COMMISSIONER OF INCOME TAX 5 MUMBAI versus M/S. ESSAR TELEHOLDINGS LTD. THROUGH ITS MANAGER

Citation: [2018] 1 S.C.R. 502 · Decided: 31-01-2018 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2018] 1 S.C.R.
COMMISSIONER OF INCOME TAX 5 MUMBAI
v.
M/S. ESSAR TELEHOLDINGS LTD. THROUGH ITS MANAGER
(Civil Appeal No. 2165 of 2012)
JANUARY 31, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Income Tax Rules, 1962 – r.8D – Said rule providing for
machinery to give effect to charging section, i.e. s.14A, Sub-sections
(2) and (3) of Income Tax Act, 1961 – Nature of operation –
Prospective or Retrospective – Plea of appellant-revenue that
charging section i.e. s.14A being retrospective, the machinery
provision,i.e. r.8D has also to be retrospective – Held:  Provisions
of s.14A, inserted by Finance Act, 2001, were fully workable without
there being any mechanism provided for computing the expenditure
incurred in relation to income which does not form part of the total
income – Sub-sections (2) and (3), providing to determine the amount
of such expenditure, were inserted by amendment in s.14A by
Finance Act, 2006 – Memorandum explaining the provision in
Finance Bill, 2006, clearly mentioned that amendments brought by
Finance Bill, 2006 would take effect from 01.04.2007 – Circular
dtd. 28.12.2006 issued by Central Board of Direct Taxes (CBDT)
itself also provided that sub-sections (2) and (3) of s.14A were to be
implemented w.e.f. 2007-08 – Further, r.8D was inserted in 1962
Rules by notification dtd. 24.03.2008 indicating that the new method
provided thereunder for computing the expenditure was to be utilized
for the Assessment Year 2008-09 and onwards – There is no
indication in r.8D that it was intended to apply retrospectively –
Thus, applying the principles of statutory interpretation for
interpreting retrospectivity of a fiscal statute and looking into the
nature and purpose of sub-ss. (2) and (3) of s.14A as well as purpose
and intent of r.8D coupled with the explanatory memorandum in
the Finance Bill, 2006 and the departmental understanding as
reflected by Circular dated 28.12.2006, it is clear that r.8D was
intended to operate prospectively – Interpretation of Statutes –
Income Tax Act, 1961 – Finance Act, 2001 – Finance Act, 2006 –
Income Tax (14th Amendment Rules, 2016) – Circulars/Notifications
– Circular No. 14/2006 dtd. 28.12.2006.
[2018] 1 S.C.R. 502
502
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Interpretation of Statutes – Nature of operation – Prospective
or retrospective – Held: Every statute is prima facie prospective unless
it is expressly or by necessary implication made to have retrospective
operation – However, mere date of enforcement of statutory
provisions does not lead to the conclusion that the statute is
prospective in nature.
Maxims – “nova constitutio futuris formam imponere debet
non praeteritis” – Principle of presumption of prospectivity of a
statute – Discussed.
Interpretation of Statutes – Machinery provision of a taxing
statute – Prospective or retrospective – Held: Applicability of the
machinery provision whether it is prospective or retrospective
depends on the content and nature of the statutory scheme.
Dismissing the appeals filed by Revenue, the Court
HELD: 1.  The legislature has plenary power of legislation
within the fields assigned to them, it may legislate prospectively
as well as retrospectively. It is a settled principle of statutory
construction that every statute is prima facie prospective unless
it is expressly or by necessary implications made to have
retrospective operations. Legal Maxim “nova constitutio futuris
formam imponere debet non praeteritis”,  i.e. ‘a new law ought to
regulate what is to follow, not the past’, contain a principle of
presumption of prospectivity of a statute. [Para 23][516-D-E]
“Principles of Statutory Interpretation” 14th Edition,
in Chapter 6 by Justice G. P. Singh – relied on.
2.1 The sub-sections (2) and (3) were inserted in Section
14A, Income Tax Act, 1961 by Finance Act, 2006. The
memorandum explaining the provision in Finance Bill, 2006, in
reference to the methods for allocating expenditure in relation
to exempt income clearly mentioned that amendments brought
by Finance Bill, 2006 will take effect from 01.04.2007. After
insertion of sub-section (2) and (3) in Section 14A by Finance
Bill, 2006, Circular dated 28.12.2006 was issued by the Central
Board of Direct Taxes. [Paras 28, 30][522-F-G; 523-F]
2.2  Income Tax Rules, 1962 were amended by notification
dated 24.03.2008 by which Rule 8D was inserted.  The
CIT 5 MUMBAI v. ESSAR TELEHOLDINGS LTD. THR. ITS
MANAGER
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