2019 (5) TMI 116 - HC - Income Tax

Benefit of deduction in respect of export business u/s 80 HHC - writ Appeals revolve around deduction u/s 80 HHC, particularly against the proviso inserted in Section 80HHC by the Taxation Law (Amendment Act, 2005) with retrospective effect on 01.04.1998 - HELD THAT - In CIT. ANR VERSUS M/S AVANI EXPORTS ANR. 2015 (4) TMI 193 - SUPREME COURT in essence the High Court 2012 (7) TMI 190 - GUJARAT HIGH COURT has quashed the severable part of third and fourth proviso to Section 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 crores should be treated similarly. This order is in substitution of the judgment in appeal. In view of the aforesaid decision of the Supreme Court, the present controversy is no longer res intergra and therefore, the present Writ Appeals filed by the Union of India Income Tax Department, also deserves to be disposed of on same terms.

Issues:
1. Benefit of deduction in respect of export business under Section 80 HHC of the Income Tax Act.
2. Validity of the proviso inserted in Section 80HHC by the Taxation Law (Amendment Act, 2005) with retrospective effect.
3. Challenging the retrospective effect of the Amendment.
4. Applicability of conditions in third and fourth provisos to Section 80HHC(3) for exporters with turnover above &8377; 10 crores.
5. Judicial interpretation of the retrospective operation of amendments affecting different classes of assessees.

Analysis:
1. The controversy in the present Writ Appeals revolves around the deduction benefit for export business under Section 80 HHC of the Income Tax Act, specifically concerning the proviso inserted in Section 80HHC by the Taxation Law (Amendment Act, 2005) with retrospective effect from 01.04.1998. The Gujarat High Court, following a transfer of petitions from various High Courts, quashed the retrospective effect of the amendment to ensure it does not adversely affect assessees with export turnover exceeding &8377; 10 crores.

2. The Gujarat High Court found that the retrospective operation of the amendment was violative as it aimed to overcome previous Tribunal decisions and deprived certain assessees of earlier granted benefits. The High Court ruled that retrospective amendments should not be detrimental to any assessee, especially when affecting only a section of them, leading to the quashing of the retrospective effect of the amendment for assessees with export turnover above &8377; 10 crores.

3. The Supreme Court upheld the Gujarat High Court's decision with modifications, emphasizing that exporters with turnover above and below &8377; 10 crores should be treated similarly regarding the benefits under Section 80HHC. The Court clarified that the conditions in the third and fourth provisos to Section 80HHC(3) were severable, and exporters should receive the benefits without being subject to onerous conditions.

4. The Supreme Court's clarification and modification aligned the treatment of exporters with turnover below and above &8377; 10 crores, ensuring equal entitlement to benefits under Section 80HHC. The Court emphasized that the retrospective operation of amendments should not disadvantage any class of assessees, leading to the disposal of Special Leave Petitions filed against the High Court's judgment.

5. Consequently, the present Writ Appeals by the Union of India - Income Tax Department were disposed of in line with the Supreme Court's decision, ensuring uniform treatment for exporters under Section 80HHC. The resolution aimed to prevent any retrospective amendments from unfairly impacting assessees, maintaining consistency and fairness in applying tax laws.

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