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Facts
The revenue appealed against the CIT(A)'s order for AY 2017-18. The AO had made an assessment under Section 143(3), disputing additions and the rate of tax under Section 115BBE. The assessee failed to appear before the CIT(A), who confirmed the additions and remitted the issue of tax rate to the AO.
Held
The Tribunal held that the amendment to Section 115BBE, enhancing the tax rate from 30% to 60% effective from 1.4.2017, is applicable for AY 2017-18. The Tribunal noted that this amendment enhanced the rate rather than creating a new liability, and thus applies from the commencement of the assessment year.
Key Issues
Applicability of the amended Section 115BBE of the Income Tax Act, 1961, at a rate of 60% for the Assessment Year 2017-18.
Sections Cited
143(3), 115BBE
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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
PER SOUNDARARAJAN K., JUDICIAL MEMBER:
This is an appeal filed by the revenue challenging the order of NFAC dated 1.2.2024 for the assessment year 2017-18.
Brief facts of the case are that the AO made an assessment u/s 143(3) of the Income Tax Act, 1961 (in short “The Act”) in which the assessee had disputed the addition made by the AO and also the rate of tax adopted u/s 115BBE of the Act. Before the ld. CIT(A), the assessee had failed to appear and therefore the ld. CIT(A) decided the appeal on merits and confirmed the addition made by the AO. The ld. CIT(A) remitted the rate of tax issue to the file of AO by holding that higher rate of tax at 60% would come into effect from assessment year 2018-19 corresponding to the financial year 2017-18. As against the said finding and the direction issued by the ld. CIT(A), the SSG Lakshmipura Housing Development-2, Bangalore Page 2 of 4 revenue is in appeal before this Tribunal with the following grounds of appeal:
1. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law in holding that amended Section 115BBE by Taxation Laws (second amendment) Act, 2016, is not applicable to assessment year 2017-18.
Whether in the facts and circumstances of the case, the ld. 2. CIT(A) is right in Law in holding that higher rate of taxation @60% as per amended Section 115BBE IS APPLICABLE from AY 2018-19 and onwards while ignoring that by second amendment dated 15-12-2016 no new liability created and the rate of tax merely stood enhanced which was applicable to assessments carried on in that year,
At the time of hearing, ld. D.R. relied on the grounds of appeal
filed before this Tribunal and contended that the rate of tax at 60% would be applicable from the assessment year 2017-18 and prayed to allow the appeal.
4. The ld. A.R. submitted that the amendment came into effect from 1.4.2017 and therefore, it should be taken into consideration for the assessment year 2018-19 and not for the assessment year 2017-18.
5. We heard the arguments of both sides and perused the materials available on record. We have also gone through section 115BBE of the Act and the amendment made by way of Taxation laws (Second Amendment) Act, 2016, which enhanced the rate of tax from 30% to 60% with effect from 1.4.2017. On a plain reading of the above provision, we are of the view that the amendment will take effect from AY 2017-18 and not from the AY 2018-19 since by way of amendment only the rate of tax has been increased and no fresh tax has been imposed. We also rely on the latest order of the Chennai Tribunal reported in (2023) 154 Taxmann.com 136 in the case of Karthick Natarajan Vs. DCIT (International taxation), wherein the Tribunal had given the following finding in respect of applicability of the amended provisions:
SSG Lakshmipura Housing Development-2, Bangalore Page 3 of 4 10.2 We noted from the taxation law, Second Amendment Act, 2016 that the Income-tax payable shall be the aggregate of the amount of income-tax calculated on the income referred to clause (a) and clause (b) of section 115BBE(l) of the Act at the rate of 60% w.e.f. 1-4-2017 that means from assessment year 2017-18 relevant to financial year 2016-17 rate of tax will be at sixty percent. In our view and as held by Hon'ble Kerala High Court, there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessment year 2017-18. rate applies from the commencement of the assessment year 2017-18, which relates to previous financial year 2016-17 as the case in the present assessee and not on the date of commencement of the amendment. The reasoning for the same is that the date of amendment on which an amendment comes into force is the date of the commencement of the amendment. It is read as amended from that date. Under the ordinary circumstances, and Act does not have retrospective operation on substantial rights which have become fixed before the date of the commencement of the Act. But, this rule is not unalterable. The legislature may affect substantial rights by enacting laws which are expressly retrospective or by using language which has that necessary result. And this language may give an enactment more retrospectivity than what the commencement clause gives to any of its provisions. When this happens the provisions thus made retrospective, expressly or by necessary intendment, operates from a date earlier than the date of commencement and affect rights which, but for such operation, would have continued undisturbed. This view has been held by Hon'ble Supreme court in the case of Ahmedabad Mfg. and Calico Printing co. Ltd v. S.G. Mehta, ITO [19631 48 ITR 154.
5.1 In view of the said clearcut finding given by the Chennai Bench of Tribunal, we are also agreeing with the view expressed in the above order and hold that the amendment made by the Taxation laws (Second Amendment) Act, 2016 would come into effect from the AY 2017-18 and not from the AY 2018-19. In view of the above said reasoning, the order of the ld. CIT(A) in directing the AO to recompute the tax as per the applicable provision of law during the year under consideration is not sustainable. We therefore, set aside the finding of the ld. CIT(A) in so far as the applicability of the rate of tax u/s 115BBE of the Act is concerned and allow the appeal filed by the revenue.