CIT vs. Alom Extrusions (Supreme Court)

DATE: (Date of pronouncement)
DATE: December 2, 2009 (Date of publication)

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Deletion of 2nd Proviso to S. 43B operates retrospectively

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S. 43B (b) provides that any sum payable by way of contribution to a provident fund etc shall be allowed as a deduction only in the year of payment. The second proviso to s. 43B provided that the sums referred to in s. 43B (b) would not be allowed as a deduction unless the sum had been paid on or before the due date. The said second proviso was omitted by the Finance Act, 2003 w.e.f. 1.4.2004. Simultaneously, the benefit of the first proviso, which provides that even sums paid beyond the previous year but before the due date of filing the return shall be allowed as a deduction, was extended to s. 43B (b). The question arose whether the deletion of the said second proviso and amendment of the first proviso was retrospective or prospective. HELD upholding the claim of the assessee that the deletion had retrospective effect:

(i) The deletion of the second proviso to s. 43B, and the amendment to the first proviso, by the Finance Act, 2003 was to overcome implementation problems. Consequently, the amendments, though made applicable by Parliament only with effect from 1.4.2004, were curative in nature and would apply retrospectively w.e.f. 1.4.1988.

(ii) In Allied Motors 224 ITR 677 it was held that even though the first proviso to s. 43B was inserted w.e.f 1.4.1988, it operated retrospectively from 1.4.1984.It was held that when a proviso is inserted to remedy unintended consequences and to make the section workable it could be read retrospective in operation. This principle applies to the deletion of the second proviso as well.

(iii) if the contention of the Department that the deletion of the second proviso is prospective is accepted, there will be hardship and invidious discrimination because assessee who have paid the contributions after the due date will be denied deduction for all times while a defaulter who pays the contribution after 1st April, 2004 would get the benefit of deduction under s. 43-B.

(iv) Though Parliament has explicitly stated that the amendment will operate w.e.f. 1.4.2004, as a principle of construction the intention should be determined 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 sub-served by the object of the legislation, then if another construction should be preferred.

Note: Pamvi Tissues 313 ITR 137 (Bom) is impliedly overruled while Nexus Computer 313 ITR 144 (Mad) & P.M. Electronics 313 ITR 161 (Delhi) are impliedly approved. See also: Saurashtra Kutch 305 ITR 227 (SC): A view contrary to the judgement of jurisdictional Court or of the Supreme Court is a “mistake apparent from the record” irrespective of when the decision was rendered and a rectification application can be filed.