Tribunal upholds deletion of AO's additions under Section 80HHC for assessment years 1999-2000 & 2004-05

The Tribunal upheld the CIT(A)'s decision to delete additions made by the AO for the assessment years 1999-2000 and 2004-05, regarding the disallowance of deductions under Section 80HHC. The Tribunal agreed with the Gujarat High Court's ruling that the retrospective amendment to Section 80HHC(3) was discriminatory and unconstitutional, quashing its retrospective application. Consequently, the Tribunal dismissed both appeals by the Revenue, affirming the deletion of the additions.

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Issues Involved:
1. Deletion of addition made by the AO on account of disallowance of deduction under Section 80HHC of the Income Tax Act, 1961.
2. Validity of retrospective amendment of Section 80HHC(3) as per the Taxation Laws (Second Amendment) Act, 2005.

Detailed Analysis:

Issue 1: Deletion of Addition Made by the AO on Account of Disallowance of Deduction under Section 80HHC
The Revenue filed two appeals against the orders of the CIT(A)-XXII, New Delhi, which deleted the additions made by the AO for the assessment years 1999-2000 and 2004-05. The AO had disallowed the deduction claimed by the assessee under Section 80HHC, amounting to Rs. 1,66,77,703/-, based on the retrospective amendment introduced by the Taxation Laws (Second Amendment) Act, 2005. The CIT(A) deleted the addition by following the judgment of the Hon'ble Gujarat High Court in the case of Avani Exports vs. Commissioner of Income Tax (2012) 348 ITR 0391, which quashed the retrospective amendment.

Issue 2: Validity of Retrospective Amendment of Section 80HHC(3)
The CIT(A) relied on the Gujarat High Court's decision, which held that the retrospective amendment to Section 80HHC(3) was discriminatory and illegal. The amendment restricted the benefit of deduction to a class of assessees with a turnover of less than Rs. 10 crores, which was deemed unconstitutional. The Gujarat High Court quashed the retrospective operation of the amendment, stating that it should only be effective from the date of the amendment and not for earlier assessment years.

The Tribunal, after hearing the Ld. Sr. DR and perusing the records, agreed with the CIT(A)'s decision. The Tribunal noted that the Gujarat High Court had quashed the retrospective amendment, emphasizing that the amendment violated Articles 14 and 19(1)(g) of the Constitution of India by discriminating against assessees with a turnover exceeding Rs. 10 crores. The Tribunal upheld the CIT(A)'s order, stating that the disallowance of Rs. 1,66,77,703/- under Section 80HHC could not be sustained based on the quashed retrospective amendment.

The Tribunal dismissed both appeals filed by the Revenue, thereby affirming the deletion of the additions made by the AO for the assessment years 1999-2000 and 2004-05.

Conclusion
The Tribunal concluded that the disallowance of the deduction under Section 80HHC, based on the retrospective amendment, was not sustainable. The Tribunal upheld the CIT(A)'s orders, which followed the Gujarat High Court's judgment quashing the retrospective amendment. Consequently, both appeals filed by the Revenue were dismissed.

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