2021 (4) TMI 1104 - HC - Income Tax

Deduction u/s 80HHC - Whether Tribunal was right in law that the amendment to the third proviso to Section 80HHC with retrospective effect from 01.04.1998 is violative of Constitution of India when the assessee has not fulfilled the conditions of proviso of Section 80HHC(3)? - HELD THAT - In view of the submissions made by the learned senior standing counsel for the appellant Revenue, following the ratio laid down in Commissioner of Income Tax Vs. Avani Exports 2015 (4) TMI 193 - SUPREME COURT the question of law that has been raised in the above appeals is decided against the Revenue. Accordingly, the Tax Case Appeals are dismissed.

Summary

Issues:
Challenging orders passed in I.T.A.Nos.1390 to 1394/Mds/2012 for assessment years 1999-2000, 2001-02, 2002-03, 2003-04 & 2004-05 on the file of Income Tax Appellate Tribunal, Chennai. Substantial question of law: Whether the amendment to the third proviso to Section 80HHC with retrospective effect from 01.04.1998 is violative of the Constitution of India when the assessee has not fulfilled the conditions of proviso of Section 80HHC(3)?

Analysis:

1. The Revenue appealed challenging the orders passed by the Income Tax Appellate Tribunal for various assessment years. The substantial question of law raised was regarding the retrospective amendment to the third proviso to Section 80HHC and its compliance with the Constitution of India.

2. The senior standing counsel for the Revenue acknowledged that the issue raised in the appeals was covered by a Supreme Court decision in Commissioner of Income Tax Vs. Avani Exports. The Supreme Court decision highlighted the conditions imposed on exporters with turnover above ?10 crores per annum to claim benefits under Section 80HHC.

3. The High Court considered the writ petitions challenging the conditions of the third and fourth provisos to Section 80HHC(3). The court found that the retrospective operation of the amendment affected certain assessees unfairly and quashed the amendment to the extent that it negatively impacted assessees with export turnover above ?10 crores.

4. The Union of India filed Special Leave Petitions against the High Court judgment. The Attorney General argued that the High Court should have focused on severing the onerous conditions rather than restricting the retrospective operation of the section. The Court clarified its direction, ensuring equal treatment for exporters with turnover below and above ?10 crores.

5. Ultimately, the High Court quashed the severable part of the third and fourth provisos to Section 80HHC(3) based on the successful challenge by the respondents. The Court's direction aimed to treat exporters with turnover below and above ?10 crores similarly, ensuring clarity and fairness in the application of the law.

6. Following the Supreme Court's precedent in Commissioner of Income Tax Vs. Avani Exports, the High Court dismissed the Tax Case Appeals raised by the Revenue, concluding that the question of law was decided against the Revenue, and no costs were awarded.