TMI Blog2018 (12) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the return cannot be confined only to the losses of the previous accounting years. We are of the clear view that the Tribunal committed error in reversing the order passed by the CIT(A)as sub-Section (8) of Section 94 is neither curative nor declaratory of the previous law, which has to be held to be prospective in operation. - Decided in favour of the assessee - Tax Case (Appeal) No.17 of 2009 - - - Dated:- 12-11-2018 - Mr. Justice T.S. Sivagnanam And Mr. Justice N. Sathish Kumar For the Appellant : Mr.R.Shankaranarayanan Senior Counsel for Ms.Harshini Jothi Raman For the Respondent : Mr.Karthik Ranganathan Senior Standing Counsel JUDGMENT T.S.SIVAGNANAM, J. This appeal, by the assessee filed under Section 260A of the Income Tax Act, 1961, (hereinafter referred to as the Act ) is directed against the order passed by the Income-tax Appellate Tribunal 'B' Bench, Chennai, ( the Tribunal for brevity) dated 18.07.2008, in I.T.A.No.384/Mds/2008 for the assessment year 2004-2005. 2. This appeal has been admitted on the following substantial questions of law, vide order dated 28.01.2009. (i) Whether the Income Tax Appellate Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such a question. 6.3. In terms of the proviso under sub-Section (4) of Section 260A, nothing in sub-Section (4) shall be deemed to takeaway or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. Therefore, essentially a person has to be aggrieved by an order passed by the Appellate Tribunal to prefer an appeal under Section 260A of the Act. 7. Admittedly, the Revenue has not preferred any appeal against the order passed by the Tribunal. Therefore, at this juncture, that too, after a period of over nine years, during which the appeal was admitted and pending before this Court, we do not propose to permit the Revenue to canvas any other point before us, more so when, the Revenue is not on appeal before us. In other words, the Revenue was never aggrieved by the order passed by the Tribunal. Thus, the present attempt of the Revenue to make an alternative plea, in case, they are unable to sustain the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (8) with regard to bonus stripping can be said to be a clarificatory amendment in order to bring bonus stripping at par with dividend stripping. Therefore, in the opinion of the Tribunal, Section 94(8) can very well be said to operate retrospectively i.e., with effect from 1st April, 2002, when sub-Section (7) was inserted in Section 94. 12. Firstly, we may point out that the Tribunal is denuded of jurisdiction to grant a declaratory relief declaring a statute as prospective or retrospective, which precisely the Tribunal has done. Nevertheless, we are entitled to examine as to whether sub-Section (8) can be given retrospective effective i.e., with effect from the date on which sub-Section (7) was inserted in Section 94. 13. If we examine the relevant Notes on Clauses for Finance Act 2004, we would be in a position to find an answer the above question. Clause 23 of the Bill seeks to amend Section 94 of the Income-tax Act relating to avoidance of tax by certain transactions in securities, which reads as follows: Under the existing provisions of sub-section (7) of said section, where a person buys securities or unit within a period of three months prior to the record date a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, relating to agreement with foreign countries. Under the existing provisions contained in the Explanation to section 90, it is declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company, where such foreign company has not made the prescribed arrangement for declaration and payment within India, of the dividends (including dividends on preference shares) payable out of its income in India. It is proposed to omit the portion where such foreign company has not made the prescribed arrangement for declaration and payment within India, of the dividends (including dividends on preference shares) payable out of its income in India occurring in the Explanation as the same has become redundant. This amendment will take effect retrospectively from 1st April, 1962, and will, accordingly, apply in relation to the assessment year 1962-1963 and subsequent years . 15. On a reading of above two Clauses namely, Clauses 22 and 23, it is clear that the amendment to Section 90 was retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were suggested to be relevant, viz., (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. The above referred decision was referred to by the Hon'ble Supreme Court in the case of CIT vs. Gold Coin Health Food (P) Ltd., (2008) 9 SCC 622. 18. As pointed out earlier, the Notes on Clauses clearly state that the amendments are to take prospective effect i.e., with effect from 1st April, 2005. Therefore, considering the general scope and purview of the Income Tax Act, the remedy sought to be applied and the former state of the law and what the legislature contemplated, we are of the clear view that sub-Section (8) of Section 94 was intended to be prospective. 19. The Revenue would contend that the argument of the assessee may apply to sub-Section (7) of Section 94 when it was first introduced with effect from 1st April, 2002, but sub-Section (8) was inserted to block the Revenue leakage and the language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the ruling in McDowell Co. Ltd. v. Commercial Tax Officer [(1985) 154 ITR 148(SC)], it may be stated that in the later decision of this Court in Union of India v. Azadi Bachao Andolan [(2003) 263 ITR 706(SC)] it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade taxes through colourable devices is not frowned upon even by the judgment of this Court in McDowell Co. Ltd. s case (supra) . Hence, in the cases arising before 1.4.2002, losses pertaining to exempted income cannot be disallowed. However, after 1.4.2002, such losses to the extent of dividend received by the assessee could be ignored by the AO in view of Section 94(7). The object of Section 94(7) is to curb the short term losses. Applying Section 94(7) in a case for the assessment year(s) falling after 1.4.2002, the loss to be ignored would be only to the extent of the dividend received and not the entire loss. In other words, losses over and above the amount of the dividend received would still be allowed from which it follows that the Parliament has not treated the dividend stripping transaction as sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where the assessee incurs expenditure to earn tax free income but where there is no acquisition of an asset. In cases falling under Section 94(7), there is acquisition of an asset and existence of the loss which arises at a point of time subsequent to the purchase of units and receipt of exempt income. It occurs only when the sale takes place. Section 14A comes in when there is claim for deduction of an expenditure whereas Section 94(7) comes in when there is claim for allowance for the business loss. We may reiterate that one must keep in mind the conceptual difference between loss, expenditure, cost of acquisition, etc. while interpreting the scheme of the Act. 22. Before concluding, one aspect concerning Para 12 of Accounting Standard AS-13 relied upon by the Revenue needs to be highlighted. Para 12 indicates that interest/ dividends received on investments are generally regarded as return on investment and not return of investment. It is only in certain circumstances where the purchase price includes the right to receive crystallized and accrued dividends/ interest, that have already accrued and become due for payment before the date of purchase of the units, that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
