Commissioner of Income Tax vs Aero Plan Shoe Factory

This reference u/s 256(1) of the income tax Act, 1961 raises the following question of law:- (1) Whether on the facts and in the circumstances of the case the Appellate Tribunal erred in law in holding that the amount of Rs 64,40,723 representing cash compensatory support received by the assessee for the assessment year in question was not a revenue receipt and not liable to tax?

The counsel for the parties state at the outset that the said question has to be decided in favour of the revenue and against the assessee in view of the amendments introduced by the Finance Act, 1990. Although the present references relate to the assessment year 1984-85, the amendments introduced by the Finance Act, 1990 would apply because they have been introduced with retrospective effect from 1-4-1967. The relevant amendments are the introduction of clause (iiib) in section 28 and clause (vb) in section 2(24) of the income tax Act 1961.

Consequently, this Court has no option but to decide the question in favour of the revenue and against the assessee in view of the retrospective amendments introduced through the Finance Act, 1990. It may be pointed out that the authorities below, while processing the case further may note the observations of this Court in Aero Leather (P) Ltd. Vs. Union of India and Others, wherein it was noted that a sympathetic view should be adopted when there is a retrospective piece of legislation. 2. The reference stands answered accordingly.