26 February 2016
Can a Finance Act make a retrospective amendment for provisions relating to Income tax ? if yes, till what period of time can it go retrospective ?
26 February 2016
Yes Finance Acts can make retrospective amendments and the retrospective effect can go back to the first day the Act come into force. The Income Tax Act 1961, came into force on 1st April 1962. A few years back Section 14 A was introduced to disallow expenses incurred on exempt incomes e.g. interest on funds borrowed for investment in shares, since dividend incomes are exempt from tax. The retrospective effect of this amendment was from 1st April 1962. however the saving clause is the Department cannot re-open old assessments for more than six (five in Central Excise/Service Tax) preceeding assessment years and therefore the effect is restricted to six years retrospectively.
27 February 2016
Thank you for answering Sir, I just want to know if this statement given in a book that i mentioned in the previous query wrong ? "FOR THE PURPOSE OF COMPUTING TAXABLE INCOME THE PROVISIONS OF INCOME TAX ACT AS ON 1ST APRIL OF THE A.Y. SHALL APPLY. ANY AMENDMENT MADE AFTER 1ST APRIL SHALL APPLY IN THE NEXT A.Y"
28 February 2016
No the statement given is PERFECTLY CORRECT. For reasons whatever Finance Act is deemed to become law immediately after presentation in the Parliament. There have been cases in the past, where a particular provision in the Budget has been rolled back, especially in case of indirect taxes, that has resulted in avoidable hardships to the tax payer, but the custom still continues.
CAclubindia
