2014 (8) TMI 32 - HC - Income Tax

Constitutional validity of section 28 and 80HHC Retrospective amendments Held that - The amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will be available to the assessees whose assessments have already been concluded - in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses - Following the decision in Avani Exports & Ors. v. CIT 2012 (7) TMI 190 - GUJARAT HIGH COURT the amendment is set aside only to the extent that the operation of the section could be given effect from the date of amendment and not in respect of earlier AYs of the assessees whose export turnover is above ₹ 10 crore - the retrospective amendment should not be detrimental to any of the assessees - the amendment brought about by introducing the 2nd, 3rd and 4th proviso to Section 80 HHC (3) (c) is to operate only prospectively and not retrospectively - Decided in favour of Assessee.

Summary

Issues:
Challenge to retrospective amendments of Taxation Laws (Amendment Act, 2005) related to sections 28 and 80 HHC of the Income Tax Act. Validity of CBDT circular No.2 of 2002. Recovery of outstanding demand created by retrospective amendments. Quashing of notice of demand and order under sections 156 and 143(3)/147 of the Act for assessment year 2000-01. Relief sought through writ petition.

Analysis:

1. The petitioner challenged the retrospective amendments to Section 80 HHC of the Income Tax Act introduced by the Taxation Laws (Amendment) Act, 2005. The issue of retrospectivity was considered by the Gujarat High Court in Avani Exports & Ors. v. CIT, where it was held that retrospective operation should only be allowed if it benefits the assessee and should not be detrimental to any assessee. The Division Bench of the Delhi High Court, in the case of CIT v. Jayanita, recognized and accepted the decision of the Gujarat High Court. Consequently, the Court allowed prayer (a) of the writ petition, declaring that the amendments to Section 80 HHC should operate prospectively and not retrospectively.

2. The Court's decision to allow prayer (a) had a consequential impact on the other prayers made by the petitioner. As the amendments to Section 80 HHC were to operate only prospectively, the Court also granted relief on the other prayers seeking to restrain the respondents from recovering outstanding demands created by the retrospective amendments. The Court quashed the impugned notice of demand and order under sections 156 and 143(3)/147 of the Act for the assessment year 2000-01.

3. The judgment concluded by stating that since prayer (a) was allowed, and the amendments to Section 80 HHC were to operate prospectively, the other prayers seeking consequential reliefs were also allowed. The writ petition was allowed to the extent of the Court's directions, providing relief to the petitioner in challenging the retrospective amendments and the related CBDT circular.

In summary, the Delhi High Court's judgment in this case addressed the challenge to retrospective amendments of the Taxation Laws (Amendment Act, 2005) regarding Section 80 HHC of the Income Tax Act. The Court upheld the principle that retrospective amendments should not be detrimental to any assessee and allowed the writ petition, granting relief to the petitioner in quashing the retrospective amendments and related demands.