The Last Question Pertains To Proportionate Disallowance Ofinterest On Diversion Of Borrowed Funds For Non-Business Purposes.standing Counsel Has Relied On Divi v. Above Judgment To The Facts Of This Case And After Giving An Opportunity

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY THURSDAY, THE 31ST MARCH 2011 / 10TH CHAITHRA 1933 ITA.No. 207 of 2001() --------------------- ITA.438/COCH/1999 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: -------------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR IT RESPONDENT/APPELLANT: --------------- M/S.BABY MARINE EXPORTS,KOLLAM. BY ADV. SRI.DALE P.KURIEN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH ITA NO.167/2001 ON 31/03/2011, THE COURT ON 31/03/2011 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &BHABANI PRASAD RAY, JJ. .................................................................... I.T. Appeal Nos.207 & 167 of 2001 ....................................................................Dated this the 31st day of March, 2011. JUDGMENT Ramachandran Nair, J. Following judgment of the Supreme Court for earlier years, weanswer the common question raised i.e. on the entitlement of therespondent-assessee for exemption under Section 80HHC of theIncome Tax Act on the export house premium in favour of the assesseeand dismiss the appeals on this issue. 2. So far as the questions raised by the Revenue for sustaining the interest levied under Section 234A, B and C are concerned, StandingCounsel brought to our notice retrospective amendment to the Sectionsjustifying the levy. If amendment made retrospectively is not declaredinvalid by the court, then the same binds on statutory authoritiesincluding the Tribunal. Since the assessment was completed prior to theamendment and none of the authorities had occasion to consider theamendment, we set aside the order of the Tribunal and that of theappellate authority on this issue and remand the matter to the officer to ITA 207&167/2001 consider the issue with reference to the amended provisions aftergiving opportunity to the assessee. 3. The last question pertains to proportionate disallowance ofinterest on diversion of borrowed funds for non-business purposes.Standing Counsel has relied on Division Bench judgment of this courtin COMMISSIONER OF INCOME TAX VS. POPULAR VEHICLESAND SERVICES LTD. reported in 228 CTR 346 and contended thatthe issue is squarely covered by this judgment. Even though counsel forthe assessee opposed stating that the Tribunal's findings aresustainable, we feel since this court has exhaustively considered thematter in the above judgment, the matter should be reconsidered by theofficer in the light of the judgment above stated with reference to factsavailable in this case. We, therefore, allow the appeals on this issuealso by setting aside the orders of the Tribunal and that of the firstappellate authority and remand the matter to the officer to reconsiderthe disallowance of proportionate interest on borrowed funds divertedfor non-business purpose by applying the principles laid down in the ITA 207&167/2001 above judgment to the facts of this case and after giving an opportunity to the assessee. C.N.RAMACHANDRAN NAIRJudge pms BHABANI PRASAD RAYJudge