Legislation UpdatesNotifications

In furtherance to the declared policy objective of the Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 (“the Act”), vide the Finance Act 2019 (“the Finance Act”), which provides that every person having a business turnover of more than Rs 50 Crore (“specified person”) shall mandatorily provide facilities for accepting payments through prescribed electronic modes. The said electronic modes have been prescribed vide notification no. 105/2019 dated 30.12.2019 (“prescribed electronic modes”). Therefore, with effect from 01-01-2020, the specified person must provide the facilities for accepting payment through the prescribed electronic modes. Further, Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act. Consequently, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01st January, 2020 on payment made through prescribed electronic modes.

2. In this connection, it may be noted that the Finance Act has also inserted Section 271 DB in the Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU. In order to allow sufficient time to the specified person to install and operationalise the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271 DB of the Act shall not be levied if the specified person installs and operationalises the facilities on or before 31″ January, 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees per day from 1-02-2020 under section 271 DB of the Act for such failure.


Ministry of Finance

[Notification dt. 30-12-2019]

Case BriefsSupreme Court (Constitution Benches)

Supreme Court: On September 26, 2019, the 5-judge bench of former CJ Dipak Misra and A.K. Sikri, A.M. Khanwilkar, Dr D.Y. Chandrachud and Ashok Bhushan, JJ, ‘finally’ put an end to the Aadhaar dilemma in a 4:1 verdict and declared that the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 was valid and not violative of the fundamental right to privacy. The Court also held that Section 7 was the core provision of the Aadhaar Act and since it satisfied the condition of Article 110 of the Constitution, the Aadhaar Act was validly passed as Money Bill.

Just over a year later, when another 5-judge bench sat to decide the validity of Finance Act, 2017 as a Money Bill, it realised that the Aadhaar issue might not just be over yet.

The 5-judge Constitution Bench of Ranjan Goigoi, CJ and NV Ramana, Dr. DY Chandrachud, Deepak Gupta and Sanjiv Khanna, JJ went through the the judgment in K.S. Puttaswamy v. Union of India (Aadhaar-5 Judge), (2019) 1 SCC 1 when both parties in the Finance Act validity case relied upon it.

After “extensively examining” the issue, the Bench noticed that the majority in K.S. Puttaswamy (Aadhaar-5) pronounced the nature of the Aadhaar Act, 2016 without first delineating the scope of Article 110(1) and principles for interpretation or the repercussions of such process. It, hence, said,

“It is clear to us that the majority dictum in K.S. Puttaswamy (Aadhaar-5) did not substantially discuss the effect of the word ‘only’ in Article 110(1) and offers little guidance on the repercussions of a finding when some of the provisions of an enactment passed as a “Money Bill” do not conform to Article 110(1)(a) to (g).”

In the Aadhaar-5 Verdict, referring to the definition of “Money Bill” and the meaning and purpose of the word ‘only’ used in Article 110(1) of the Constitution, Ashok Bhushan, J. had observed that legislative intent was that the main and substantive provision of an enactment should only be any or all of the sub-clauses from (a) to (f). In the event the main or substantive provisions of the Act are not covered by sub-clauses (a) to (f), the bill cannot be said to be a “Money Bill”. It was further observed that the use of the word ‘only’ in Article 110(1) has its purpose, which is clear restriction for a bill to be certified as a “Money Bill”. It was, hence, observed that the Aadhaar Act veers around the government’s constitutional obligation to provide for subsidies, benefits and services to individuals and other provisions are only incidental provisions to the main provision. Therefore, the Aadhaar Bill was rightly certified by the Speaker as a “Money Bill.

