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2015 (5) TMI 191 - DELHI HIGH COURT

2015 (5) TMI 191 - DELHI HIGH COURT - TMI - Assessment completed invoking 153A - Whether the amendment to Section 80HHC(3) by inserting three provisos with retrospective effect from 01.04.1998 could have been invoked to disallow the amounts in respect of concluded assessments for AY 1999-2000 in the assessee’s case - Held that:- The burden was upon the Revenue to prove that the restrictions imposed by the amending Act are reasonable. We find that the Revenue has failed to discharge that burden b .....

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atter shall be re-examined by the AO in the light of the Supreme Court’s final order. Since this Court has already ruled upon the merits of the disallowance made, the question as to whether the assessments could have been made under Section 153A is rendered academic; the same is accordingly kept open - ITA 263/2015, C.M. APPL.7337/2015, ITA 264/2015, C.M. APPL.7349/2015, ITA 265/2015, C.M. APPL.7351/2015 - Dated:- 28-4-2015 - S. Ravindra Bhat And R.K. Gauba JJ. For the Appellant : Sh. Salil Agga .....

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erred to as the Act ): (a) Whether in the given facts of the case, the assessment could have been completed by invoking 153A of the Income Tax Act; (b) Whether the amendment to Section 80HHC(3) by inserting three provisos with retrospective effect from 01.04.1998 could have been invoked to disallow the amounts in respect of concluded assessments for AY 1999-2000 in the assessee s case. 3. The admitted facts are that the assessee is an exporter entitled to the benefits of Section 80HHC. Its asses .....

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e on 31.05.2005. In response, the assessee, through a letter, intimated on 27.08.2005 that it stood by the original returns which had been processed under Section 153(1). However, the AO thereafter proceeded to finalize the assessment under Section 153A. Whilst doing so, he disallowed certain amounts in the sense that all the deductions permissible under Section 80HHC and granted originally (to the tune of ₹ 11,17,71,086/-), the deduction actually permitted pursuant to these proceedings wa .....

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etrospective amendment to Section 80HHC(3) by virtue of Taxation Laws (Amendment) Act, 2005 since it was brought into force with retrospective effect. It is contended that this amendment was challenged on both a substantive basis as well as on the ground of its unreasonable retrospective operation, before the Gujarat High Court in Avani Exports and Ors. v. CIT 2013 (348) ITR 391. Learned counsel relied on the said decision to say that the classification made by the said amendment as between thos .....

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id not dispute the legal position but submitted that the first question of law, i.e. as to the completion of the assessment, does not arise. It was submitted that since the ruling of the Gujarat High Court has been indeed allowed with some modification by the Supreme Court, the decision in this appeal should be confined to that question alone. 7. Section 80HHC to the extent it is relevant is as follows: [Deduction in respect of profits retained for export business. 6980HHC. 70[(1) Where an asses .....

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see, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which .....

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y the assessee 80[(other than the supporting manufacturer)] in convertible foreign exchange 81[, within a period of six months from the end of the previous year or, 82[within such further period as the competent authority may allow in this behalf].] 83[Explanation.-For the purposes of this clause, the expression competent authority means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exc .....

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ndia. Explanation 2.-For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill o .....

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such goods bears to the total turnover of the business carried on by the assessee; (b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover90 in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; (c) where the export out of India is of goods or merchandise manufactured 91[or processed] by the assessee and of trading goods, the 92profits derived from such export shall,- (i) in .....

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ed that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee : 93[Provided further that in the case of an assessee having e .....

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ee : Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried .....

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ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that,- .....

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ssion Scheme calculated in the manner as may be notified by the Central Government :] 94[Provided also that in case the computation under clause (a) or clause (b) or clause (c) of this sub-section is a loss, such loss shall be set off against the amount which bears to ninety per cent of- (a) any sum referred to in clause (iiia) or clause (iiib) or clause (iiic), as the case may be, or b) any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section 28, as applicable in th .....

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the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3) ; (c) adjusted total turnover means the total turnover of the business as reduced by the export turnover in respect of trading goods ; (d) direct costs means costs directly attributable to the trading goods exported out of India including the purchase price of such goods ; (e) indirect costs means costs, not being direct costs, allocated in the ratio of the export turnover in .....

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served as follows: 10. After hearing the learned counsel for the parties and after going through the impugned amendment, we find that classification based on export turnover is a recognized way of classification throughout the world. We find substance in the contention of the learned counsel for the Revenue that progressive levy is based on income classification in terms of both, the basis of taxation and the rate of tax, and on this ground, the same cannot be said to be arbitrary. In this conne .....

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the matter of completion of assessment, the assessees have little role to pay. After the assessees have submitted their returns within the time fixed by law, if for any reason the respondent delays in making the assessment, taking advantage of their own delay, the Revenue cannot deprive a class of the assessees of the benefit whereas other assessees of the same class whose assessment have already been completed would get the benefit. We, therefore, find that discrimination based on two classes, .....

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ions imposed by the amending Act are reasonable. We find that the Revenue has failed to discharge that burden by pointing out the reason for making classification based on the above two aspects which have no reasonable connection with the object of amendment. XXXXXX XXXXXX XXXXXX 19. After hearing the learned counsel for the parties and after going through the decisions cited at the bar, we are of the view that although in taxing statute laxity is permissible and after giving a benefit to the as .....

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plying whereas if such promise was not there, the citizen could arrange his affairs in a different way to get similar or at least some benefit, such amendment must be held to be arbitrary and if not, an ingenious artifice opposed to law. In the case before us, the object of the amendment, as it appears from the statements of the Finance Minister while moving the bill, is to get rid of the alleged wrong decision of the Tribunal interpreting the then provision of the Statute in a way beneficial to .....

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nterior date. According to the existing law enacted by the Parliament itself, wrong orders passed by a Tribunal should be challenged by the aggrieved party before the appropriate High Court and if such party is still aggrieved by the order of the High Court, he should move the Supreme Court. 10. The Court thereafter noticed that the legislation was not just an amendment of the taxing statute creating a new provision retrospectively. Recognising that the legislature could confer benefits prospect .....

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to the existing law, if a valid piece of legislation is wrongly interpreted by the Tribunal, the aggrieved party should move higher judicial forum for correct interpretation. As pointed by the Apex Court in the case of Pritvi Cotton Mills Ltd (supra), the legislature does not possess or exercise power to reverse the decision in exercise of judicial power. Thus, we are of the view that the principles laid down in the case of R. C. Tobacco (P) Ltd. (supra) has no application to the facts of the p .....

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impugned 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 other words, 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 c .....

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e facts and circumstances, there will be, however, no order as to costs. In view of the above order passed in the writ-applications, the Civil Applications do not survive and are disposed of accordingly. 11. The Revenue filed several appeals before the Supreme Court by special leave, claiming direction against the operative part of the Gujarat High Court in Avani Exports extracted above. After noticing the reasoning of the High Court, the Supreme Court stated that the entitlement of benefits to .....

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turn over of more than ₹ 10 crores p.a. is concerned, two conditions contained in third and fourth proviso to the said amendment were to be satisfied for claiming the benefits. Those were: (a) He had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and (b) The rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme, being Duty Rem .....

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