DCIT, CHENNAI V. K.H.Arind Ltd., CHENNAI

ITA 401/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68819 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-10-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: M BALAGANESH
• Keywords: Retrospective amendment
• Section: 143(3); 80HHC; 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 401/MDS/2013 (ASSESSMENT YEAR: 1999-2000) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(4), 121, M.G.ROAD, CHENNAI-600 034. VS. M/S. K.H. ARIND LTD. 2, THIRUNARAYANA GURU ROAD, CHOOLAI, CHENNAI-600 112. PAN:AAACK1426B (APPELLANT) (RESPONDENT) APPELLANT BY : MR. N.MADHAVAN JCIT RESPONDENT BY : MR. M.BALAGANESH, FCA DATE OF HEARING : 24 TH OCTOBER, 2013 DATE OF PRONOUNCEMENT : 06TH NOVEMBER, 2013 O R D E R PER CHALLA NAGENDRA PRASAD : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHEN NAI DATED 30.09.2012 FOR THE ASSESSMENT YEAR 1999-2000 ARISING OUT OF THE ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 OF THE ACT. THE ONLY GRIEVANCE OF THE REVENUE IN THE APPEAL IS THAT THE COMMISSIONER OF INCOME TAX ( APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ITA NO.401/MDS//2013 2 UNDER SECTION 80HHC ON THE EXPORT INCENTIVE RECEIV ED BY THE ASSESSEE IN RESPECT OF SALE OF DEPB. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS A COMPANY F ILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1999-2000 ON 28.12.1999 ADMITTING INCOME OF ` 2,57,670/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) ON 21.09.2000. LA TER, NOTICE UNDER SECTION 148 WAS ISSUED ON 30.03.2006 AND THE ASSESSMENT WAS COMPLETED ON 28.12.2006 UNDER SECTIO N 143(3) READ WITH SECTION 147 DETERMINING THE INCOME AT ` 59,63,004/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 80 HHC ON THE PROFIT OF SALE OF DEPB WHICH WAS ALLOWED WHILE PROCESSING THE RETURN. THE NOTICE UNDER SECTION 148 WAS ISSUE D AND ASSESSMENT WAS REOPENED DENYING THE DEDUCTION UNDER SECTION 80HHC ON PROFIT OF SALE OF DEPB, BY VIRTUE OF AMENDMENT TO SECTION 80HHC(3) OF TAXATION LAWS (AMENDMENT) ACT, 2005, WHICH INTRODUCED NEW PROVIS O WITH RETROSPECTIVE EFFECT FROM 1998. AS PER THIS PROVISO , IF ASSESSEES EXPORT TURNOVER EXCEEDS ` 10,00,00,000/- ITA NO.401/MDS//2013 3 INCENTIVE ON SALE OF DEPB LICENSE IS ELIGIBLE FOR D EDUCTION UNDER SECTION 80HHC, ONLY IN CASE THE ASSESSEE PROV ES THAT THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUS TOMS DUTY WAS HIGHER THAN THE RATE OF CREDIT ALLOWABLE UNDER THE DEPB SCHEME. ACCORDING TO THE ASSESSING OFFICER, SINCE THE ASSESSEE COULD NOT PROVE THAT THE RATE OF DRAWBACK CREDIT ATTRIBUTABLE TO THE CUSTOMS DUTY WAS HIGHER THAN TH E RATE OF CREDIT ALLOWABLE UNDER THE DEPB SCHEME, THE ASSESSE E IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80HHC OF THE A CT ON THE PROFIT ON SALE OF DEPB. ON APPEAL, THE COMMISSION ER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS VS. CIT ( 248 ITR 391) ALLOWED THE APPEAL OF THE ASSESSEE AS THE HONBLE GUJARAT HIGH COURT QUASHED THE IMPUGNED AMENDMENT T O SECTION 80HHC(3) TO THE EXTENT THAT THE OPERATION O F THE SAID SECTION WAS GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS. 3. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE OR DER OF THE ASSESSING OFFICER. ITA NO.401/MDS//2013 4 4. ON THE OTHER HAND, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS CHALLENGED THE RETROS PECTIVE OPERATION OF THE AMENDMENT TO SECTION 80HHC(3) WHIC H WAS INTRODUCED THE SECOND PROVISO TO THE SAID SECTION B Y TAXATION LAWS (AMENDMENT) ACT, 2005, WITH RETROSPECTIVE EFF ECT FROM 1998 IN THE HIGH COURT OF MADRAS. THE COUNSEL SUBM ITS THAT ALL THESE PETITIONS WERE TRANSFERRED TO SUPREME COU RT AND THE HONBLE SUPREME COURT TRANSFERRED ALL THESE PETITIO NS TO HIGH COURT OF GUJARAT AND THE HONBLE COURT WHILE DISPOS ING OF THE BATCH OF WRIT PETITIONS HELD THAT AMENDMENT TO SE CTION 80HHC (3) IS ONLY PROSPECTIVE AND NOT RETROSPECTIVE . THEREFORE, HE SUBMITS THAT BY VIRTUE OF THIS DECISI ON OF THE HONBLE GUJARAT HIGH COURT, THE ASSESSMENT MADE BY THE ASSESSING OFFICER DENYING THE DEDUCTION UNDER SECTI ON 80HHC ON THE PROFIT ON SALE OF DEPB BY VIRTUE OF A MENDMENT TO SECTION 80HHC(3) IS BAD IN LAW. 5. HEARD BOTH