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, we answer the common question raised i.e. on the entitlement of the respondent-assessee for exemption under Section 80HHC of the Income Tax Act on the export house premium in favour of the assessee and 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, Standing Counsel brought to our notice retrospective amendment to the Sections justifying the levy. If amendment made retrospectively is not declared invalid by the court, then the same binds on statutory authorities including the Tribunal. Since the assessment was completed prior to the amendment and none of the authorities had occasion to consider the amendment, we set aside the order of the Tribunal and that of the appellate authority on this issue and remand the matter to the officer to ITA 207&167/2001 2 consider the issue with reference to the amended provisions after giving opportunity to the assessee. 3. The last question pertains to proportionate disallowance of interest on diversion of borrowed funds for non-business purposes. Standing Counsel has relied on Division Bench judgment of this court in COMMISSIONER OF INCOME TAX VS. POPULAR VEHICLES AND SERVICES LTD. reported in 228 CTR 346 and contended that the issue is squarely covered by this judgment. Even though counsel for the assessee opposed stating that the Tribunal's findings are sustainable, we feel since this court has exhaustively considered the matter in the above judgment, the matter should be reconsidered by the officer in the light of the judgment above stated with reference to facts available in this case. We, therefore, allow the appeals on this issue also by setting aside the orders of the Tribunal and that of the first appellate authority and remand the matter to the officer to reconsider the disallowance of proportionate interest on borrowed funds diverted for non-business purpose by applying the principles laid down in the ITA 207&167/2001 3 above judgment to the facts of this case and after giving an opportunity to the assessee. C.N.RAMACHANDRAN NAIR Judge BHABANI PRASAD RAY Judge pms