April 2012
(2012) 25 STR 231 (M.P.) — Entertainment World Developers Ltd. v. Union of India.
By Puloma Dalal, Jayesh Gogri
Chartered Accountants
Reading Time 2 mins
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Tax liability — Retrospective effect — Validity of service tax on renting of immovable property — Amended section 65(95)(zzzz) of the Finance Act, 1994 with retrospective effect — Even if the amendment is not clarificatory but creates a substantive liability or right, the Parliament’s right to legislate and create liabilities or rights with retrospective effect can be curtailed only by restriction placed upon the legislative power of Parliament by one or the other provision of Constitution of India — No provision of Constitution of India shown restricting the right of Parliament to legislate retrospectively creating a tax liability.
Facts:
The amended section 65(95)(zzzz) of the Finance Act, 2010 defined taxable service as “any service provided or to be provided to any person, by any other person, by renting of immovable property”. This amendment is not clarificatory, but brings about a substantive liability of taxation upon the service providers. It was also contended that the service provider is liable to pay interest as well as penalty on default in payment of service tax for the past period.
Held:
The Parliament’s right to legislate or create liability of service tax with retrospective effect can be curtailed by a restriction placed upon its legislative powers by one or other provision of the Constitution of India. Hence it was held that the service tax liability arises retrospectively.
