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M/s. Euro Leder Fashions Limited,99, G.S.T. Road, Pallavaram,Chennai 600 043. Vs. The Deputy Commissioner of Income Tax, Company Circle II (1),Chennai.
July, 28th 2012
              IN THE INCOME-TAX APPELLATE TRIBUNAL
                        `C' BENCH, CHENNAI.

              Before Shri N.S. Saini, Accountant Member &
             Shri Challa Nagendra Prasad, Judicial Member

                        I.T.A. No. 1804/Mds/2010
                       Assessment Year : 2003 - 04

M/s. Euro Leder Fashions Limited,         The Deputy Commissioner of Income
99, G.S.T. Road, Pallavaram,          Vs. Tax, Company Circle II (1),
Chennai 600 043.                          Chennai.
[PAN: AAACE0729P]

            (Appellant)                                 (Respondent)

                       Appellant by    :   Shri V.S. Jayakumar, Advocate
                    Respondent by      :   Ms. Anupama Shukla, CIT
                    Date of Hearing    :   19.07.2012
            Date of pronouncement      :   26.07.2012




                                  ORDER

PER Challa Nagendra Prasad, Judicial Member


      This is an appeal filed by the assessee against the order of the

Commissioner of Income Tax, Chennai-I, Chennai passed under section 263

of the Income Tax Act dated 23.03.2010 for the assessment year 2003-04.

Shri V.S. Jayakumar, Advocate represented on behalf of the assessee and

Ms. Anupama Shukla, CIT represented on behalf of the Revenue.


2.    This appeal is filed late by 92 days and the assessee filed an affidavit

praying for condonation of delay stating the delay is neither wanton nor

willful but due to circumstances beyond the control of the assessee and thus
                                        2                                  No.1804/M/
                                                                    I.T.A. No.1   /M/10
                                                                                04/M/1


prayed for condonation of delay and to admit the appeal for hearing as it was

prevented by sufficient cause in filing of the appeal in time.


2.1   To this plea of the condonation of delay, the ld. DR did not strongly

object.


2.2   After hearing both sides and considering the material on record with

regard to limitation issue, we are satisfied that the assessee was prevented

by sufficient cause from not filing the appeal within the stipulated time. As

such, while accepting the plea of the assessee, we condone the delay and

admit the appeal for hearing.


3.    The assessee raised following grounds of appeal:

      "1.    The order of the CIT u/s. 263 of the Income Tax Act is contrary to the
             law, facts and circumstances of the case.
      2.     The CIT erred in directing the AO to modify the order dated 26.11.07
             passed under section 143(3) read with section 147.

      3.     The CIT erred in holding that the amendment brought in Section 80
             HHC has nothing to do with the reduction of earlier year's losses
             while computing relief under 80 HHC.

      4.     The CIT erred in ignoring the interim stay granted by the High Court
             in respect of the operations of the amendment made by the taxation
             laws (Amendment Act, 2005).

      5.     The CIT failed to notice that the two decisions relied on by him does
             not put the assessee in a worst position as they are not applicable to
             the facts of the appellant's case.

      6.     The CIT failed to note that the assessment completed under section
             143(3) read with section 147 cannot be revised under section 263 in
             the manner done by him.
                                      3                                 No.1804/M/
                                                                 I.T.A. No.1   /M/10
                                                                             04/M/1




      7.    The appellant craves leave to adduce additional grounds of appeal at
            the time of hearing."

4.    Facts of the case are that the assessee filed return of income for the

assessment year 2003-04 on 30.03.2003 admitting NIL income. The return

was processed under section 143(1) on 07.02.2004. Later, a notice under

section 148 was issued on 23.02.2007. The assessment was completed on

26.11.2007 under section 143(3) read with section 147 of the Act. While

completing the assessment the Assessing Officer recomputed the deduction

allowable under section 80HHC by reducing 90% of income on sale of DEPB

license and computed the income accordingly. Later, the Commissioner of

Income Tax, Chennai - I issued a notice under section 263 of the Act dated

23.02.2010 requiring the assessee to show-cause as to why the assessment

completed on 26.11.2007 under section 143(3) read with section 147 by the

Assessing Officer should not be set aside as the assessment order is

erroneous and prejudicial to the interest of Revenue for the reason that

deduction under section 80HHC was allowed before set off of carry forward

losses of earlier assessment years.


5.    The assessee filed its objection to the notice issued by the

Commissioner of Income Tax stating that the assessee filed a Miscellaneous

Petition before the Hon'ble Madras High Court challenging the constitutional

validity of the amendment made to 80HHC and an ad-interim stay was
                                     4                                No.1804/M/
                                                               I.T.A. No.1   /M/10
                                                                           04/M/1





granted by the Hon'ble Madras High Court. Therefore, since an ad-interim

stay was granted by the Hon'ble Madras High Court, the Commissioner of

Income Tax cannot revoke section 263 to direct the Assessing Officer to

rework out the deduction allowable under section 80HHC. Taking into

consideration, the reply filed by the assessee, the Commissioner of Income

Tax passed order on 23.03.2010 under section 263 of the Act directing the

Assessing Officer to modify the assessment order suitably to allow

credit/relief under section 80HHC as per the ratio of the decision of the

Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. vs. DCIT [266

ITR 521]. Against this order of the Commissioner of Income Tax, the

assessee is in appeal before us.


