Category Archives: Taxation

The Proviso to Section 113 of the Income Tax Act

Posted on by
Reply

Whether the proviso of Section 113 inserted by the Finance Act, 2002 w.e.f. 1.6.2002 is clarificatory in nature and therefore retrospective.

• The Delhi High Court had, in the case of CIT v. Devi Das Malhan decided on 23.2.2007 decided that the proviso to Section 113 does not have retrospective effect.

• The Punjab and Haryana High Court overruled its decision in CIT v. Roshan Singh Makker 287ITR160 in the case of Civil Writ Petition NO. 2046/2005 Lalit Hosiery & Ors. v. Union of India & Ors. decided on 18.10.2006.

In Roshan Singh Makker, the P&H High Court had held that the proviso to section 113 does not have retrospective effect. The search in that case had been carried out on 6.4.2000.

In Lalit Hosiery, the P&H HC said that Roshan Singh cannot ‘be taken to be an authority for the proposition that irrespective of a provision in the Finance Act,levy of surcharge was not permissible on the ground that roviso to Section 113 of the Act was added only w.e.f 1.6.2002’.

• Following the decision in Roshan Singh Makker, the Madras High Court held that the proviso to S. 113 is not retrospective in effect in CIT v. Neotech Co. (Firm) 291ITR27. The revenue has challenged this decision by filing an SLP.

According to Commissioner of Income Tax v. Suresh N Gupta, 297ITR322, both the Finance Acts of 2000 and 2001 indicated that a substantive charge was created in respect of the income tax to be levied. Both these acts prescribed rates of surcharge. The said surcharge did not depend for its leviability on the assessee’s liability to pay income tax but on the assessed tax. … Therefore, in our view, the said proviso was clarificatory in nature. In taxation, legislation of the type indicated by the proviso has to be read strictly. There is no question of retrospective effect. The proviso only clarifies that out of the four dates, Parliament has opted for the date, namely the year in which the search is initiated, which date would be relevant for the applicability of a particular Finance Act. Therefore, we have to read the proviso as it stands.