Law:

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2007] 295 ITR 282 [2008] 166 TAXMAN 188 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax (Central) *, Ludhiana v. Max India Ltd. S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ. CIVIL APPEAL NOS. 5555-5556 OF 2005 NOVEMBER 1, 2007 Section 263, read with section 80HHC, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1992-93 - Assessee claimed deduction under section 80HHC, which was allowed by Assessing Officer - However, Commissioner was of view that order passed by Assessing Officer was prejudicial to interest of revenue as while working out deduction under section 80HHC Assessing Officer had ignored negative profit and, accordingly, set aside order of Assessing Officer by passing order dated 5-3-1997 - Revenue's case was that 2005 amendment in section 80HHC which is clarificatory and retrospective in nature itself indicates that view taken by Assessing Officer at relevant time was unsustainable in law - Whether since two views existed on word 'profits' in proviso to section 80HHC(3), on day when Commissioner passed his order and moreover mechanics of section have become so complicated over years that two views were inherently possible, subsequent amendment in 2005 even though retrospective would not attract provision of section 263, particularly when one had to take into account position of law as it stood on date when Commissioner passed order in purported exercise of his powers under section 263 - Held, yes FACTS For the assessment year 1992-93, the assessee claimed deduction under section 80HHC, which was allowed by the Assessing Officer. However, the Commissioner was of the view that order passed by the Assessing Officer was prejudicial to interest of revenue as while working out the deduction under section 80HHC there was negative profit at one stage which had been ignored by the Assessing Officer and thereby excess deduction had been allowed and, accordingly, set aside order of the Assessing Officer. On appeal, the High Court upheld the order of the Assessing Officer. In appeal to the Supreme Court, the revenue contended that 2005 amendment in section 80HHC which is clarificatory and retrospective…

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