Court Protects Company's Right to Tax Dispute Despite Rule Change.
02 April 2024
Income Tax >> Tax Laws
In a recent case, the High Court of Madras protected a company's right to settle a tax dispute despite a retrospective clause introduced in the Finance Act, 2021.
The company filed an application with the Income Tax Settlement Commission (ITSC) on March 18, 2021, seeking to resolve tax issues for several assessment years. However, the Finance Act, introduced in Parliament on February 1, 2021, proposed to abolish the ITSC and establish a new body. The Act also included a controversial clause making applications to the ITSC after February 1, 2021, invalid.
The company argued that their application, filed before the Act was notified, was valid under the prevailing law. The Revenue Department, on the other hand, contested the application based on the retrospective clause.
The Court sided with the company, highlighting two key points. Firstly, the application was filed when Section 245C of the Act allowed such applications. Secondly, the Court recognized the company's vested right to have their application considered since the law permitted it at the time of filing.
The Court's decision likely took into account the retrospective nature of the clause and its potential violation of vested rights. This argument is supported by a similar case (Jain Metal Rolling Mills vs. UOI) where the court ruled that application eligibility should be based on the Act's notification date (April 1, 2021) and not the retrospective date.
This verdict protects the company's right to a fair settlement process and sets a precedent for other companies who may have filed applications before the Act's implementation. It also reinforces the importance of legal rights established under existing laws.