Though in Ranka and Ranka it was held by the Court that Instruction No. 3 of 2011 issued by the CBDT is applicable to the pending cases filed prior to 09.02.2011, this view is against public interest and public policy because clause 11 of the said Instruction specifically says that it will be applicable only to cases filed on or after 9.2.2011. The Revenue’s contention that Instruction No.3 dated 09.02.2011 has no retrospective effect is upheld

Though s. 260A (2A) has been inserted retrospectively w.e.f. 01.10.1998 by the Finance Act, 2010, the fact remains that cases already settled before the said amendment cannot be re-opened as per the ratio laid down in Babu Ram v. C. C. Jacob AIR (1999) SC 1845, where it was observed that the prospective declaration of law is a devise innovated by the apex court to avoid reopening of settled issues and to prevent multiplicity of proceedings. It is also a devise adopted to avoid uncertainty and avoidable litigation. By the very object of prospective declaration of law, it is deemed that all actions taken contrary to the declaration of law prior to its date of declaration are validated. This is done in the larger public interest. In matters, where decisions opposed to the said principle have been taken prior to such declaration of law cannot be interfered with on the basis of such declaration of law. The amendment is applicable to future cases to avoid uncertainty as per the ratio laid down in M. A. Murthy v. State of Karnatka 264 ITR 1 SC, where it was observed that prospective over-ruling is a part of the principles of constitutional canon of interpretation and can be resorted to by the Court while superseding the law declared by it earlier. It is not possible to anticipate the decision of the highest court or an amendment and pass a correct order in anticipation as per the ratio laid down in CIT v. Schlumberger Sea Company 264 ITR 331 (Cal). Therefore, the amendment introduced in s. 260-A(2A) has the effect only on pending and future cases. On the date when the appeal was dismissed on the ground of limitation, there was no discretion with the court to condone the delay. A discretion has come to the court by virtue of the amendment by inserting s. 260-A (2A). The appeal was (rightly) dismissed as per the then law and the subsequent amendment is not applicable as the matter has already attained finality

Though in Sureshchandra Durgaprasad Khatod (HUF) (and other judgements), it has been held that Instruction No. 3 of 2011 dated 9.2.2011 shall apply to pending appeals paragraph 11 of the Instruction itself provides that “This instructions will apply to appeals filed on or after 9th February 2011. However, the cases where appeals have been filed before 9th February 2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed”. The issue requires consideration by a larger Bench. A number of decisions of various High Courts on the subject (Kodananad Tea Estates 275 ITR 244, Varinder Construction Co 331 ITR 449 (P&H)(FB), John L. Chackola 337 ITR 385(Ker)) were not brought to the notice of this Court in the case of Sureshchandra Durgaprasad Khatod (HUF). We, independently also have serious doubts if the instructions of 2011 can be applied to cases filed earlier. Also, the said Instruction cannot be interpreted on the basis of the litigation policy. Also, prospective application of the instructions would not lead to any absurdity. If by applying the instructions prospectively, certain appeals would be decided on merits, because the appeals were filed prior to issuance of the new instructions, the same cannot be stated to be absurd. A counter situation also may arise if such instructions are applied with retrospective effect to all pending appeals whereby an appeal would be dismissed without examination on merits simply because the same survived for a longer period than the cognate appeals. Sureshchandra Durgaprasad Khatod (HUF) accordingly requires reconsideration

The total salary received by the assessee in India was Rs.77.00 lakhs on which the tax payable at the maximum rate of 44.8% comes to Rs.35.00 lakhs. Since the assessee under the Tax Equalization Policy was entitled to get reimbursement of the tax payable on the amount of Rs.77.00 lakhs, his salary income was Rs.113.00 lakhs (Rs.77.00 lacs plus Rs.35.00 lacs). Though the assessee paid tax of Rs.50.00 lakhs, he was entitled to reimbursement of tax amounting to Rs.35.00 lakhs and the balance Rs.15.00 lakhs was borne out of the salary income received by the assessee in India. The confusion had arisen because the assessee in his computation had added Rs.50.00 lakhs as income and deducted Rs.15.00 lakhs from the income, when in fact the said amount of Rs.15.00 lakhs was not received from the company but paid out of the salary amount received in India. In other words, though the assessee had paid tax of Rs.50.00 lakhs, since the assessee was entitled to reimbursement of Rs.35.00 lakhs from the Company, the salary income (Rs.77.00 lakhs) received by the assessee had to be enhanced by Rs.35.00 lakhs only and not by the balance Rs.15.00 lakhs which is paid by the assesses from the salary income. Accordingly, the tax of Rs.15.00 lakhs paid by the assessee from the salary income (not reimbursed by the company) could not be added to the assessee’s income