2019 (3) TMI 59 - HC - Income Tax

Claim u/s 10A - scope of amendment - entitlement to exemption u/s 10A only upto 1997-98 as five years within a block of eight years from the assessment year 1990-91 - intention of the Legislature in bringing forth the amendment in 1998 - since the assessee has already availed the exemption for five years, amendment to Section 10A which came into effect on 01.04.1999 extending the period of five years to ten years, is not available to the assessee? - HELD THAT - A Division Bench of the Karnataka High Court has in C.I.T. v. DSL Software Ltd. 2011 (10) TMI 423 - KARNATAKA HIGH COURT considered the object behind the amendment extending the period of exemption under Section 10B, wherein also a similar amendment was brought in 1998 and the period of exemption was extended from five years out of eight yeas to a period of ten years with effect from 01.04.1999. Object with which this amendment was introduced, was to extend the benefit for a period of ten consecutive years from the date of commencement of manufacture or production. Only if the assessee has already availed the benefit under the unamended provision and ten consecutive years would fall prior to 01.04.1999; when the amendment came into effect, would the assessee be disentitled to the said benefit. If the ten years from the date of production has not expired prior to the date on which the amendment came into effect, for the remaining unexpired period, he would be entitled to the benefit and he cannot be denied the benefit for the reason that he has availed the benefit of the unamended provision for a period of five years and that had expired before the amendment came into force. The Karnataka High Court was of the opinion that it would run counter to the intention with which the amended provision was brought into the Statute book and that it would negate the amended provision - Decided against revenue.

Summary

Issues:
1. Claim under Section 10A of the Income Tax Act, 1961 for the assessment year 1999-2000.
2. Extension of relief under Section 10A without retrospective effect.

Analysis:
1. The judgment revolves around the appellant's appeal against the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal's findings favoring the assessee-company's claim under Section 10A of the Income Tax Act, 1961 for the assessment year 1999-2000. The appellant, the Revenue, contested the exemption granted to the assessee under Section 10A, which was allowed by the Commissioner of Income Tax (Appeals) and upheld by the Income Tax Appellate Tribunal.

2. The core issue in this case was whether the relief granted to the assessee under Section 10A could be extended further by an amended law without giving retrospective effect to it, after the assessee had already exhausted its quota spanning eight years beginning with the year of commencement of production. The Revenue argued that since the assessee had already availed the exemption for five years, the amendment to Section 10A extending the period from five to ten years, effective from 01.04.1999, should not apply to the assessee.

3. The appellant contended that the amendment to Section 10A in 1998, extending the exemption period from five to ten years, was not retrospective and, therefore, the assessee was not entitled to the benefit of the extended period. On the other hand, the assessee's counsel argued that the legislative intention behind the amendment was to benefit the assessee by extending the exemption period to ten years, omitting certain restrictive clauses from the previous provision.

4. The judgment referred to a decision by a Division Bench of the Karnataka High Court in a similar case, where the court interpreted a comparable amendment to Section 10B, extending the exemption period. The Karnataka High Court held that the intention of the amendment was to provide the benefit for ten consecutive years from the date of commencement of production. It emphasized that if the assessee had not completed the ten-year period before the amendment came into effect, they should be entitled to the benefit for the remaining unexpired period.

5. The High Court agreed with the Karnataka High Court's interpretation, emphasizing the legislative intent behind the amendment to extend the benefit to the assessee for a continuous ten-year period. It concluded that there was no reason to interfere with the concurrent findings of the appellate authorities and ruled in favor of the assessee, rejecting the Revenue's appeal.

In conclusion, the judgment upheld the assessee's claim under Section 10A for the assessment year 1999-2000 and clarified that the amendment extending the exemption period to ten years should apply to the assessee, even if they had already availed the benefit for a shorter period under the unamended provision.