Ita/876/2008 Of The Commissioner Of Income Tax v. M/S Ge Thermometrics India Pvt Ltd

IN THR HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THER 2 DAY OF NOVBMBEBR 2014 PRESENT| THRE HON'BLE MR. JUSTICE N. KUMAR ANT) THR HON’BLE MR. JUSTICK B. MANOHAR| ITA NO.876 OF 2JOOC/WITA NO.877 OF 2008 BETWEEN; 1.|The Commissioner ot Income-tax. C.R.Building, Queens Road Bangalore. |The Assistant Commissioner of Income-Tax. Circle-11(2), C.R.Building| Queens Road Bangalore. .. APPELLANTS(COMMON). (By Shri.Jeevan J.Neeralgi, Advocate) AND: M/s.GE Thermometrics India Pvt., Ltd.,No.181, Lakeshore RoadBTM Layout, II StageBangalore — 560 076. _ RESPONDENT(COMMON). (By Shri.Chythanya.K.K., Advocate) ITA No.8/76/2008 is filed under Section 260-A otf |IT Act, 1961 arising out of order dated 30-05-2008|passed in ITA No.258/BNG/2008, tor the Assessment|Year 2OO4-O05 praying to tftormulate the substantiquestions of law stated therein and allow the appeal|and set aside the order passed by the ITAT Bangalore inITA No.258/BNG/2008 dated 30.05.2008 confirm the,orders of the Appellate Commissioner and confirm the)order passed by the Assistant Commissioner of Income,tax, Circle-11(2), Bangalore. ITA No.877/2008 is filed under Section 260-A ofIT Act, 1961 arising out of order dated 30-05-2008|passed in ITA No.257/BNG/2008, for the Assessment,Year 2003-04 praying to tormulate the substantial|questions of law stated therein and allow the appeal|and set aside the order passed by the ITAT Bangalore inITA No.257/BNG/2008 dated 30.05.2008 confirm the,orders of the Assistant Commissioner of Income tax,|Circle-11(2), Bangalore. These ITAs coming on for Hearing, this day,N. KUMAR, J.delivered the tollowing:- JUDGMENT The revenue has preferred these two appealsagainst a common order granting relief to the assessee and therefore, they are taken up for consideration|together and disposed of by this common judgment. 2)The assessee is engaged in the manufactureand sale of PTC & NTC Thermistors, Probes and similar|products. The assessee-company earlier belonged to |Spirent B.V.Group, which was engaged in various|businesses including manufacture and sale of sensors. |M/s.spirent B.V. Group held 74% of share capital ot the assessee-company. They decided to exit from the|sensor business on a worldwide basis and its Sensor|business across the world was acquired by GE Group. |According to the assessee, this global acquisition of,sensor business necessitated change in share holding otthe assessee. The aforesaid change of 74% in share.holding took place in the financial year 2002-03. The.said change was necessitated by genuine business re-organization carried out at the global level. The!assessee was enjoying the benefit under Section 10B of,the Act. However, in view of the said re-organization,|which resulted in change of share holding, in other| word s, beneficial interest in the undertaking, the|Assessing Authority declined to extend the benefit otfexemption under Section 10B for the year when the re-organization took place and for subsequent years in)view of sub-Section (9) of Section 10B of the Income Tax,Act, 1961. The assessment orders were passed on|2/.02.2006 and on 27.10.2006 for the financial years|2003-04 and 2004-05 respectively. Aggrieved by the.said order, the assessee preferred an appeal to the.Commissioner of Income-tax (Appeals), who dismissed.the appeals. It is against the said order, the assessee.preferred an appeal to the Tribunal. CnThe assessee contended that by way of an.amendment, sub-Section (9) of Section 10B was omitted with effect trom 01.04.2004. Therefore, the Assessing|Authority was not justified in declining to grant the.benetit under Section 10B relying on a provision whichwas not in the statute book on the day of assessment|orders were passed. The Tribunal accepted the said|contention and set aside the assessment orders.anddirected|theAssessingAuthority | to grant the relief. Aggrieved by the said orders, the,appeals are preferred by the revenue. CnThe assessee contended that by way of an.amendment, sub-Section (9) of Section 10B was omitted with effect trom 01.04.2004. Therefore, the Assessing|Authority was not justified in declining to grant the.benetit under Section 10B relying on a provision whichwas not in the statute book on the day of assessment|orders were passed. The Tribunal accepted the said|contention and set aside the assessment orders.anddirected|theAssessingAuthority | to grant the relief. Aggrieved by the said orders, the,appeals are preferred by the revenue. 