TMI Blog2003 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... me members of village co-operative societies, the village societies become members of primary marketing co-operative societies (district societies) and district societies become members of the State Co-operative Societies (apex societies). The issue raised by the appellants relates to the construction and constitutional validity of section 80P(2)(a)(iii) of the Income-tax Act, 1961, and grant of deduction of the profits made by the societies by the marketing of agricultural produce. Under the Indian Income-tax Act, 1922 (hereinafter referred to as the 1922 Act) exemption was granted in respect of profits and gains of business of cooperative societies including societies engaged in the marketing of the agricultural produce of its members. The Income-tax Act, 1961, continued this exemption under section 81(1)(c) which read: "81. Income of co-operative societies.--Income-tax shall not be payable by a co-operative society- (i) in respect of the profits and gains of business carried on by it, if it is--... (c) a society engaged in the marketing of the agricultural produce of its members". By the Finance (No. 2) Act, 1967, section 81 was omitted and its provisions re-enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der article 136. In these circumstances the view expressed in Assam Co-operative's case [1993] 201 ITR 338 (SC) came to be reconsidered by a larger Bench in 1998. This court by its decision in Kerala State Co-operative Marketing Federation Ltd. v. CIT [1998] 231 ITR 814; [1998] 5 SCC 48 overruled Assam Cooperative's case [1993] 201 ITR 338 (SC) and held that the word "of" in section 80P(2)(a)(iii) had been too restrictively construed in Assam Co-operative's case [1993] 201 ITR 338 (SC). On an interpretation of the provisions of section 80P and having regard to the object with which the provisions had been introduced, it was held that the Legislature did not intend to limit the scope of exemption only to primary societies and that the phrase "product of its members" must be construed as including any society engaged in marketing agricultural produce "belonging to" its members. It said: "The language adopted in section 80P(2)(a)(iii) with which we are concerned will admit of the interpretation that the society engaged in marketing of agricultural produce of its members as agricultural produce 'belonging to' its members which is not necessarily raised by such member. Thus, when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts members." The Bill was passed after obtaining the assent of the President and became the Income-tax (Second Amendment) Act, 1998 (Act No. 11 of 1999). The appellants impugned this amendment before the Delhi High Court under article 226. They prayed for a declaration that the 1999 amendment Act in so far as it seeks to retrospectively amend section 80P(2)(a)(iii) of the Income-tax Act, 1961, was unconstitutional, and for an order to restrain the respondents from seeking to assess or reassess the appellant society in respect of any previous year prior to the date of the enactment of the amendment Act. The Delhi High Court dismissed the writ petition holding that the amendment was valid and that the Legislature was competent to retrospectively take away a benefit granted earlier by an amendment of the law. However, the court recorded the statement of the Solicitor General appearing on behalf of the respondent authorities that the amendment would apply only to assessments which were yet to be finalised. That the Legislature can enact laws retroactively is not in dispute. Nor is it disputed that the amendment is intended to be retrospective and that the amendment would at le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Syndicate Ltd., AIR 1971 SC 57; [1970] 1 SCC 509 and Indian Aluminium Co. v. State of Kerala [1996] 7 SCC 637; AIR 1996 SC 1431. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. "Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Some times this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon courts. The Legislature may follow any one method or all of them--Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136 (SC); [1969] 2 SCC 283." A validating clause coupled with a substantive statutory change is therefore only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atel Gordhandas Hargovindas redefining the word "rate" in section 73 itself. The constitutionality of the Validation Act was challenged. In dismissing the challenge, this court in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136 held that the Legislature could exercise its undoubted powers of redefining the word "rate" in section 73 to validate the assessments earlier made under rule 350A. The court held that when a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively: "It is not sufficient to declare merely that the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances". Once the circumstances are altered by legislation, it may neutralise the effect of the earlier decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have been given in the altered circumstances. This enunciation of the law has been noted with approval by the Constitution Bench in State of Tamil Nadu v. Arooran Sugars Ltd. [1997] 1 SCC 326; AIR 1997 SC 1815. The appellant has relied on this court's decision in Madan Mohan Pathak v. Union of India [1978] 2 SCC 50; AIR 1978 SC 803 to contend that what the Legislature had done in the present case was to statutorily overrule the decision of this court in Kerala Marketing [1998]231 ITR 814. In Madan Mohan Pathak [1978] 2 SCC 50; AIR 1978 SC 803 a settlement had been arrived between the Life Insurance Corporation and its employees, inter alia with regard to bonus payable to its classes III and IV employees. Subsequent to the settlement, the Payment of Bonus Act, 1976, came into force which considerably curtailed rights of employees to bonus in industrial establishments. Although the Payment of Bonus Act was not applicable to the Life Insurance Corporation, the Central Government issued a directive to the Life Insurance Corporation that it should not make payment of bonus to its employees without getting the same cleared by the Central Government. The Life Insurance Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the parties for the assessment years in question and cannot be reopened because of the 1998 amendment. This principle, how ever, does not in any way detract from the principle that the Legislature may "cure" the statute so that it more correctly represents its intention. Such curative legislation does not in fact touch the validity of a judicial decision which may have attained finality albeit under the pre-amended law. The main thrust of the appellant's argument has been to the constitutionality of the amendment. The substitution in 1998 of the phrase "grown by" in section 80P(2)(a)(iii) of the Act to operate from 1968, it is argued, amounts to a new levy and an unforeseen financial burden imposed on apex societies like the appellant with effect from the past 30 years. If this were so doubtless the court may have considered the amendment to be excessively and unreason ably retrospective violating the appellants' fundamental rights under articles 19(1)(g) and 14 of the Constitution--Ujagar Prints V. Union of India [1989] 179 ITR 317; [1989] 3 SCC 488, 517. Bui in fact the grievance is unfounded. The test of the length of time covered by the retrospective operation cannot by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O [2002] 254 ITR 772 (SC); [2002] 4 SCC 339. Different considerations would arise if, by the amendment even final assessments were unambiguously sought to be opened-Commercial Tax Officer v. Biswanath Jhunjhunwalla, AIR 1997 SC 357; [1996] 5 SCC 626. That is not the case here. The concession of the Solicitor General on behalf of the Revenue that the amendment would apply only to assessments which were yet to be finalised could not of course be a relevant consideration in upholding the amendment if it were found to be constitutionally infirm-Collector of Customs v. Nathella Sampathu Chetty, AIR 1962 SC 316; [1962] 3 SCR 786, 825; Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Ltd., AIR 1983 SC 239; [1983] 1 SCC 147. But it was an unnecessary concession, since having regard to the limited operation of the amendment, it could only apply to pending assessments in the sense that it could not revive a power lost by efflux of time. The final submission of the appellant as to the possible adverse economic impact of the amendment on farmers and primary societies is not a consideration which is relevant to a decision on its validity--particularly when neither the factual basis for su ..... 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