INDIA BUSINESS WORLD - March 1^st - March 15^th - 2008

FINANCE BILL SET TO OVERTURN 23 JUDGEMENTS

As many as 23 court or tribunal judgements are slated to be overruled by the 2008 finance bill. The government, with the dual purpose of clarity and preventing abuse of tax norms, has sought to carry out amendments in 11 tax rules.

While the scope of agricultural income has been widened to include income derived from saplings or seedlings planted in potted plants, the definition of "charitable purpose" has been streamlined to exclude any activity in nature of trade, commerce or business. Interestingly, some of these amendments are proposed to be implemented with retrospective effect. Clarification on minimum alternate tax (MAT) on deferred tax, dividend distribution tax, interest on income tax will come into effect from April 1, 2001, reversing judgements in the case of Balrampur Chini Mills and Salgaonkar Mining Ind.

Similarly, the amendment doing away with the need for recording of satisfaction for initiation of penalty is proposed to come into effect from 1989. On the same lines, a ruling in the of Associated Cements has been overruled by amending Section 201 of the IT Act which deals with the consequences of non-deduction of tax. Sources point that the focus this budget has been on bringing about more clarity and correcting the situation which may have arisen through an anomalous interpretation of law and against the intent of Parliament.

"Our judicial system gives a lot of importance to case laws and precedence. Making retrospective amendments to counter judicial decisions on the grounds that they are contrary to the legislative intent creates significant uncertainty in the minds of the tax payer who has relied on such judgements while computing his taxes for past years. This also seems to indicate that the government wants the tax payers to interpret the law more on its intent rather than on how it has been worded. This is not always feasible," says Amitabh Singh, partner, Ernst & Young.