TRIVENU SHIP BREAKERS Vs. HARSH PRAKASH

JUDGEMENT

(1.) BY this petition under Art. 226 of the Constitution of India, the petitioner has challenged notice dt. 28th May, 2001 issued by the respondent under S. 148 of the IT Act, 1961 ("the Act") reopening the petitioner's assessment for the asst. yr. 1994-95.

(2.) THE petitioner, a registered firm, carries on business of ship breaking. For this purpose it purchases ships that are not sea worthy from sellers usually based abroad. The transaction is carried out through banking channel. The buyer remits a portion of the amount through the bank and takes over possession of the ship. The remaining amount is to be paid within 60 days along with interest now popularly known as "usance interest. The petitioner filed its return of income on 31st Oct., 1994 for asst. yr. 1994-95 along with computation of income accompanied by Audit Report and relevant annexures as required under s. 44AB of the Act. Subsequently, after seeking various information and details, the assessment came to be framed under S. 143(3) of the Act on 26th March, 1997 making certain additions and disallowances.

(3.) MR . B.D. Karia, learned advocate appearing on behalf of the petitioner invited attention to the provisions of S. 10(15)(iv)(c) of the Act which provides that the interest payable by an industrial undertaking in India on any moneys borrowed or debt incurred by it before the 1st June, 2001, in a foreign country in respect of the purchase outside India of raw materials or components or capital plant and machinery, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan or debt and its repayments shall not be included in computing the total income of the previous year of any person. It was submitted that the Taxation Laws (Amendment) Act, 2003 Expln. 2 came to be inserted under cl. (c) with retrospective effect from 1st April, 1962, whereby the usance interest payable outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of ship from outside India is deemed to be interest payable on debt incurred in a foreign country in respect of the purchase outside India. It was submitted that in the light of the Expln. 2 to cl. (c) the usance interest payable by the petitioner would not be includible in computing the total income of the petitioner for the year under consideration. It was accordingly submitted that in the light of the aforesaid amendment, the very foundation of the show cause notice issued under S. 148 of the Act does not survive.