Sec. 94(7)(b): Such person sells or transfers such securities or unit within a period of three months after such date;" A new clause was inserted by the Finance (No. 2) Act, 2004, w.e.f. 1st April, 2005 to s. 94(7)(b), which reads as under: "(b) such person sells or transfers- (i) such securities within a period of three months after such date; or (ii) such unit within a period of nine months after such date; He further drew our attention to the Finance (No. 2) Act, 2004 and specifically drew our attention to the preamble, which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding Act provides otherwise either expressly or by necessary implication, the normal presumption would be that any amendment brought about of the nature referred above would apply only to the previous year which is yet to come or after the date on which such amendment is enforced. The CIT(A) wrongly brushed aside this judgment in paras 1-10 of his order and observed that the facts of the case are not applicable firstly because sections involved are different and on the basis of Supreme Court judgment (which he misinterpreted) the first of April of any year has to apply the assessment year beginning on that date. The CIT(A) completely lost his sight on the judgment of Allahabad High Court as the High Court had held that any amendment carried out after the beginning of the financial year which is the exact case of the applicant is not applicable to the relevant assessment year of that financial year. Further, he submitted that the learned CIT(A) relied upon the judgments of Hon'ble Supreme Court in the cases reported in Reliance Jute Industries Ltd. vs. CIT (1979) 13 CTR (SC) 186 : (1979) 120 ITR 921 (SC) and CIT vs. Isthmian Steamship Lines (1951) 20 ITR 572 (SC) which are distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the additional units referred to in cl. (b), then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in cl. (b) as are held by him on the date of such sale or transfer.' (c) in the Explanation, for cl. (aa), the following clause shall be substituted, namely: '(aa) 'record date' means such date as may be fixed by- (i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or (ii) a mutual fund or the administrator of the specified undertaking or the specified company as referred to in the Explanation to cl. (35) of s. 10, for the purposes of entitlement of the holder of the units to receive income, or additional unit without any consideration, as the case may be." We have also carefully gone through the Memorandum Explaining the Notes on Clauses. Clause 23 [(2004) 189 CTR (St) 151 : (2004) 268 ITR (St) 131] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, accordingly, apply in relation to the asst. yr. 2005-06 and subsequent years." 6.1 The contention of the assessees's counsel is that there is a specific mention that the legislature intended in this sub-section to be effective from 1st April, 2005 and not with retrospective effect. In the absence of retrospective operation having been expressly given, this sub-section cannot be applied retrospectively. On the other hand, the contention of the AO is that the said provision would be a law as it existed on the date of filing of the return. In our opinion, the circumstances under which amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or not. The presumption against retrospective operation is not applicable to declaratory statutes. For modern purposes, a declaratory Act may be defined as an Act to remover of doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wledged evil for the benefit of the community as a whole. 6.3 Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the Courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the Courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. The rule against retrospectivity does not extend to protect from the effect of a repeal. a privilege which did not amount to accrued right. 6.4 In the above background, we will now consider the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided expressly or by necessary implication. 6.6 The Hon'ble Supreme Court in the case of Union of India vs. Madan Gopa Kabra (1954) 25 ITR 58 (SC) was considering the applicability of Finance Act, 1950 to 'United States of Rajasthan' for the asst. yr. 1950-51 and they observed, that the income for the asst. yr. 1950-51 became assessable to Indian income-tax in respect of the previous year 1949-50, They rejected the contention that as the Constitution of India had, come into force only on 26th Jan., 1950, the income of the previous year before 26th Jan., 1950 was not taxable to Indian income-tax. At p. 70, they observed that "The case is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian IT law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive legislation, though its operation may affect acts done in the past. 6.7 The Hon'ble Punjab Haryana High Court in the case of L. Rajeshwar Pershad vs. CIT (1986) 52 CTR (P H) 305 was dealing with the accessibility to capital gains of sale of ornaments in the financial year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be carried forward into the accounts of the asst. yrs. 1941-42, 1942-43 and 1943-44." 