2015 (4) TMI 193 - SC - Income Tax

Amendment to Section 80HHC(3) - High court quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment (retrospectively) and not in respect of earlier assessment years of the assessees whose export turnover is above ₹ 10 crore - respondents exporters, belong to the second category challenging conditions mentioned in third and fourth proviso to Section 80 HHC(3) - Held that - We find that in essence the High Court has quashed the severable part of third and fourth proviso to Sec.80HHC (3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr. Should be treated similarly. This order is in substitution of the judgment in Appeal.

Summary

Issues:
Amendment to Section 80HHC(3) of the Income Tax Act, 1961 with retrospective effect and conditions imposed on exporters with turnover above Rs. 10 crores per annum.

Analysis:
The judgment deals with the retrospective amendment to Section 80HHC(3) of the Income Tax Act, 1961, which extended benefits to exporters but imposed conditions on those with turnover exceeding Rs. 10 crores per year. The exporters challenged the conditions, arguing they should be declared ultra vires and severed. The High Court ruled in favor of the exporters, stating that the retrospective operation of the amendment could only be beneficial to the assessee and not detrimental to any of them. The High Court quashed the impugned amendment to the extent that it affected exporters with turnover above Rs. 10 crores, ensuring that the retrospective amendment should not be detrimental to any assessee.

The Union of India filed Special Leave Petitions (SLPs) against the High Court judgment, arguing that the conditions should have been severed instead of being made prospective only. The Attorney General accepted that exporters with turnover above and below Rs. 10 crores should be treated equally under the law. The Supreme Court found that the High Court had effectively quashed the conditions imposed on exporters with turnover above Rs. 10 crores. To clarify the position, the Supreme Court substituted the High Court's direction, stating that exporters with turnover below and above Rs. 10 crores should be treated similarly. Consequently, all the SLPs, including those filed by the assessees against the judgment of the High Court, were disposed of with this clarification.