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India, one of the fastest growing economies of the world with an exemplary rate of GDP
is a nation which in spite of abundant social, cultural, economical, political etc. problems
is making its roaring presence in virtually each and every happening on the global
scenario.
The population stretch of the country consists of below poverty liners and extends till the
ones included in Forbes Top 10 Richest. The main source of Government revenue
being tax, which contributes approximately 18% revenue to the GDP, and has always
been a very sensitive issue taking into consideration the economic condition of
population at large with synchronisation to the progress targeted during budget and
actually achieved.
The phase of evolving a perfect taxation platform is still in the probationary period which
is struggling for perfection on both State and well as Central level after giving due
consideration to the Legislature and the Judiciary.
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The issue is not to determine the intention of the Honble court but to determine the
unpredictability of Indias tax regime. The Supreme Court laid down that a single
transaction cannot contain both transfer of right and a service [3] , the activity of renting
is by definition, a transfer of right and thus cannot be considered rendering a service, so
the idea of service tax in the present case is absurd. Above all this, Ministry of Finance
itself in a circular [4] mentioned specifically that activity of letting out premises is ipso
facto not rendering a service. The question arises, when the thumb rules to decide the
case were already present by way of precedents, the ruling of the Honble court is
surprising and contradicting creating an unnecessary dilemma in minds of public as to
which is the correct interpretation.
It has been a tendency in recent Finance Acts to change the position of law in relation to
the Income Tax Act through retrospective amendments; in order to overturn judicial
decisions against the Revenue. In this context, a question arises as to what extent the
An amendment can be introduced in different forms. In India, most notable ways includes
introduction of a new piece of Legislation overriding a legitimate argument of taxpayers
mostly backed up by any interpretation of law or any judicial precedent and the other is
by way of addition of explanation to the legislation, terming it as a way to clarify the
intent of law.
The Finance Ministry has defended the recent trend towards increased retrospective
amendments to the income-tax law handed down in successive Budgets. The Revenue
Secretary, Mr P.V. Bhide, said that such amendments were required to correct the
aberrations that had come in by decisions of the quasi-judicial bodies, which went
against the legislative intent.
It is a known fact that the Legislature can always revalidate a law quashed or stayed by a
court by bringing in necessary changes. But in reality are our politicians ready to
compromise their so called legislative intent for public good or facility? Or is our judicial
system flexible enough to accommodate such changes in a hard frame of a statutes
preamble? All these foundation defects when linked to a super sensitive subject area of
tax, definitely requires immediate attention. The judiciary decides not only on the
implementation of law by the executive, but also on the validity of the legislation sought
to be implemented. One of the functions of superior judiciary is to examine the
competence and the validity of legislation, both from the point of legislative competence
as well as its consistency with fundamental rights. Hence, there is always a risk labelled
with an excessive imposition to be quashed on grounds on unconstitutionality.
Parliament / State legislature can make a retrospective amendment of the law in cases
where such legislation does not contravene other provisions of the Indian Constitution.
This essay has been submitted to us by a student in order to help you with your studies.
This is not an example of the work written by our professional law writers.
The amendment should not create any unreasonable restriction upon the fundamental or
existing statutory rights of the tax payer. If it creates untoward fiscal impacts on the tax
payers so as to deprive him of his rightful claim, then in such a case, the amendment
cannot be upheld to have been done in public interest and is arbitrary and discriminatory
and violates Articles 14 and 19(1) (g) of the Constitution of India. [7]
It is thus the duty of the court to evaluate the reasonableness of the retrospective
amendment of law in light of the above mentioned principle to ascertain whether it
violates the provisions of Article 19(1) (g) of the Constitution so as to declare it as
unconstitutional.
To survive, a common man is left with two options-either increase the earnings anyhow
or cut down on basic requirements. The businessmen to continue making profit, will
increase the product prices, which will definitely be a high percentage as the cumulative
effect of the retrospective tax is huge and the service class will demand more
remuneration, and the worst hit would be the labour class whose fate is often ignored
while making considerations. The well set economic structure will go for a toss. The
validity of such retrospective amendment statute might prevail, but it does not have any
significance. It will always be referred to as a bad law. Unless and until the incidence of
such tax is very well known to the public and due to any constraints it is within
reasonable limits for the public to understand the necessity of such amendment to be
introduced, it will continue to remain unwelcomed.