It is pertinent to note that Chandrachud, J was the lone dissenting judge in the 4:1 Aadhaar-5 verdict and he was also the part of the 5-judge bench that referred the issue of validity of Finance Act being passed as Money Bill to a 7-judge bench. In his minority opinion in the Aadhaar-5 verdict, Chandrachud, J had, referring to the word ‘only’ in Article 110(1) of the Constitution, observed that the pith and substance doctrine which is applicable to legislative entries would not apply when deciding the question whether or not a particular bill is a “Money Bill”. He had held,

“the Money Bill must deal with the declaration of any expenditure to be charged on the Consolidated Fund of India (or increasing the amount of expenditure) and, therefore, Section 7 of the Aadhaar Act did not have the effect of making the bill a Money Bill as it did not declare the expenditure incurred on services, benefits or subsidies to be a charge on the Consolidated Fund of India.”

Noticing that the majority judgment in K.S. Puttaswamy (Aadhaar-5) did not elucidate and explain the scope and ambit of sub-clauses (a) to (f) to clause (1) of Article 110 of the Constitution, a legal position and facet which arises for consideration in the present case and assumes considerable importance, the Court, held

“Given the various challenges made to the scope of judicial review and interpretative principles (or lack thereof) as adumbrated by the majority in K.S. Puttaswamy (Aadhaar-5) and the substantial precedential impact of its analysis of the Aadhaar Act, 2016, it becomes essential to determine its correctness. Being a Bench of equal strength as that in K.S. Puttaswamy (Aadhaar-5), we accordingly direct that this batch of matters be placed before Hon’ble the Chief Justice of India, on the administrative side, for consideration by a larger Bench.”

[Roger Mathew v. South India Bank Ltd.,  2019 SCC OnLine SC 1456, decided on 13.11.2019]


Read the full report on 2018 Aadhaar Judgment here.

Read the full report on the Finance Act judgment here

Case BriefsSupreme Court (Constitution Benches)

Supreme Court: The 5-judge Constitution Bench of Ranjan Goigoi, CJ and NV Ramana, Dr. DY Chandrachud, Deepak Gupta and Sanjiv Khanna, JJ has upheld the validity of Section 184 of the Finance Act, 2017 and held that the said Section does not suffer from excessive delegation of legislative functions as there are adequate principles to guide framing of delegated legislation, which would include the binding dictums of this Court.

The Court, however, struck down the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, made under Section 184 of the Finance Act, 2017, for being contrary to the parent enactment and the principles envisaged in the Constitution.

In the 255-pages long verdict, CJI Ranjan Gogoi penned the majority opinion for the Bench and Justices DY Chandrachud and Deepak Gupta wrote separate but concurrent opinions.

Majority Opinion written by Gogoi, CJ

Finance Act being a Money Bill

The Court said that the provisions of Article 110(1) have to be given an appropriate meaning and interpretation to avoid and prevent over-inclusiveness or under-inclusiveness. Any interpretation would have far reaching consequences. It is therefore, necessary that there should be absolute clarity with regard to the provisions and any ambiguity and debate should be ironed out and affirmatively decided. In case of doubt, certainly the opinion of the Speaker would be conclusive, but that would not be a consideration to avoid answering and deciding the scope and ambit of “Money Bill” under Article 110(1) of the Constitution.

It, hence, held,

“The issue and question of Money Bill, as defined under Article 110(1) of the Constitution, and certification accorded by the Speaker of the Lok Sabha in respect of Part-XIV of the Finance Act, 2017 is referred to a larger Bench.”

Correctness of Aadhaar Verdict & reference to 7-judge bench

Since both the parties had relied upon the judgment in K.S. Puttaswamy v. Union of India (Aadhaar-5 Judge), (2019) 1 SCC 1, the Court extensively examined the issue and noticed that the majority in K.S. Puttaswamy (Aadhaar-5) pronounced the nature of the Aadhaar Act, 2016 without first delineating the scope of Article 110(1) and principles for interpretation or the repercussions of such process. It said,

“It is clear to us that the majority dictum in K.S. Puttaswamy (Aadhaar-5) did not substantially discuss the effect of the word ‘only’ in Article 110(1) and offers little guidance on the repercussions of a finding when some of the provisions of an enactment passed as a “Money Bill” do not conform to Article 110(1)(a) to (g).”

