2014 (5) TMI 660 - AT - Income Tax

Applicability of proviso 3rd and 4th to Section 80HHC(3) of the Act Held that - Following AVANI EXPORTS & OTHERS Versus COMMISSIONER OF INCOME TAX RAJKOT & ORS 2012 (7) TMI 190 - GUJARAT HIGH COURT - the amendment brought in by the Finance Act 2005 by inserting 3rd and 4th proviso of section 80HHC(3) have no applicability with retrospective effect - The amendment is prospective in nature - the amendment is liable to be quashed to the extent that the operation of the section could be given effect from the date of amendment and not in respect of earlier assessment - in case of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessees but not in a case where it affects even a fewer section of the assessees - the retrospective amendment should not be detrimental to any of the asesseees the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues: Applicability of proviso 3rd and 4th to Sec.80HHC(3) of the Act.

Analysis:
1. The appeals were filed by the Revenue challenging the orders of the Commissioner of Income Tax (Appeals)-VI, Chennai, for the assessment years 2001-02 and 2002-03. The common issue raised in both appeals pertained to the applicability of proviso 3rd and 4th to Sec.80HHC(3) of the Act. The Assessing officer initially disallowed the deduction claimed under section 80HHC by the assessee, citing a judgment of the Hon'ble Apex Court. Subsequently, the Commissioner of Income Tax (Appeals) allowed the appeals of the assessee based on a decision of the Hon'ble Gujarat High Court in another case. This led to the Revenue appealing before the Tribunal.

2. The Tribunal considered the submissions of both parties and reviewed the lower authorities' orders. The key issue in both appeals revolved around the applicability of the 3rd and 4th provisos to Sec.80HHC(3). The Tribunal noted the judgment of the Hon'ble Gujarat High Court in the case of M/s. Avani Exports and others, which addressed the Constitutional validity and retrospective applicability of the provisions in question. The High Court concluded that the amendments introduced by the Finance Act 2005, specifically the 3rd and 4th provisos of section 80HHC(3), were prospective and not retrospective. It further stated that retrospective operation could only be applied if it benefited the assessees and not if it adversely affected any group of assessees.

3. Ultimately, the Tribunal found no errors in the Commissioner of Income Tax (Appeals) orders and dismissed both appeals by the Revenue for lacking merit. The judgment was pronounced on May 9, 2014, in Chennai.