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Bombay High Court Upholds Amendment introduced in 2015 to the Finance Act

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Published on: December 06, 2023 at 12:30 IST

The Bombay High Court rejected a petition filed by the Serum Institute of India (SII) challenging the validity of amendments introduced in 2015 to the Finance Act.

The amendments included the insertion of sub-clause (xviii) to Section 2(24), defining taxable “income.”

The division bench of Justices KR Shriram and Neela Gokhale upheld the validity of the amendment on December 4, emphasizing that courts should refrain from intervening in economic policy matters.

The Court asserted that economic policy decisions are best left to the wisdom of the legislature and should only be interfered with in exceptional cases where the legislative view is impossible to adopt.

The amendment, effective from 2016, categorized subsidies, grants, incentives, waivers, concessions, and reimbursements provided by the Central or State governments as taxable income for an assessee.

The Court dismissed SII’s plea, stating that there was no evidence of irrationality in the amendment. It emphasized that the petitioner failed to demonstrate a clear violation of constitutional principles.

Serum Institute, a vaccine manufacturer, had contested the amendment, claiming unintended retrospective application and arguing that it indirectly taxed the revenue of the State.

SII had previously applied for incentives under the ‘Package Scheme of Incentives of 2013’ issued by the State of Maharashtra. After the Finance Act amendment, the vaccine manufacturer challenged the inclusion of such incentives in taxable income.

The Court upheld the exclusive powers of the parliament to make laws related to taxing income and emphasized the limited role of the judiciary in economic and fiscal policy formulation.