Noticing that the majority judgment in K.S. Puttaswamy (Aadhaar-5) did not elucidate and explain the scope and ambit of sub-clauses (a) to (f) to clause (1) of Article 110 of the Constitution, a legal position and facet which arises for consideration in the present case and assumes considerable importance, the Court, held

“Given the various challenges made to the scope of judicial review and interpretative principles (or lack thereof) as adumbrated by the majority in K.S. Puttaswamy (Aadhaar-5) and the substantial precedential impact of its analysis of the Aadhaar Act, 2016, it becomes essential to determine its correctness. Being a Bench of equal strength as that in K.S. Puttaswamy (Aadhaar-5), we accordingly direct that this batch of matters be placed before Hon’ble the Chief Justice of India, on the administrative side, for consideration by a larger Bench.”

Validity of Section 184 of Finance Act, 2017

Accepting the submission of Attorney General KK Venugopal that Section 184 was inserted to bring uniformity and with a view to harmonise the diverse and wide-ranging qualifications and methods of appointment across different tribunals carries weight, the Court said,

“we do not think that the power to prescribe qualifications, selection procedure and service conditions of members and other office holders of the tribunals is intended to vest solely with the Legislature for all times and purposes.”

Grounds for striking down the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017

  • Search-cum-Selection Committee as formulated under the Rules is an attempt to keep the judiciary away from the process of selection and appointment of Members, Vice-Chairman and Chairman of Tribunals.
  • There has been a blatant dilution of judicial character in appointments whereby candidates without any judicial experience are prescribed to be eligible for adjudicatory posts such as that of the Presiding Officer. Parliament cannot divest judicial functions upon technical members, devoid of the either adjudicatory experience or legal knowledge.
  • In many Tribunals like the National Green Tribunal where earlier removal of members or presiding officer could only be after an enquiry by Supreme Court Judges and with necessary consultation with the Chief Justice of India, under the present Rules it is permissible for the Central Government to appoint an enquiry committee for removal of any presiding officer or member on its own. The Rules are not explicit on who would be part of such a Committee and what would be the role of the Judiciary in the process. In doing so, it significantly weakens the independence of the Tribunal members.
  • The extremely short tenure of the Members of Tribunals is anti-merit and has the effect of discouraging meritorious candidates to accept posts of Judicial Members in Tribunals.
  • There are also certain contradiction in the Rules that warranted a relook.

The Court, hence, directed the Central Government to re-formulate the Rules ensuring non-discriminatory and uniform conditions of service, including assured tenure, keeping in mind the fact that the Chairperson and Members appointed after retirement and those who are appointed from the Bar or from other specialised professions/services, constitute two separate and distinct homogeneous classes.

The Court, however, granted interim relief and directed that appointments to the Tribunal/Appellate Tribunal and the terms and conditions of appointment shall be in terms of the respective statutes before the enactment of the Finance Bill, 2017 till the new Rules are framed.

Judicial Impact Assessment

The Court issues a writ of mandamus to the Ministry of Law and Justice to carry out a Judcial Impact Assessment of all the Tribunals referable to the Finance Act, 2017 so as to analyse the ramifications of the changes in the framework of Tribunals as provided under the Finance Act, 2017.

Direct Appeal to Supreme Court

The Court also asked the Central Government to re-visit the provisions of the statutes referable to the Finance Act, 2017 or other Acts and place appropriate proposals before the Parliament for consideration of the need to remove direct appeals to the Supreme Court from orders of Tribunals within 6 months.

Chandrachud, J’s separate but concurrent opinion

Chandrachud J, who was the lone dissenting judge in the 4:1 K.S. Puttaswamy (Aadhaar-5)  verdict, has held that Part XIV of the Finance Act 2017 could not have been enacted in the form of a Money Bill, hence, the aspect of money bill should be referred to a larger Bench.

