2017 (10) TMI 869 - HC - Income Tax

Deduction under Section 80HHC - retrospective effect of amendment in section 80HHC - Sections 3 and 4 of Taxation Laws (Amendment) Act, 2005 - Held that - The issue has been settled by the decision of the Honourable Supreme Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER V. AVANI EXPORTS & OTHERS 2015 (4) TMI 193 - SUPREME COURT , where it was held that Amendment of section 80HHC(3) made by insertion of certain conditions in the third and fourth provisos thereto with retrospective effect by Taxation Laws (Second Amendment) Act, 2005 is quashed; exporters having turnover below ₹ 10 crores and those having turnover above ₹ 10 crores should be treated similarly - petition allowed.

Summary

Issues involved:
Challenge to provisions under Sections 3 and 4 of Taxation Laws (Amendment) Act, 2005 denying deduction under Section 80HHC for exporters with turnover exceeding ?10 crores with retrospective effect.

Analysis:

1. Issue of Ultra Vires Constitutionality:
The petitioner sought a Writ of Declaration against the provisions of Taxation Laws (Amendment) Act, 2005, denying deduction under Section 80HHC for exporters with turnover exceeding ?10 crores retrospectively. The High Court referred to the Supreme Court decision in the case of COMMISSIONER OF INCOME TAX AND ANOTHER V. AVANI EXPORTS & OTHERS, where the High Court's decision was in favor of the writ petitioners. The Supreme Court held that the retrospective operation of the amendment was violative and should not be detrimental to any assessee. The High Court quashed the impugned amendment to the extent that it affected exporters with turnover above ?10 crores for earlier assessment years.

2. Challenge by Union of India:
The Union of India filed Special Leave Petitions (SLPs) against the High Court judgment. The Attorney General argued that the High Court should have focused on the prayer to severe the conditions as onerous and ultra vires. However, it was acknowledged that exporters below and above ?10 crores turnover should be treated equally. The High Court quashed the third and fourth provisos to Section 80HHC(3), ensuring that exporters with turnover below and above ?10 crores are treated similarly. The Supreme Court substituted the High Court's direction to clarify that both categories of exporters should be treated equally.

3. Revenue's Position and Conclusion:
The Revenue did not dispute that the issue was covered by the Supreme Court decision mentioned earlier. The conclusion was that the amendment made by the Taxation Laws (Second Amendment) Act, 2005, inserting conditions with retrospective effect, was quashed. The Supreme Court directed that exporters with turnover below and above ?10 crores should be treated similarly. Consequently, the writ petition was allowed as per the Supreme Court's orders, with no costs imposed.

In summary, the judgment addressed the challenge to the retrospective provisions denying deductions for exporters with turnover exceeding ?10 crores under Section 80HHC. The Supreme Court's decision emphasized equal treatment for exporters below and above the specified turnover limit, leading to the quashing of the impugned amendment and a directive for uniform treatment of exporters in this regard.