Its common experience that every Union Budget makes retrospective amendments to tax laws to overcome judicial decisions adverse to the Government. In Union Budget ,2012 there were a record number of retrospective amendments some of them effective from 1st April 1961.
Retrospective amendments come into force from a back date. Retrospective amendments cause obvious inconvenience to the taxpayers. As I had pointed out in my letter to editor of Economic Times dated 11th October 2012 http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=pastissues2&BaseHref=ETM/2012/10/12&PageLabel=14&EntityId=Ar01407&ViewMode=HTML:
"Citizens structure their transactions as per the tax laws in force at the time of the transaction. Retrospectively amending tax laws to bring into the tax net previously excluded transactions or transaction structures is patently unfair. Constitutions of various countries such as Sweden, Brazil, Greece, etc, forbid retroactive amendments to tax laws."
However, unfairness or fairness is one thing. Legality is quite a different thing. Unlike the Constitutions of some other countries, the Constitution of India doesnot forbid retrospective amendments to laws except to criminal laws. Only retrospective amendments which create new offence or enhance punishments are per se unconstitutional. Retrospective amendments to tax laws are not per se unconstitutional or illegal in India. Courts have consistently held that Parliament's power to amend includes power to amend retrospectively. However, in Avani Exports v CIT [2012]23 taxmann.com 62, the Gujarat High Court ruled that retrospective amendments to provisions conferring tax benefits cannot take away tax benefits by imposing new conditions retrospectively which the assessee cannot go back in point of time and satisfy. My powerpoint slides on this ruling are available here http://www.slideshare.net/sri2009/constitutionality-of-retro-amendments-depriving-tax-benefits
Its high time that the Constitution of India be amended to bar retrospective amendments to tax laws which are adverse to the taxpayer. Apart from obvious inconvenience to taxpayers, the retrospective amendments render the Judiciary redundant in a way. Only one person can win a tax case. The Government. If Government loses the case, it will retrospectively amend tax laws to overcome the ruling.
Retrospective amendments come into force from a back date. Retrospective amendments cause obvious inconvenience to the taxpayers. As I had pointed out in my letter to editor of Economic Times dated 11th October 2012 http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=pastissues2&BaseHref=ETM/2012/10/12&PageLabel=14&EntityId=Ar01407&ViewMode=HTML:
"Citizens structure their transactions as per the tax laws in force at the time of the transaction. Retrospectively amending tax laws to bring into the tax net previously excluded transactions or transaction structures is patently unfair. Constitutions of various countries such as Sweden, Brazil, Greece, etc, forbid retroactive amendments to tax laws."
However, unfairness or fairness is one thing. Legality is quite a different thing. Unlike the Constitutions of some other countries, the Constitution of India doesnot forbid retrospective amendments to laws except to criminal laws. Only retrospective amendments which create new offence or enhance punishments are per se unconstitutional. Retrospective amendments to tax laws are not per se unconstitutional or illegal in India. Courts have consistently held that Parliament's power to amend includes power to amend retrospectively. However, in Avani Exports v CIT [2012]23 taxmann.com 62, the Gujarat High Court ruled that retrospective amendments to provisions conferring tax benefits cannot take away tax benefits by imposing new conditions retrospectively which the assessee cannot go back in point of time and satisfy. My powerpoint slides on this ruling are available here http://www.slideshare.net/sri2009/constitutionality-of-retro-amendments-depriving-tax-benefits
Its high time that the Constitution of India be amended to bar retrospective amendments to tax laws which are adverse to the taxpayer. Apart from obvious inconvenience to taxpayers, the retrospective amendments render the Judiciary redundant in a way. Only one person can win a tax case. The Government. If Government loses the case, it will retrospectively amend tax laws to overcome the ruling.
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