MAHENDRA KUMAR Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner has by this petition challenged the validity of the Taxation Laws (Amendment) Act, 1984, whereby Sub-section (3) of Section 80L has been introduced with retrospective effect, i.e., April 1, 1976. THE petitioner has also prayed that the assessment for the assessment year 1985-86 may be declared illegal. He has also prayed that the penalty proceedings initiated under Section 271(1)(c) of the Income-tax Act, 1961, for imposition of penalty for the said period of assessment should be quashed. THE petitioner has also prayed for quashing the notices issued under Section 148 of the Act as illegal.

(2.) THE brief facts giving rise to this petition are that the petitioner is an assessee. He was assessed to income-tax by respondent No. 2, ITO B-Ward, Ujjain. THE sources of his income are house property and share income from three partnership firms, namely, Babulal Porwal, Ujjain, Harishchand Ashok Kumar, Ujjain and Sharad Textiles Agency. During the assessment year 1985-86, he also derived income from bank interest amounting to Rs. 3,076. This amount of Rs. 3,076 fell to the share of the petitioner from the total interest of the firm in which he is a partner. THE petitioner claimed deduction under Section 80L of the Act. It was disallowed by the Income-tax Officer on the ground that Section 80L was amended by the insertion of Sub-section (3) of the Taxation Laws (Amendment) Act, 1984, with retrospective effect from April 1, 1976. It was clarified that for such income, the petitioner is not entitled to the benefit under Section 80L. Hence, the petitioner has challenged the validity of Sub-section (3) of Section 80L introduced by the Taxation Laws (Amendment) Act, 1984.

(3.) WE have considered the arguments of both sides and we are of the opinion that Section 80L of the Act provides benefit of deduction to small people for their small savings and previously the benefit was up to the extent of Rs. 7,000 which was increased to Rs. 13,000. Clauses (i) to (x) of Sub-section (1) of Section 80L enumerate income by way of interest from various sources, like securities of the Central Government or a State Government, debentures, National Deposits Scheme, etc. Where the income as referred to in Sub-section (1) is derived from any asset held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under the said sub-section in respect of such income in computing the total income of any partner of the firm or any member of the association or body. It was intended only for the benefit of an individual, or a Hindu undivided family and it is not intended to widen the scope of this benefit to any other body of individuals or firms. The benefit is to be extended to an individual, a Hindu undivided family or an association of persons or a body of individuals for investment in various securities and various institutions enumerated in Section 80L(l)(i) to (x). WE are, therefore, of the opinion that right from the beginning it was only intended to benefit individuals or Hindu undivided families. Subsequently, a clarification has been introduced by inserting sub-section (3) in Section 80L by the Amendment Act, 1984, only with a view to remove the doubt which had arisen in some quarters", may be in the mind of the assessee and may be as a result of some assessment. Be that as it may, it appears that Section 80L clearly lays down that this benefit is only admissible to an individual or Hindu undivided family and not to any firm or body of persons. WE are of the opinion that this clarification has been made with effect from April 1, 1976, but in any way it does not deprive any person of any vested rights and as such, it cannot be held ultra vires or arbitrary or violative of articles 14 and 19 of the Constitution of India.