TMI Blog2021 (1) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from the Statements of Objects and Reasons, was to curb, evasion of tax and black money as also plug loopholes in the IT Act and to ensure that defaulting assessees are subjected to higher tax and stringent penalty provision. Both the measures spoken of herein were to further the said objects and there cannot be any nexus assumed nor is it discernible. Section 115 BBE was inserted by Finance Act 2012 w.e.f 01.04.2013. As on 01.04.2016 the financial year in which the subject seizures occurred Section 155BBE provided for 30% tax on income refereed to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was amended by the 2nd Amendment Act; w.e.f. 01.04.2017, enhancing the rate to 60%. Hence there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessments carried on in that year. The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year. Likewise it was by Chapter II with heading 'Rates of Income Tax', as provided in the Finance Act 2016, that a surcharge was introduced by way of the 3rd proviso of Section 2(9) of that Finance Act. This comes into effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K.VINOD CHANDRAN AND THE HONOURABLE MR. JUSTICE T.R.RAVI APPELLANT: SMT.LATHA ANAND, SRI.M.N.RADHAKRISHNA MENON, SRI.JOSEPH SEBASTIAN (PARACKAL) AND SRI.S.VISHNU (ARIKKATTIL) RESPONDENT: SRI. JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX(B/O) JUDGMENT K.Vinod Chandran, J The writ petition sought for a declaration that the amendments made by the Taxation Laws (Second Amendment) Act, 2016, to Section 115BBE of the Income Tax Act, 1961 enhancing the rate of income tax, for specified incomes which are unexplained, to 60% and the surcharge provided in the Finance Act, 2016 to 25% for income covered under Section 69A, to be prospective. The above referred enactments are herein after referred to as the '2nd Amendment Act', 'IT Act' and the 'Finance Act'. The 2nd Amendment Act was dated 15.12.2016 and the amendment to Section 115BBE was specified to be effective from 01.04.2017. The amendment enhancing the rate of tax was incorporated in the I T Act and that of surcharge in the Finance Act. On declaration, consequential relief is sought against Ext.P2 assessment order levying tax at the enhanced rate of 60% and surcharge @25% on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the amendments brought into force on the 1st of April of a particular year; which under the IT Act is the assessment year (AY) for the previous financial year. 4. Karimtharuvi Tea Estate dealt with Kerala Agricultural Income Tax Act 1950, wherein the assessment made in an year is of the previous year. A surcharge @ 5% was levied by virtue of Kerala Surcharge on Taxes Act, 1957 which came into force from 01.09.1957. The question raised was whether the surcharge would be applicable for the assessments made in the assessment year 1957-58, which is of the previous year 1956-57. It was held that since the Surcharge Act came into force in September of 1957 and not as on the 1st of April of that year it could not be regarded as the law in force at the commencement of the assessment year. A Division Bench of this Court in A Wahab followed the above Constitution Bench. A.Wahab in the assessment year 1980-81 claimed 40% depreciation on motor vehicles as per the amendment which came into effect on 24.07.1980. Prior to the amendment such depreciation was allowable only at 30%. The Division Bench found that the depreciation allowable in the subject assessment year relating to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guffic Chem P. Ltd, was concerned with the assessment year 1997-1998 and the issue arose as to whether the amounts received by the assessee as non-competition fee would be a capital receipt, not taxable under the IT Act. The Court highlighted the dichotomy between a compensation received for loss of agency, which is a revenue receipt and that received as against a negative/restrictive covenant, which is a capital receipt. Finding the income received by the assessee to be a capital receipt, it was also noticed that the non competition fee received was always treated as a capital receipt till the assessment year 2003-04. By Finance Act 2002, w.e.f 01.04.2003 the said receipts were made taxable. The settled proposition that a liability cannot be created retrospectively was noticed. Shiv Raj Gupta was also on identical facts and law. We are of the opinion that nothing turns on these decisions since there was no consideration as to whether in an assessment of the previous year, ie: of the financial year 2002-03 carried out in the year 2003-04, whether a capital receipt received in that financial year could have been taxed. 7. Sarkar Builders was concerned with the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded provision. The Court found that the scheme of the Act read with the Rules indicate that the charging section makes the subject of charge; the extent of plantation held by an assessee on the first day of each financial year (the 'valuation date') at the rates prescribed in Schedule (1) to the Act. Section 3 (1) also indicates that the tax assessed is payable for the Financial Year until the extent is revised and that even in the event of a revision it would be payable only from the financial year, immediately following such revision. It was found in Paragraph 24: 24 ... As stated above, chargeability is independent of the passing of the Finance Act. Therefore, one has to read the Finance Act in consonance with the provisions of the charging section. The function of the Finance Act primarily is to prescribe the rate of tax and the manner of calculation of tax; and it is not intended to incorporate the entire procedural and substantive law relating to tax. In the circumstances, we do not find merit in the contention advanced on behalf of the appellant-State that the object of the Finance Act, 18 of 1987 was only to revise the rates of plantation tax. [underlining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Standing Counsel, as is clearly discernible from the precedents too; is that the rate prescribed by a Finance Act brought into effect from the 1st of April of an year would apply to the assessments made in that year relating to the previous year. The precedents would also indicate that there cannot be disturbance caused to accrued rights or obligations imposed, unless the legislative intent clearly indicates a retrospective effect as has been declared by another Constitution Bench in Vatika Township Pvt. Ltd. This is the legal aspect on which the facts in the present case has to be applied. 11. Before we look at the amendments carried out, on facts, there were two seizures of cash made on 02.08.2016 and 03.11.2016 respectively of ₹ 1,05,03,500/- and ₹ 1,24,68,750/- both in the F.Y 2016-2017. The persons from whom the cash was seized as also the appellant herein admitted that it belonged to the appellant who carries on trading in gold bullion. The appellant not having produced any books of accounts or cash flow statements failed to establish the source of the money seized; which was included in the total income under Section 69A of the IT Act. The writ petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016-2017; which is the year in which the subject seizures were occasioned. The proviso refers to various provisions where the advanced tax computed under the first proviso stands increased by a surcharge for the purpose of the Union. Section 115BBE is one of the provisions referred to in the 3rd proviso and in the case of individuals the surcharge was @15% where the total income exceeds one crore, as on 01.04.2016. By the 2nd Amendment Act Section 2 of the Finance Act, 2016 stood amended by which 115BBE was omitted from the 3rd proviso. After the 6th proviso yet another proviso was inserted which provided for the 'advance tax' computed under the first proviso, in respect of any income chargeable to tax under Section 115BBE(1)(i), to be increased by a surcharge for the purposes of the Union, calculated @25%. Hence there is no new liability of surcharge created and it is a mere enhancement of the rate of surcharge. 15. In the financial year 2016-17 itself the tax as provided under section 115BBE and the surcharge on advance tax was available as discernible from the IT Act and Finance Act, 2016 as it stood on 1.4.2016 itself. A major misdemeanor leading to assessment of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word surcharge has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term Income tax as used in Section 2 includes surcharge. 8. According to Article 271 notwithstanding anything in Articles 269 and 270 Parliament may at any time increase any of the duties or taxes referred to in those Articles by a surcharge for the purpose of the Union and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India. Article 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in clause (2). Article 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Article 268 which is the first one under the heading distribution of reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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