2019 (5) TMI 352 - HC - Income Tax

Deduction in respect of export business u/s 80 HHC - Deduction in respect of profits retained for export business - scope of proviso inserted in Section 80HHC by the Taxation Law (Amendment Act, 2005) with retrospective effect from 01.04.1998 - HELD THAT - As decided in M /S AVANI EXPORTS ANR. 2015 (4) TMI 193 - SUPREME COURT 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:
Controversy over deduction in respect of export business under Section 80 HHC of the Income Tax Act with retrospective effect from 01.04.1998.

Analysis:
The judgment by the Division Bench of the Gujarat High Court addressed the issue of the retrospective effect of the amendment to Section 80HHC of the Income Tax Act. The court found that the retrospective operation of the amendment was violative as it deprived certain assessees of benefits granted earlier. The court held that a retrospective amendment should only be given effect if it benefits the assessee and should not be detrimental to any assessee. Consequently, the court quashed the retrospective effect of the amendment for assessees whose export turnover exceeded Rs. 10 Crores, ensuring that the amendment did not harm any assessee.

The Supreme Court, in a subsequent case, upheld the decision of the Division Bench of the Gujarat High Court with a modification. The Court clarified that exporters with turnover below and above Rs. 10 Crores should be treated similarly regarding the benefits under Section 80HHC. The Court emphasized that the benefits should be accorded without insisting on certain conditions for exporters with turnover exceeding Rs. 10 Crores. The Court substituted the High Court's direction to ensure clarity on the treatment of exporters under the amended provision.

Based on the Supreme Court's decision, the present Writ Appeals filed by the Union of India - Income Tax Department were disposed of on the same terms. The controversy was no longer res integra, and the Court followed the precedent set by the Supreme Court. The Appeals were closed with no order as to costs, and connected Miscellaneous Petitions were also closed.