Commissioner of Income Tax vs Silver and Art Palace

M.P. Singh, Actg. C.J.

This is an application u/s 256(2) of the Income Tax Act, 1961.

The assessee is a registered firm. It derived income from purchase and sale of precious and semi-precious stones as well as handicraft items. It claimed a sum of Rs. 1,02,955 as deduction u/s 80HHC out of the profits earned on export of goods or merchandise out of India and also the sales at the counter to the foreign buyers.

The Assessing Officer, while passing the order of assessment u/s 143(3), allowed the deduction. The Commissioner of Income Tax invoked his power u/s 263 of the Income Tax Act and modified the assessment order withdrawing the deduction u/s 80HHC. Against that order, an appeal was filed by the assessee before the Income Tax Appellate Tribunal. It was allowed.

Thereafter, the Revenue filed an application u/s 256(1) of the Income Tax Act before the Income Tax Tribunal to refer the following question :

"Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in cancelling the order of the Commissioner of Income Tax, Jaipur, u/s 263 notwithstanding the fact that the Assessing Officer in the assessment made u/s 143(3) allowed deduction u/s 80HHC on sales made in foreign exchange to the foreigners at business counter of the assessee in India ?"

The reference application was rejected. The learned Tribunal, after applying its mind and hearing the parties, expressed the view that the issue involved in the appeals was decided by the Tribunal on the basis of the Supreme Court decision in the case of Ben Gorm Nilgiri Plantations Company, Coonoor and Others Vs. Sales Tax Officer, Special Circle, Ernakulam and Others, Since the operation of the newly inserted Clause (aa) in the Explanation after Section 80HHC(4A) stood already stayed under the orders of the Rajasthan High Court, in the case of Mugal India, Jaipur, the issue in the point was clearly covered by the aforementioned decisions of the Supreme Court.

Admittedly, the assessment relates to the assessment year 1986-87 and the transaction period relates to April 1, 1985, to March 31, 1986. The amendment made in the section was incorporated on April 1, 1986. It could not be made applicable retrospectively from the assessment year 1985-86.

The case of Ben Gorm Nilgiri Plantations Company, Coonoor and Others Vs. Sales Tax Officer, Special Circle, Ernakulam and Others, in no way, is of any assistance to counsel for the Department and the view expressed by the Tribunal rejecting the application, does not suffer from any illegality.

Thus, no question of law is involved and the order of the Tribunal, rejecting the application u/s 256(1) is perfectly correct. The reference is accordingly rejected.