He also suggested that a “National Tribunals Commission” be set up to oversee the selection process of members, criteria for appointment, salaries and allowances, introduction of common eligibility criteria, for removal of Chairpersons and Members as also for meeting the requirement of infrastructural and financial resources. It should comprise of:

  • Three serving judges of the Supreme Court of India nominated by the Chief Justice of India;
  • Two serving Chief Justices or judges of the High Court nominated by the Chief Justice of India;
  • Two members to be nominated by the Central Government from amongst officers holding at least the rank to a Secretary to the Union Government: one of them shall be the Secretary to the Department of Justice who will be the exofficio convener; and
  • Two independent expert members to be nominated by the Union government in consultation with the Chief Justice of India
  • The senior-most among the Judges nominated by the Chief Justice of India shall be designated as the Chairperson of the NTC.

Gupta J’s separate but concurrent opinion

While Gupta, J agreed that it was necessary to have such a Commission which is itself an independent body manned by honest and competent persons, he disagreed on the composition of the said Committee as suggested by Chandrachud, J. He said that the serving Judges of the Supreme Court or the Chief Justice of the High Courts were already overburdened and that it would be much better if they could spend their time and energy in filling up the vacancies in the High Courts rather than venturing into the field of tribunals.

He also said that having a very large committee would not serve the purpose. The Composition of the “National Tribunals Committee” as suggested by Gupta, J is:

  • Two retired Supreme Court Judges with the senior most being the Chairman
  • One retired Chief Justice of High Court to be appointed by the Chief Justice of India.
  • One member representing the executive to be nominated by the Central Government from amongst officers holding the rank of Secretary to the Government of India or equivalent. This member shall be the ex-officio convener.
  • One expert member can be co-opted by the by full time members. This expert member must have expertise and experience in the field/jurisdiction covered by the tribunal to which appointments are to be made.

[Roger Mathew v. South India Bank Ltd., 2019 SCC OnLine SC 1456, decided on 13.11.2019]

Business NewsNews

The Central Board of Direct Taxes (CBDT) has clarified that the pension received by a taxpayer from his former employer is taxable under the head “Salaries”. The Finance Act, 2018 has amended Section 16 of the Income–tax Act, 1961(“the Act”) to provide that a taxpayer having income chargeable under the head “Salaries” shall be allowed a deduction of Rs 40,000 or the amount of salary, whichever is less, for computing his taxable income. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000 or the amount of pension, whichever is less, under Section 16 of the Act.

Earlier pensioners were not able to enjoy any allowance on account of transport and medical expenses, but after this provision they will also get the benefit of this deduction. Consequently the present exemption in respect of these two allowances stands withdrawn from FY18-19. However, in case of differently-abled persons, the transport allowance at enhanced rate shall continue to be available.

Pension received by dependent family members (as legal heirs) of the retired individual is known as family pension and is considered as ‘income from other sources’. So, in case an employee passes away, then after his death the for the family pension, a standard deduction under Section 57 (iia) is available under which an amount of Rs 15,000 or 1/3rd of the uncommuted pension received, whichever is less, shall be exempt. Spouse, children below the age of 25 years, unmarried daughter and dependent parents in certain cases shall come under the definition of dependent family members.

[Press Release no. 1527822, dt. 05-04-2018]

Ministry of Finance

Hot Off The PressNews

Supreme Court: On 04.08.2017, the bench of J.S. Khehar, CJ and Dr. D.Y. Chandrachud, J agreed to hear the plea filed by Congress leader Jairam Ramesh challenging the validity of some provisions of the Financy Act, 2017 on the ground that those provisions would destroy the independent functioning of the NGT and 18 other tribunals.

The Court, however, refused to stay the operation of the Act and tagged the petition with a  similar pending petition filed by NGO Social Action for Forest and Environment.

The Finance Act, 2017, which came into effect from April 1, led to framing of the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 and these allegedly gave “unbridled” powers to the Executive to decide the qualification of the members, their appointment and removal among other issues. The petitioner said that the changes brought about by the Act would weaken functioning of tribunals including the NGT and curtail their powers and that the tribunal rules gave primacy to the Executive in the appointment and removal process of the chairperson or president and judicial members of the statutory tribunals and authorities and it amounted to attempting to usurp judicial appointment powers and influence the administration of justice.

Source: PTI