As a retrospective amendment affects ongoing contracts too, it is very difficult for the
contracting parties to accommodate a new levy against their private interest agreeable to
both ends at once. In addition to domestic issues, International transactions will also
suffer a heavy blow and will certainly affect the foreign investment and faith, triggering
financial crunches. It is never wise on the part of the government to create new tax
sources on cost of the previous ones against will of people.
This essay has been submitted to us by a student in order to help you with your studies.
This is not an example of the work written by our professional law writers.
and incur debts for the same or he in order to recover the amount from the subsequent
parties will resort to judicial help which altogether will account for large number of
recovery suits and later pendencies. Also, Article 245 and 246 of the Constitution
prohibits Legislature to exercise its plenary power to declare a judicial decision invalid
[9] , leaving academia with a challenge to work out on planning a way out of such
situations which will avoid strife between the judiciary and legislature.
CONFLICTS:
Nova Constitutio Futuris Formam Imponere Debet Non Praeteritis
It is well settled that if a statute is curative or merely declaratory of the previous law
retrospective operation is generally intended and it is a cardinal principle of construction
that every statute is prima facie prospective unless it is expressly or by necessary
implication made to have a retrospective operation [10] . But the rule in general is
applicable where the object of the statute is to affect vested rights or to impose new
burdens or to impair existing obligations. Unless there are words in the statute sufficient
to show the intention of the legislature to affect existing rights, it is deemed to be
prospective only. Thus in order to qualify as a retrospective law the words used must
expressly provide or necessarily connote retrospective operation. [11]
The legislature in recent times has perverted its power to enact retrospective changes in
taxing statutes. One major instance would be of the Finance Act, 2009, which exemplifies
several retrospective alterations in the Income Tax Act; the solitary purpose of which
being changing the legal position after an inconvenient interpretation. Thus, while
intending to elucidate the provision, these impugned legislations have lead to
unanticipated burden on the taxpayers.
On an in depth analysis of the present Indian scenario, the position that emerges is, that
the Government any how has the weapon of retrospective amendment available for its
disposal and assessee has realized that it is better to pay tax and not to combat the
legislation. Even if he brings home the bacon, the department still has the power to come
up with a retrospective amendment which would ultimately result in his paying the tax.
The second very important observation is that normally Government amends the law
when it is pending or decided by the Apex Court, but Retrospective amendments are to be
done when the decision of the Highest Court of India goes against the Government. The
Government had assured the Delhi High Court that they will instruct the officers not to
write letter for depositing the tax. [13] On the contrary, they came up with a retrospective
amendment. If it goes further in the same manner the day is not far when we can see the
retrospective amendments by way of tribunal decisions.
Alternatives:
The alternate viable for the government is to resort more to Minimum Alternate Tax
(MAT) i.e. high income individuals, corporations, trusts, and estates pay at least some
minimum amount of tax regardless of deductions, credits or exemptions by way of adding
certain tax preference items back into adjusted gross income. Else government can
withdraw the unnecessary exemptions and reliefs which are declared only to fulfil
political goals. The best way is to make Goods and service tax (GST) sufficient enough to
accommodate incidence of all money flows which the government expects to generate by
levying varied taxes. Proper audit of governments income and expenditure should be
mandatory, and the same should be communicated to the public in order to strengthen
their faith which is at present shaken by so many scams and corruption.
Conclusion:
Considering all the effects and conflicts with law, no government has the right in the
process of extracting tax to cause misery and harassment to the taxpayer and the eroding
feeling that he is made a victim of tangible injustice. Also, adequate measures ought to be
taken by the government at the time of formulating laws so as to prevent any future
imbalances and promote stability in the economic structure thereby preventing public
distrust due to improvidence of the legislators. It is also the solemn duty of the legislature
to act promptly while amending the laws because it is at last the general public at large,
who are left at the clemency of legislators. Also, the retrospective amendment should be
countenanced in the rare cases where it is essayed that there are omissions/errors/lacunae
in drafting or if the intention of the lawmakers is not clearly divulged in the laws drafted
by them , which has led to protracted litigation before the Judiciary. Court might have
upheld the constitutional validity of a retrospective amendment but considering the harsh
realities one is bound to conclude that what is legal as declared by legislature and upheld
by the judiciary may not unremittingly be ethical, upright and equitable.
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