Amendments with prospective effect shall not be given retrospective effect

The Supreme Court cleared that any amendments with prospective effect shall not be given retrospective effect for the block of period under assessment.   images (4)

Case: M.G. Pictures (Madras) Ltd. vs. Assistant Commissioner of Income Tax

Facts:

The assessee being a company was engaged in production and distribution of Tamil motion pictures. During a search under section 132 at the business premises of the assessee, certain books of account were seized.

After the search procedure, assessment for the block of 1-4-1986 to 31-3-1996 and thereafter upto 13-9-1996 was proposed.

During the assessment proceedings, the AO disallowed the expenditures where the payments were made in cash in excess of Rs.10,000 relying on section 40A(3) as it stood prior to 1-4-1996.

The assessee appealed to the Tribunal. The tribunal partly allowed the appeal and remitted the matter to the Assessing Officer.

Assessee further appealed to the High Court where appeal was dismissed. Thus, appeal was made to the Supreme Court.

Held:

As per Section 40A (3), any cash payment in excess of Rs. 20,000 shall be disallowed. The said limit was amended in the year 1996 whereas the limit was Rs. 10,000 for the year covered in assessment. With this amendment, in cases where the cash payment is made in excess of Rs.20,000, disallowance is limited to 20 per cent of the expenditure.

The assessee contended that as the amendment date falls within the block years under assessment thus, benefit of such amendment shall  be spread over all the years under assessment.

The Court highlighted that the amendment was substantive in nature and thus, cannot be applied retrospectively. Order of High Court was thus upheld.

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