2000 (6) TMI 130 - AT - Income Tax

Summary

Issues Involved:
1. Retrospective application of the Explanation to section 80HHD(2) of the Income-tax Act, 1961.
2. Rejection of the assessee's claim for deduction under section 80HHD(3).
3. Allegation of the assessee's intention to defraud the revenue.

Issue-wise Detailed Analysis:

1. Retrospective Application of the Explanation to Section 80HHD(2):
The primary issue in this case was whether the Explanation to section 80HHD(2), inserted by the Finance (No. 2) Act, 1991, with effect from 1st April 1992, should apply retrospectively. The assessee contended that this Explanation was merely clarificatory and should apply to past assessment years as well. The Assessing Officer and the Commissioner of Income Tax (Appeals) [CIT(A)] disagreed, stating that the amendment was applicable only from the assessment year 1992-93 onwards.

The Tribunal examined the general rule of interpretation, which presumes statutes to be prospective unless explicitly or implicitly made retrospective. It noted several exceptions, particularly for curative or declaratory statutes. The Tribunal referred to the Supreme Court's principles on retrospective operation, emphasizing that statutes affecting substantive rights are presumed prospective unless indicated otherwise. The Tribunal also considered the nature and purpose of the amendment, concluding that it was introduced to remedy an unintended hardship and was thus curative or declaratory. Consequently, the Tribunal held that the amendment should be applied retrospectively.

2. Rejection of the Assessee's Claim for Deduction Under Section 80HHD(3):
The assessee claimed a deduction of Rs. 4,65,528 under section 80HHD based on receipts of convertible foreign exchange. The Assessing Officer allowed only Rs. 65,995, excluding Rs. 71,36,312 received in Indian currency. The Assessing Officer argued that these receipts did not qualify for deduction as they were not received in convertible foreign exchange. The CIT(A) upheld this view, citing the amendment's applicability from the assessment year 1992-93.

The Tribunal analyzed the provisions of section 80HHD, which aimed to provide tax concessions for earnings in convertible foreign exchange from services provided to foreign tourists. It noted that the amendment allowed payments received in Indian currency, converted from foreign exchange, to qualify for deduction if accompanied by a certificate. The Tribunal concluded that the amendment intended to correct an unintended error and should be applied retrospectively, thus supporting the assessee's claim.

3. Allegation of the Assessee's Intention to Defraud the Revenue:
The Assessing Officer alleged that the assessee's higher claim for deduction was intended to defraud the revenue and initiated penalty proceedings under section 271(1)(c). The CIT(A) did not find this relevant to the main issue of retrospective application.

The Tribunal did not specifically address the allegation of fraud in detail, focusing instead on the interpretation of the amendment to section 80HHD. It implicitly rejected the fraud allegation by supporting the assessee's interpretation of the law and directing a recomputation of the relief under section 80HHD.

Conclusion:
The Tribunal concluded that the amendments to section 80HHD, introduced by the Finance Act, 1991, were retrospective in nature. It set aside the orders of the lower authorities and directed the Assessing Officer to recompute the relief under section 80HHD, ensuring that procedural requirements were satisfied by the assessee.