2015 (1) TMI 10 - HC - Income Tax

Effect of repealing section Benefit of section 10B to be granted or not - Whether the Tribunal was correct in holding that in view of the omission of sub section 9 to Section 10B of the Act, w.e.f. 01.04.2004, it should be understood that the section never existed in the statute book and therefore the benefit claimed by the assessee u/s 10B should be allowed Held that - The decision in KOLHAPUR CANESUGAR WORKS LTD., VS. UNION OF INDIA 2000 (2) TMI 823 - Supreme Court of India - the effect of deletion of a provision in the statute is delat with and held that the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed - there is no saving clause or provision introduced by way of an amendment while omitting sub-section (9) of Section 10B - therefore, once the section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed in 2006, the AO was not justified in taking note of a provision which was not in the statute book and denying benefit to the assessee - the whole object of such omission is to extend the benefit u/s 10B of the Act irrespective of the fact whether during the period to which they are entitled to the benefit, the ownership continues with the original assessee or it is transferred to another person - benefit is to the undertaking and not to the person who is running the business the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Interpretation of Section 10B of the Income Tax Act regarding the benefit claimed by the assessee.
2. Effect of the omission of sub-section (9) of Section 10B with retrospective effect from 01.04.2004 on the assessment orders passed in 2006.

Issue 1: Interpretation of Section 10B:
The case involved an appeal by the revenue against an order granting relief to the assessee engaged in the manufacture and sale of various products. The assessee's shareholding changed due to a global acquisition of sensor business, leading to a denial of exemption under Section 10B by the Assessing Authority. The assessee argued that since sub-section (9) of Section 10B was omitted with effect from 01.04.2004, the benefit should be allowed. The Tribunal accepted this contention, setting aside the assessment orders and directing the relief. The revenue contended that the Act as amended on the first day of April of any financial year must apply to the assessment of that year, even if amendments come into force later. The Tribunal's approach was challenged by the revenue.

Issue 2: Effect of Omission of Sub-section (9) of Section 10B:
The debate centered on whether the omission of sub-section (9) of Section 10B with effect from 01.04.2004 meant that the provision never existed in the statute book. The revenue argued that the omitted provision applied until the date of omission, even if assessments were made later. The assessee, supported by a Constitution Bench judgment, contended that the omission erased the provision from the statute as if it never existed, especially in the absence of a saving clause. Citing the case of KOLHAPUR CANESUGAR WORKS LTD., VS. UNION OF INDIA, it was highlighted that without a saving clause, the provision should be considered as if it had never been passed. As there was no saving clause introduced while omitting sub-section (9) of Section 10B, the Tribunal's decision to grant relief to the assessee was upheld. The judgment favored the assessee, emphasizing that the benefit under Section 10B is for the undertaking, not the person running the business, and the omission of the provision aimed to extend this benefit regardless of ownership changes.

In conclusion, the High Court of Karnataka dismissed the revenue's appeals, upholding the Tribunal's decision in favor of the assessee. The judgment clarified the interpretation of Section 10B and the effect of the omission of sub-section (9) with retrospective effect, emphasizing that the omission erased the provision from the statute as if it never existed, leading to the benefit being allowed to the assessee.