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2019 (5) TMI 1263 - AT - Income TaxDisallowance of deduction u/s 80HHC - scope of amendment - claim the benefit of 3rd Proviso to 80HHC (3) without complying with any conditions laid down therein - HELD THAT - 3rd and 4th proviso to Section 80HHC inserted by taxation law (Second Amendment Act, 2005) would not operate retrospectively, and period prior to the same and the cases of exporters having turnover below 10 crores and also the exporters with turnover above 10 crores should be treated similarly, and even the exporters with turnover exceeding 10 crores would be entitled to claim the benefit of 3rd Proviso to 80HHC (3) without complying with any conditions laid down therein. In the facts and circumstances involved in this matter, we have no hesitation to hold that this case is squarely covered by the decision of the Hon ble Apex Court in the case of Avani Exports . 2015 (4) TMI 193 - SUPREME COURT and, therefore, the deduction u/s 80HHC of the Act shall be calculated in accordance with this decision. Decision of the Hon ble Apex Court is the law of the land and the authorities cannot refuse to follow the same, when once it is brought to their notice. 18. With this view of the matter, we find force in the submissions of the Ld. AR that the deduction u/s 80HHC has to be computed by giving benefit of the decisions of the Hon ble Apex Court in the case of Avani Exports (Supra). The assessee to provide the working for such a re-computation before the Ld. A.O and the Ld. A.O will verify and extend the benefit of the decision of the Hon ble Apex Court in thecae of Avani Export (Supra) to the case of the assessee.- Decided in favour of assessee.
Issues Involved:
1. Allowability of deduction under Section 80HHC of the Income Tax Act for the Assessment Year 2001-02. 2. Impact of retrospective amendments by the Taxation Laws (Amendment) Act, 2005 on the computation of deduction under Section 80HHC. 3. Applicability of the Supreme Court's decision in Topman Exports vs. CIT and Avani Export vs. CIT on the computation of deduction under Section 80HHC. Detailed Analysis: 1. Allowability of Deduction under Section 80HHC The assessee, a partnership firm engaged in the manufacture and export of cotton garments, leather garments, bags, and other leather goods, claimed a deduction of ?1,56,83,432 under Section 80HHC for the Assessment Year 2001-02. The initial assessment disallowed this deduction, and the CIT(A) upheld the disallowance. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer (A.O) to recompute the deduction. The High Court remitted the matter back to the Tribunal for fresh consideration in light of retrospective amendments to Section 80HHC. 2. Impact of Retrospective Amendments by the Taxation Laws (Amendment) Act, 2005 The High Court noted the retrospective amendments to Section 28(iiid) and Section 80HHC by the Taxation Laws (Amendment) Act, 2005, effective from April 1, 1998. The Tribunal, considering these amendments, remanded the issue back to the A.O to recompute the deduction under Section 80HHC in light of the amended provisions and the Supreme Court's decision in Topman Exports. 3. Applicability of the Supreme Court's Decisions The A.O, while recomputing the deduction, followed the Supreme Court's ruling in Topman Exports, which held that the profit on transfer of DEPB is taxable as business profit. The CIT(A) upheld this recomputation. However, the assessee argued that the decision in Avani Export, which invalidated the retrospective amendments, should apply. The Tribunal noted that the authorities below did not consider the Avani Export decision, which mandates that exporters with turnover exceeding ?10 crores should be treated similarly to those with turnover below ?10 crores for the purpose of Section 80HHC deductions. Tribunal's Decision The Tribunal held that the law, as settled by the Supreme Court in Avani Exports, should be applied. This decision states that the third and fourth provisos to Section 80HHC, inserted by the Taxation Laws (Second Amendment) Act, 2005, do not operate retrospectively. Therefore, exporters with turnover exceeding ?10 crores are entitled to the same benefits as those with turnover below ?10 crores without complying with additional conditions. The Tribunal directed the A.O to recompute the deduction under Section 80HHC in accordance with the Supreme Court's decision in Avani Exports. The assessee was instructed to provide the necessary computations, which the A.O would verify and apply accordingly. Conclusion The appeal was allowed, and the A.O was instructed to recompute the deduction under Section 80HHC, considering the Supreme Court's rulings in both Topman Exports and Avani Exports. The decision of the Supreme Court was deemed the law of the land, which the authorities are bound to follow once it is brought to their notice. Order Pronounced The order was pronounced in the open court on May 17, 2019.
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