COMMISSIONER OF INCOME TAX v. M-S. ALOM EXTRUSIONS LIMITED

Citation: [2009] 15 S.C.R. 1154

Court: Supreme Court of India

Bench: S.H. KAPADIA, H.L. DATTU

Case summary

COMMISSIONER OF INCOME TAX v. M-S. ALOM EXTRUSIONS LIMITED.pdf

Judgment text

[2009) 15 (ADDL. ) S. C. R. 1154 COMMISSIONER OF INCOME TAX v. ,..... M/S. ALOM EXTRUSIONS LIMITED (Civil Appeal No. 7771 of 2009) NOVEMBER 25, 2009 [S. H. KAPADIA AND H. L. DATTU, JJ. ] Income Tax Act, 1961 - s. 43-8 second proviso - Payment made by employer towards contribution to provident - ~ fund or any other welfare fund allowable as deduction, if paid before date for filing return of income - Omission/deletion of second proviso w. e. f. 01. 04. 2004 by Finance Act, 2003 - Effect of - Held: Amendment of s. 438 is curative in nature - Finance Act, 2003 deleted the second proviso and brought about uniformity in first proviso by equating tax, duty, cess and fee with contributions to welfare funds of employee - Hence, ) ::. The deduction was disallowed under Section 43-B which, as stated above, was inserted with effect fro:;, 1st Aprii, 1984.

It is also relevant to note that the first provisu which came into force with effect from 1st April, 1988 was not on the statute book when the as~essments were made in the case of Allied Motors (P) Limited (supra). However, the assessee contended that even though the first proviso came to be inserted with effect from 1st April, 1988, it was entitled to the benefit of that proviso - ....... __ because it operated retrospectively from 1st April, 1984, when Section 43-B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Limited (supra). This Court, in Allied Motors (P) Limited (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, ~ particularly to give effect to the section as a whole.

Accordingly, this Court, in Allied Motors (P) Limited (supra), held that the first proviso was curative in nature, hence, retrospective in operation with effect from 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and ~ fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgement in Allied Motors (P) Limited (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 2003, will operate retrospectively with effect from 1st April, 1988 [when the first proviso stood inserted].

Lastly, we may point out the A hardship and the invidious discrimination which would be -caused to the assessee(s) if the contention of tRe1)epartment is to be accepted that Finance Act, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R. P. F. C. after 31st March [end of accounting year] but before filing of the Returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43-B of the Act for all times.

They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43-8 of the Act. In our view, therefore, Finance Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was introduced. It is true that the Parliament has explicitly stated that Finance Act, 2003, will ... __ operate with effect from 1st April, 2004. However, the·matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 16. Before concluding, we extract hereinbelow the relevant observations of this Court in the case of Commissioner of Income Tax, Bangalore vs. J. H. Got/a, reported in [1985) 156 l. T. R.

323, which reads as under: ~ "We should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i. e. , a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though ..... _ equity and taxation are often strangers, attempts should be .. made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literai construction. " 17. For the afore-stated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate with effect from 1st April, 1988 [when the first proviso came to be inserted].

For the above reasons, we find no merit in this batch of civil appeals filed by the Department which are hereby dismissed with no order as to costs. Civil Appeal No. 7755/2009 @ S. L. P. (C) No. 20581/2008 and Civil Appeal No. 7757/2009@ S. L. P. (C) No. 18380/ 2009: 18. Leave granted. 19. In view of our judgement in the case of Commissioner of Income Tax vs. Mis. A/om Extrusions Limited [civil appeal arising out of S. L. P. (C) No. 23851 of 2007], we set aside the impugned judgement and order of the Bombay High Court and allow these civil appeals filed by the assessees with no order as to costs. N. J. Appeals disposed of.