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2014 (12) TMI 1009 - AT - Income TaxClaim of deduction u/s 80HHC Export incentives to be considered as part of profits or not - Held that - Against the claim of deduction u/s 80HHC of Rs. 7, 29, 536/- of the Assessee the claim of deduction was recalculated by A.O at Rs. 83, 773/- in view of the amendment made by Taxation Laws Amendment Act 2005 Following the decision in Avani Exports vs. CIT 2012 (7) TMI 190 - GUJARAT HIGH COURT wherein the amendment is quashed made by the Taxation Law and (Amendment) Act 2005 with retrospective effect from 1st April 1998 by adding second third fourth & fifth proviso to Section 80HHC(3) and held that the operation of the said section could be given effect from the date of amendment and not in respect to earlier assessment years of the assessees whose export turnover is above Rs. 10 crore - revenue has not brought any binding contrary decision in its support thus AO could not have reduced the claim of deduction of Assessee u/s. 80HHC Decided in favour of assessee.
Issues Involved:
1. Validity of assessment framed under section 153A read with section 143(3). 2. Adjustments made by the Assessing Officer regarding the assessee's claim for deduction under section 80HHC. Detailed Analysis: Issue 1: Validity of Assessment under Section 153A Read with Section 143(3) The appellant contested the validity of the assessment framed under section 153A read with section 143(3). However, this ground was not pressed by the appellant's representative during the proceedings and was thus dismissed. Issue 2: Adjustments to Deduction Claim under Section 80HHC The primary contention revolved around the adjustments made by the Assessing Officer (A.O.) concerning the assessee's claim for deduction under section 80HHC. 1. Assessment Proceedings and Claim Reduction: - During the assessment proceedings, the A.O. noted that the assessee had claimed a deduction of Rs. 7,29,536/- under section 80HHC. - The A.O. revised this deduction to Rs. 83,773/- based on the amendments introduced by the Taxation Laws Amendment Act, 2005, which required specific conditions to be met for claims exceeding Rs. 10 crore in turnover. - The A.O. concluded that the assessee did not meet these conditions, leading to the reduced deduction. 2. CIT(A) Decision: - The CIT(A) upheld the A.O.'s decision, noting that the law applicable at the time of the original assessment differed from that at the time of the search. - The CIT(A) referenced several decisions indicating that section 153A proceedings could be initiated only for years where incriminating documents were found, a point contested by the assessee. 3. Arguments by the Assessee: - The assessee argued that no incriminating material or undisclosed assets were discovered during the search. - They contended that since the original assessments were completed and no proceedings were pending, there was no basis for abatement of the assessments. - The assessee also cited the Supreme Court's decision in the case of Topmen Exports vs. CIT, which overruled the Bombay High Court's decision in Kalpatru Colours and Chemicals, a case relied upon by the CIT(A). 4. Tribunal's Findings: - The Tribunal noted that the Gujarat High Court in Avani Exports vs. CIT had quashed the retrospective amendment to Section 80HHC, holding it ultra vires. - The Tribunal found that the A.O. could not have reduced the deduction claim based on the quashed amendment. - Consequently, the Tribunal allowed the assessee's appeal, reversing the A.O.'s reduction of the deduction claim. Conclusion: The Tribunal concluded that the A.O.'s adjustments to the deduction under section 80HHC were not justified, given the Gujarat High Court's ruling in Avani Exports. Both appeals filed by the assessee for the assessment years 2003-04 and 2004-05 were allowed, restoring the original deduction claims. Separate Judgments: The judgment delivered was a consolidated decision for both assessment years 2003-04 and 2004-05, with no separate judgments by different judges. The order was pronounced in open court on 21-11-2014.
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