6.9 In Karimtharuvi Tea Estate Ltd. us. State of Kerala, their Lordships of the Supreme Court considered whether the Kerala Surcharge on Taxes Act, 1957, which came into force w.e.f. 1st Sept., 1957, could be applied to the asst. yr. 1957-58. While holding that the law which was not in force on 1st April, 1957, could not be applied to the asst. yr. 1957-58, the Supreme Court laid down the following proposition: "Now, it is well-settled that the IT Act, as it stands amended on the 1st day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force." 6.10 In M.K. Venkatachalam, ITO Anr. vs. Bombay Dyeing Manufacturing Co. Ltd. (1958) 34 ITR 143 (SC) and in the case of Reliance Jute Industries Ltd. vs. CIT, it has been consistently held that the amended law obtaining on the date of filing the return would apply to the assessment proceedings of that par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the concerned previous year. It may also include carried forward loss which is required to be set up against future income under s. 72 of the Act. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting year. In CST vs. Yuvraj Amrinder Singh 4 SCC 609, the relevance of the Notes on Clauses was highlighted. Para 15 reads as follows: '15. The proviso to sub-cl. (vi) has been reproduced above. It has the effect of cutting down the exemption contained in the sub-clause to some extent. It commences with the words 'provided that in the case of a policy of insurance the premium or other payment whereon is payable during a period of less than 10 years' and the argument is that the italicised words suggest that the expression 'any policy of insurance' in the main sub-clause must mean a policy based on human life and that too where the periodical premia are payable and as such an annuity on life which consists of lump sum investment followed by deferred. annual or monthly payments is excluded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premia are payable over a period of ten years or more. In cases where premia are payable over a period of less than ten years, only a proportionate amount of the value of the taxpayer's right or interest in the policy of insurance will be exempt from wealth-tax. The Finance Minister's Speech, though strictly not relevant as an aid to construction, substantially reiterates what has been stated in the 'Notes on Clauses' accompanying the Bill. On this account, therefore, there is no warrant to put a narrow construction on the expression 'any policy of insurance' occurring in sub-cl. (vi) of s. 5(1).' 'As noted by this Court in CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67 : 5 SCC 482, the circumstances under which the amendment was brought into existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it win have retrospective effect or it was not so. In Principles of Statutory Interpretation, 11th Edn. 2008, Justice G.P. Singh has stated the position regarding retrospective operation of statutes as follows: "The presumption against retrospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise provided expressly or by necessary implication. Even a procedural provision cannot, in the absence of clear contrary intendment expressed therein, the given greater retrospectively than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to reopen liabilities which have become barred by lapse of time." 6.14. In the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala, the question was that whether the Kerala Surcharge Act, 1957, which came into force on 1st Sept., 1957, would not apply to the period when it was not in force. It was held that amendment to IT Act, which was not in force on the 1st day of April of any financial year, would not apply to the assessment for that year. That principle cannot be applied in the present case. In that case, their Lordships were dealing with the substantive provisions i.e., charging provisions and the amendment became effective in September, 1957. However, in the present case, there was a clear mention by the legislature, the date with effect from which the amendment came into force and also assessment year to which it relates. It can be seen from the memorandum explaining clauses (Notes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the IT Act, w.e.f. 1st April, 1976 not applicable to the previous year 1975-76 relevant to the asst. yr. 1976-77. However, in the present case, when the amendment made by Finance Act, 2004 to s. 94(7)(b) for which assent was given by the President on 10th Sept., 2004 there was specifically provided in the Act that it is applicable w.e.f. 1st April, 2004 (sic-2005) for the asst. yr. 2004-05 (sic-2005-06). Hence, in view of the express implication by the Act in itself, the same to be construed as applicable for the asst. yr. 2005-06. 6.20. The learned counsel for the assessee has relied on the following judgments: (i) CIT vs. Isthmian Steamship Lines; (ii) Reliance Jute Industries Ltd. vs. CIT; (iii) Karimtharuvi Tea Estate Ltd. vs. State of Kerala; (iv) Tribunal, Delhi Bench in the case of Dy. CIT vs. Ghanshyam Dass Seth. We have carefully gone through these judgments and find that these judgments support the claim of the Revenue instead of assessee. Moreover, specifically similar argument was made before the jurisdictional High Court in the case of L. Rajeshwar Pershad vs. CIT (1986) 52 CTR (P H) 305 where they have considered the judgment in the case of Karimtha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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