4 The substantial question of law that arises.for consideration in these appeals is as under:- “Whether the Tribunal was correct in.holding that in view of the omission of sub-section 9 to Section 10B of the Act, w.e.f..01.04.2004, it should be understood that.the said section never existed in the statutebook and therefore the benefit claimed bythe assessee u/s 10B should be allowed?” 5)ThelearnedCounsel|for|theTEVENUECassailing the impugned order contends that it is well,settled that the Income Tax Act as it stands amended|on the first day of April of any financial year must apply|to the assessment of that year. Any amendments in the.Act which come into force after first day of April of a)financial year would not apply to the assessment for|that year, even if the assessment is actually made after|the amendments come into force. In support of his|contention, he relies on the judgment of the Apex Court in the case ofKARIMTHARUVI TEA ESTATE LTD., VS.)STATE OF KERALA reported in [/1966/ 060 ITR 026. Onthe same analogy, though sub-section (9) of Section.10B was omitted with effect from 01.04.2004, on the|day the beneficial interest was transferred and for,subsequent period, till the said omission took place, thesaid omitted provision is applicable and he submits|that the approach of the Tribunal is erroneous and|requires to be set aside. 6,Per contra, the learned Counsel for the.assessee relying on the judgment of the Constitution|Bench of the Apex Court contended that when a.provision in a statute is omitted from the statute book,the result is that the said provision did not ever exist inthe statute in the absence of any Saving provision. |Admittedly, there is no saving provision. Therefore, he.submits that the approach of the Tribunal is correct,and no case for interference 1S made out. TOThe Apex Court in the case ofKOLHAPURCANESUGAR WORKS LTD., VS. UNION OF INDIAreported in AIR 2000 SC 811dealing with the effect ofdeletion of a provision in the statute is held at Para 38)as under: “38. The position ts well-known that atcommon law, the normal effect of repealing a)Statute or deleting a provision is to obliterate|it from the statute book as completely as ff it|had never been passed, and the statute mustbe considered as a law that never existed. |To this Rule, an exception is engrafted by theprovisions of Section 6(1). If a provision of a)Statute is unconditionally omitted without a)SavingclauseIn|favourofpendingproceedings, all actions must stop where the)omission finds them, and tf final relief has|not been granted before the omission goes|into effect, it cannot be granted afterwards.savings of the nature contained in Section 6|or in special Acts may modify the position.Thus the operation of repeal or deletion as tothe future and the past largely depends on|the savings applicable. In a case where a|particular provision in a statute is omitted|and in its place another provision dealing| with the same contingency is introducedwithout a saving clause in favour of pendingproceedings then it can be_ reasonablyinferred that the intention of the Legislature is"thatthependingproceedingShallNot|continue but a fresh proceeding for the same|purpose may be initiated under the new)provision.” with the same contingency is introducedwithout a saving clause in favour of pendingproceedings then it can be_ reasonablyinferred that the intention of the Legislature is"thatthependingproceedingShallNot|continue but a fresh proceeding for the same|purpose may be initiated under the new)provision.” 8]Admittedly, in the instant case, there is nosaving clause or provision introduced by way of an.amendment while omitting sub-section (9) of Section10B. Therefore, once the aforesaid section is omitted|from the statute book, the result is it had never been|passed and be considered as a law that never exists and.therefore, when the assessment orders were passed in 2006, the Assessing Officer was not justified in taking)note of a provision which was not in the statute book.and denying benefit to the assessee. The whole object.of such omission is to extend the benefit under Section|10B of the Act irrespective of the fact whether during|the period to which they are entitled to the benefit, theownership continues with the original assessee or it is. transferred to another person. Benefit is to the)undertaking and not to the person who is running the|business. We do not see any merit in these appeals.The substantial question of law is answered in favour ofthe assessee and against the revenue. Accordingly, theappeals are dismissed. Sd/-)JUDGE Sd/-|JUDGE Prs*