2015 (8) TMI 659 - HC - Income Tax

Deduction under Section 80HHC (2) - amounts realised in convertible foreign exchange after the specified period (i.e. within six months from the end of the previous year) - ITAT allowed claim - Held that - Notwithstanding that there may not be any time limit as such prescribed for disposal of applications by the CIT in respect of a request made for extension of period within which the export proceeds have to be realised in convertible foreign exchange, on the facts of the present case there appears to be no justification shown by the Revenue for the CIT to have sat on the application of the Assessee for several years after it was made. Consequently, the Court is not inclined to interfere with the conclusion of the CIT (A), which has been affirmed by the ITAT in the impugned order in the impugned order, that the CIT should be deemed to have granted the permission as prayed for by the Assessee. - Decided in favour of the Assessee. Whether in view of Section 80HHC (2), the ITAT could have allowed the benefit thereunder beyond the period of 31.12.1991 when the Assessee himself applied for extension only upto that date? - Held that - The court finds merit in the submission of Revenue that Assessee itself having sought permission for extension of time to realise the export proceeds in convertible foreign exchange only up to 31st December, 1991, the CIT (A) was not justified in extending the time beyond the 31st December, 1991. Further there appears to be no justification to the CIT (A) to further extend the time to within a period of 10 months from 1st October, 1991 to 31st July, 1992. - Decided in favour of the Revenue. It is held that CIT (A) and ITAT could not have allowed the benefit to the Assessee under Section 80HHC (2) beyond 31st December, 1991. - Decided against assessee.

Summary

Issues:
1. Interpretation of Section 80 HHC (2) of the Income Tax Act, 1961 regarding deduction on amounts realized in convertible foreign exchange.
2. Validity of extending the benefit under Section 80 HHC (2) beyond the specified period.

Analysis:
1. The appeal was against an order of the Income Tax Appellate Tribunal (ITAT) regarding the deduction under Section 80 HHC (2) of the Income Tax Act, 1961 for the Assessment Year 1991-92. The main contention was whether the ITAT erred in allowing the deduction on amounts realized in convertible foreign exchange after the specified period without the Commissioner of Income Tax granting any extension. The Assessee had applied for an extension due to outstanding foreign bills, but the application was pending with the Commissioner of Income Tax. The AO allowed the deduction only for proceeds recovered up to a certain date. The CIT (A) later directed the AO to re-work the taxable amount considering the proceeds realized within a specific period. The Court held that the Revenue had not justified the delay in deciding on the extension application, and thus deemed the permission to be granted in favor of the Assessee.

2. The second question revolved around the extension of the benefit under Section 80 HHC (2) beyond the initial deadline. The Assessee had initially sought permission only up to a certain date, but the CIT (A) extended the time frame further. The Court found merit in the Revenue's argument that the extension granted was not justified beyond the initial deadline. It was held that the CIT (A) and ITAT could not have allowed the benefit under Section 80 HHC (2) beyond the specified date. Therefore, the second question was answered against the Assessee and in favor of the Revenue.

In conclusion, the Court upheld the decision in favor of the Assessee regarding the first question but ruled against the Assessee on the second question. The appeal was disposed of accordingly, addressing the issues raised regarding the interpretation and validity of extending benefits under Section 80 HHC (2) of the Income Tax Act, 1961.