6.    The counsel for the assessee submits that retrospective amendment

was made to section 80HHC by Taxation Law (Amendment) Act, 2005 with

effect from 01.04.1998, whereby the export turnover of `.10.00 crores was

arbitrarily fixed to confer certain benefit under section 80HHC viz, the DEPB

profits, cash incentives and other sums. The deduction is allowed in full in

the hands of the assessee whose turnover did not exceed `.10.00 crores

and in the cases where the turnover exceeded `.10.00 crores the claim was

flatly denied. He submits that the assessee filed a writ petition before the

Hon'ble Madras High Court challenging the constitutional validity of the said

amendment in section 80HHC and an ad interim stay was granted by the
                                     5                                No.1804/M/
                                                               I.T.A. No.1   /M/10
                                                                           04/M/1


Hon'ble Madras High Court. The counsel for the assessee submits that the

Hon'ble Gujarat High Court in the case of Avani Exports & Others v. CIT &

Ors. in a batch of appeals by order dated 02.07.2012 in Special Civil

Application No. 7926 of 2006 has held that the amendment to Taxation Laws

(Amendment) Act, 2005 is only prospective and could be given effect from

the date of amendment and not in respect of earlier assessment years. The

counsel for the assessee further submits that in view of the decision of the

Hon'ble Gujarat High Court, the issue is debatable. Therefore, the

Commissioner of Income Tax is not justified in invoking the provisions of

section 263. To disturb the working made by the Assessing Officer in the

assessment order.


7.    The   counsel   for   the   Revenue   supported   the   order    of    the

Commissioner of Income Tax passed under section 263 of the Act.

8.    We have heard both sides, perused the materials available on record,

orders of lower authorities and the case law relied upon. The assessment

was completed under section 143(3) read with section 147 on 26.11.2007.

While completing the assessment, the Assessing Officer allowed deduction

under section 80HHC without setting off of carry forward loss of the earlier

assessment years. Since the order passed by the Assessing Officer is

against the ratio of the decision of the Hon'ble Supreme Court in the case of

IPCA Laboratories vs. DCIT, judgment dated March 11, 2004 reported in
                                     6                                No.1804/M/
                                                               I.T.A. No.1   /M/10
                                                                           04/M/1


266 ITR 521, the Commissioner of Income Tax directed the Assessing

Officer to recompute the relief allowable under section 80HHC suitably in

view of the decision of the Hon'ble Supreme Court in the case of IPCA

Laboratories vs. DCIT (supra). The contention of the assessee is that the

Hon'ble Madras High Court granted an ad-interim stay, therefore, the

deduction allowed under section 80HHC by the Assessing Officer cannot be

reworked appears to be not relevant with the issue of allowing deduction

under section 80HHC in accordance with the ratio laid down by the Hon'ble

Supreme Court in the case of IPCA Laboratories v. DCIT (supra). Because,

what was challenged by the assessee before the Hon'ble Madras High Court

was the constitutional validity of retrospective amendment to section 80HHC,

whereby the export turnover of `.10.00 crores was arbitrarily fixed to confer

certain benefit under section 80HHC, DEPB profits, cash incentives and

other sums. Similarly, the decision of the Hon'ble Gujarat High Court in the

case of Avani Exports & Others v. CIT & Ors.(supra) holding that

amendment to section 80HHC is prospective and could be given effect from

the date of amendment and not in respect of earlier assessment years is

also nothing to do with the ratio of the decision of the Hon'ble Supreme

Court in the case of IPCA Laboratories v. DCIT (supra). In the

circumstances, we see no infirmity in the order passed by the Commissioner

of Income Tax under section 263 in directing the Assessing Officer to allow

deduction under section 80HHC in accordance with the ratio of the decision
                                       7                                No.1804/M/
                                                                 I.T.A. No.1   /M/10
                                                                             04/M/1


of IPCA Laboratories (supra). The grounds raised by the assessee are

dismissed.


9.     In the result, the appeal of the assessee is dismissed.

       Order pronounced on Thursday, the 26th of July, 2012 at Chennai.



Sd/-                                                             Sd/-
(N.S. SAINI)                               (CHALLA NAGENDRA PRASAD)
ACCOUNTANT MEMBER                                    JUDICIAL MEMBER

Chennai, Dated, the 26.07.2012

Vm/-

To: The assessee//A.O./CIT(A)/CIT/D.R.
 
 
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