Deemed Sales Under Article 366(29A)(D) of The Constitution of India: Clarification or Confusion?

Abstract

The Vodafone controversy has still not found settled shores. The numerous amendments implemented with an intention to resolve the problem, function as continuing evidence of the fact that they only generate more problems than solutions. The amendment made to Article 366(29A)(d) of the Constitution of India in order to increase the tax base of sales tax has suffered a similar fate. The legislature, in promulgating this amendment specifically sought to override certain key decisions of the Supreme Court which had taken a strict interpretation of the Article and restricted the application of the Article in the case of certain sale-service transactions. However, the Supreme Court has once again taken an activist position in re-interpreting the Amendment itself and curtailing its applicability to provide relief to taxpayers from excessive taxes. By retaining the 'dominant intention' test and the 'effective control and possession' test to limit the applicability of sub-clause (d) of Article 3 66 (29A), the judiciary has arguably defied the intention of the legislature. The tug of war between the legislature and the judiciary in this respect therefore continues, and correspondingly, has only led to an increase in the taxpayers' woes.