SIDES. PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND HAVE GONE THROUGH THE DECISION OF T HE HONBLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS VS. CIT ITA NO.401/MDS//2013 5 (SUPRA). THE HONBLE GUJARAT HIGH COURT, WHILE HOL DING THAT AMENDMENT IS ONLY PROSPECTIVE AND NOT RETROSPECTIVE , OBSERVED AS UNDER:- 25. IN THE CASE BEFORE US , IT IS NOT ONE WHERE THE EXECUT I V E HA S FAILED T O CARRY OUT THE OBJECT OF THE PARLIAMENT NECESSITATING EXERC I SE OF CONT R OL BY RETROSPECTIVE AMENDMENT WHAT THE E X E C U TIVE OUGH T T O HAVE ACH I E VED . IN THE PRESENT CASE, ACCORDING TO THE FINANCE MINISTER PRESE NT ING T HE B I LL , A VALID PIECE OF LEGISLATION HAS BEEN WRONGLY INTERPRETED B Y TH E TRIBUNAL . WE HAVE ALREADY POINTED OUT THAT ACCORDING TO THE EXI STI NG L AW, IF A VALID PIECE OF LEGISLATION IS WRONGLY INTERPRETED BY THE TRIB U NAL , TH E AGGRIEVED PARTY SHOULD MOVE HIGHER JUDICIAL FORUM FOR C ORR ECT INTERPRETATION. AS PAINTED B Y THE APEX COURT IN THE CASE OF PRI T V I CO TTON MILLS LTD (SUPRA) , THE LEGISLATURE DOES NO T P O SS E SS OR EXER C ISE POWER TO RE V ERSE THE DECISION IN EXERC I SE OF J UD I C I AL POWER . T HUS, W E A RE O F T H E VIEW THA T T HE PRINCIPLES LAID DOWN IN THE CASE OF R . C . TOBACCO (P) LTD. ( SUPR A) H A S NO APPLICATION ' ' TO THE FA C TS OF THE PRES E NT CASE . THE IM PUGNE D AM E NDMENT GRANTING ' BENEFIT RESTRICTING IT TO A CL A SS OF ASSESS EE W H OSE TURNOVER IS LESS THAN ` 10 CRORE IS PERMISS I BL E PROSPECTIVEL Y BU T T H E WAY IT HAS BEEN ENACTED , IT TAKES AWAY AN ENJOYED RIGHT 01 A C LASS O F CITIZEN WHO AVAILED OF THE BENEFIT BY COMPL Y ING W I TH THE REQUIR EME N TS OF THE THEN PROVISIONS OF LAW . 26 . ON CONSIDERATION OF THE ENT I RE MATERIALS ON RECORD, WE , TH E R EFOR E , FIN D SUBSTANCE IN THE CONTENTION OF THE LEARNED C OUNSEL FOR T HE P ETIT I O N ERS T HAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTIV E OPE R A T ION I N ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL , AND AT THE S AME TIME , FOR DEPRIVING THE BENEFIT EARLIER GRANTED TO A CLASS OF THE ASS E S SEES W H OS E ASSESSMENTS WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AV A ILABL E T O THE ASSESSEES WHOSE ITA NO.401/MDS//2013 6 ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OT HER WORDS, IN THIS TYPE ' OF SUBSTANTIVE AMENDMENT , RETROSPECT I VE O PERA T I ON CAN BE GIVEN ONLY IF IT IS FOR THE BENEFIT OF THE ASSESSEE BUT NOT IN A CASE W HERE IT AFFECTS EVEN A FEWER SECTION OF THE A SSES S ES . 2 7. WE , ACCORDINGLY, QUASH THE I MPUGNED AMENDMENT ON LY T O TH IS EX TENT T HAT THE OPERATION OF ' THE SAID SECTION COULD BE GIVEN EFFECT FROM T HE D ATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT Y EARS OF T H E ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE ` 10 CRORE. IN OTHE R WORD S , THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO A N Y OF T H E A SSESSES. 6. AS COULD BE SEEN FROM THE ABOVE, THE HONBLE GUJ ARAT HIGH COURT QUASHED THE IMPUGNED AMENDMENT TO THE EX TENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIV EN EFFECT PROSPECTIVELY AND NOT FROM EARLIER ASSESSMENT YEARS OF THE ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE ` 10 CRORES. IT WAS ALSO OBSERVED BY THE HONBLE HIGH COURT THAT RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL T O ANY OF THE ASSESSEES. IN THE PRESENT CASE, THE ASSESSMEN T HAS BEEN REOPENED TO DENY DEDUCTION UNDER SECTION 80HHC BY VIRTUE OF AMENDMENT IN SECTION 80HHC(3) AND SINCE T HE HONBLE GUJARAT HIGH COURT HAS QUASHED THE AMENDMEN T SAYING THAT IT IS ONLY OPERATIVE PROSPECTIVELY AND NOT RETROSPECTIVELY AND THE RETROSPECTIVE AMENDMENT SH OULD NOT ITA NO.401/MDS//2013 7 BE DETRIMENTAL TO THE ASSESSEES, THE COMMISSIONER O F INCOME TAX (APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HON BLE HIGH COURT, WE UPHOLD THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS) IN ALLOWING THE APPEAL OF THE ASSESSE E. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 6 TH DAY OF NOVEMBER, 2013 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY ) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI. DATED THE 6TH NOVEMBER, 2013. SOMU COPY TO: (1) APPELLANT (4 ) CIT(A) (2) RESPONDENT (5 ) D.R. (3) CIT (6 ) G.F.