Yes, retrospective tax amendments that override judicial decisions and impact vested rights of taxpayers can be treated as unconstitutional. The legal principle of non-retroactivity generally prevents new laws from altering past events or actions. Retrospective amendments are particularly problematic when they disrupt previously settled matters, potentially violating fairness and natural justice.

Constitutionality of Retrospective Tax Amendments Overriding Judicial Decisions
The issue of retrospective tax amendments that nullify judicial rulings and affect vested rights of taxpayers raises significant constitutional concerns under Article 14 (Right to Equality), Article 19(1)(g) (Freedom to Trade), and Article 265 (Taxation Only by Authority of Law) of the Indian Constitution.

1. Legal Framework & Key Judicial Precedents
(A) Legislative Power to Enact Retrospective Laws
Article 245 empowers Parliament to legislate retrospectively.

Article 265 mandates that no tax shall be levied except by authority of law, implying that retrospective taxation is permissible if duly enacted.

(B) Judicial Checks on Retrospective Taxation
Unreasonable Retrospectivity Violates Article 14

If a law is arbitrary, oppressive, or confiscatory, it can be struck down.

Example:

National Agricultural Cooperative Marketing Federation of India v Union of India (2003, SC) – Held that retrospective amendments must be reasonable and not arbitrary.

Harshad Shantilal Mehta v Custodian (1998, SC) – Excessive retrospectivity affecting vested rights may violate Article 14.

Cannot Nullify Judicial Decisions Without Valid Justification

While Parliament can clarify the law, it cannot reverse court decisions in a discriminatory manner.

Example:

Madras Bar Association v UoI (2021, SC) – Struck down a law that retrospectively nullified a judicial ruling, calling it "legislative overreach."

Vodafone & Cairn Energy Controversy

Vodafone International Holdings v UoI (2012, SC): Ruled that offshore transactions were not taxable under existing law.

Retrospective Amendment (2012): The Finance Act amended the Income Tax Act to override Vodafone’s ruling, leading to global criticism.

Cairn Energy v India (PCA, 2020): International tribunal held India’s retrospective tax violated fair treatment under BITs.

2. When Can Retrospective Tax Amendments Be Unconstitutional?
A retrospective tax law may be struck down if:

It is Arbitrary & Oppressive (Violates Article 14)

No reasonable justification for retrospectivity.

Example: A sudden tax demand on a closed transaction where the taxpayer had legitimate expectations based on prior law.

It Violates Legitimate Expectations & Vested Rights

If a taxpayer acted in good faith under a judicial ruling, a sudden retrospective tax can be challenged.

Example: Godfrey Phillips India v State of UP (2005, SC) – Held that retrospective taxes cannot disrupt settled rights without compelling public interest.

It Lacks a Valid Public Interest Justification

Example: State of Rajasthan v Mohan Lal (2015, SC) – Retrospective tax laws must serve public interest, not merely revenue collection.

It Violates International Law (BITs & Investment Treaties)

Cairn Energy v India (2020): Awarded damages to Cairn for violation of fair & equitable treatment.

3. Judicial Trends in India
(A) Upholding Retrospective Amendments
Chhotabhai Jethabhai Patel v UoI (1962, SC): Parliament can validate past actions retrospectively.

Shiv Dutt Rai Fateh Chand v UoI (1983, SC): Retrospective clarifications are valid if not arbitrary.

(B) Striking Down Unreasonable Retrospectivity
Rai Sahib Ram Jawaya Kapur v Punjab (1955, SC): Excessive retrospectivity can be arbitrary.

State of Tamil Nadu v M/s. Kothari Sugars (1999, SC): If a law destroys vested rights, it violates Article 14.