Retrospective effect given to 3rd & 4th Provisos to s. 80HHC is ultra vires
The assessee filed a Writ Petition to challenge the constitutional validity of clause (iiid) and (iiie) to s. 28 and the insertion of the third and fourth provisos to s. 80HHC by the Taxation Laws (Amendment) Act, 2005. Similar matters had been filed before various High Courts. Pursuant to the department’s application, the Supreme Court directed that the matter should first be decided by the Gujarat High Court. The Gujarat High Court allowed the Petition in Avani Exports vs. CIT and held that retrospective effect given to 3rd & 4th Provisos to s. 80HHC is ultra vires. HELD by the Bombay High Court:
In Avani Exports, it was held that the 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 case where it affects even a fewer section of the assessee. The amendment was quashed to the extent that the operation of the said section could be given effect from the date of the amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 Crore. In other words, the retrospective amendment should not be detrimental to any of the assessee. As the Supreme Court had transferred all the matters to the Gujarat High Court in order to avoid confusion and difficulties in enforcement of conflicting judgments of different High Courts, it would be appropriate to follow the judgment of the Gujarat High Court.