1 R IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 12 TH DAY OF JUNE, 2013 BEFORE THE HON’BLE MR. JUSTICE H.N. NAGAMOHAN DAS W.P.No. 16896/2012 C/W W.P.Nos. 21939-942/2011 & 21943-946/2011 , W.P.No.23199/2011, W.P.No.39358/2012 (T-IT) W.P.No. 16896/2012 BETWEEN : -------------- M/S MINDTREE LTD GLOBAL VILLAGE, R.V.C.E. POST, MYLASANDRA, MYSORE ROAD, BANGALORE-560059. (REPRESENTED BY ITS CEO & MANAGING DIRECTOR SRI. KRISHNAKUMAR NATARAJAN AGED ABOUT 54 YEARS, S/O SRI.K. NATARAJAN) ... PETITIONER (By Sri. CHYTHANYA K. K., ADV.) AND : -------- 1.UNION OF INDIA REPRESENTED BY THE SECRETARY TO THE MINISTRY OF FINANCE GOVERNMENT OF INDIA NEW DELHI. 2 2.THE COMMISSIONER OF INCOME-TAX-LTU J S S TOWERS, 100 FT RING ROAD, BANASHANKARI III STAGE, BANGALORE-560085. ... RESPONDENTS (By Sri. E. I. SANMATHI, SR.ADV., FOR R1) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA WITH A PRAYER TO DECLARE THE NEWLY INSERTED PROVISO TO SECTION 115JB (6) BY FINANCE ACT, 2011 AS ULTRA VIRES SECTION 27 OF THE SEZ ACT READ WITH THE SECOND SCHEDULE THERETO & HENCE,UNENFORCEABLE. W.P.Nos. 21939-942/2011 & 21943-946/2011 BETWEEN : -------------- 1.M/S OPTO INFRASTRUCTURE LIMITED OPTO SEZ, NANJANGUD & HASSAN PLOT NO. 83, 2 ND FLOOR, 1 ST PHASE ELECTRONIC CITY, BANGALORE-560100 (REP BY DR. MANJE GOWDA, DIRECTOR) 2.M/S OPTO CARDIAC CARE LIMITED, VSEZ UNIT, PLOT NO. 83 2ND FLOOR, 1ST PHASE ELECTRONIC CITY, BANGALORE-560100 (REP BY DR MANJE GOWDA, DIRECTOR) 3.M/S OPTO EUROCOR HEALTHCARE LIMITED, VSEZ UNIT, PLOT NO. 83, 2ND FLOOR, 1ST PHASE ELECTRONIC CITY, BANGALORE-560100 (REP BY DR. MANJE GOWDA, DIRECTOR) 3 4.M/S OPTO CIRCUITS (INDIA) LIMITED (UNIT-III-SEZ UNIT) (VISAKHAPATNAM SPECIAL ECONOMIC ZONE) PLOT NO. 83, ELECTRONIC CITY, HOSUR ROAD BANGALORE-560100 (REP BY DR MANJE GOWDA, DIRECTOR) 5.M/S MANGALORE SEZ LIMITED NO. 16, "PRANAVA PARK ", 3 RD FLOOR INFANTRY ROAD, BANGALORE-560001 (REP BY RAJIV BANGA, MANAGING DIRECTOR) 6.M/S BIOCON LIMITED, SEZ DEVELOPER BIOCON SPECIAL ECONOMIC ZONE PLOT NO.2 TO 5, PHASE IV BOMMASANDRA INDUSTRIAL AREA BOMMASANDRA JIGANI LINK ROAD BANGALORE-560099 (REP BY S R SUNDARESH VICE PRESIDENT COMMERCIAL) 7.M/S RGA SOFTWARE SYSTEMS PVT LTD SY.NO. 51 TO 64, OUTER RING ROAD BELLANDUR VILLAGE, VARTHUR HOBLI BANGALORE-560103 (REP BY RAMAKRISHNAN, CFO) 8.M/S PRIMAL PROJECTS PVT LTD PRITECH PARK SEZ SY.NO.51 TO 64, OUTER RING ROAD BELLANDUR VILLAGE, VARTHUR HOBLI BANGALORE-560103 (REP BY RAMAKRISHNAN, CFO). ... PETITIONERS (By Sri. K.S. RAVISHANKAR, ADV.) 4 AND : -------- 1. THE UNION OF INDIA MINISTRY OF FINANCE NORTH BLOCK, NEW DELHI-110 001 REP BY ITS SECRETARY 2.THE UNION OF INDIA MINISTRY OF COMMERCE NORTH BLOCK, NEW DELHI-110 001 REP BY ITS SECRETARY 3.THE BOARD OF APPROVALS MINISTRY OF COMMERCE & INDUSTRIES (SEZ), GOVERNMENT OF INDIA UDYOG BHAVAN, ROOM NO. 2L63-C, 2ND FLOOR NEW DELHI-110 017 REP BY ITS CHAIRMAN. 4.THE CHIEF COMMISSIONER OF INCOME TAX, C R BUILDINGS, QUEENS ROAD BANGALORE-560001 ... RESPONDENTS (By Sri.N.R. BHASKAR, CGSC FOR R1 & R2 Sri M.V.SHESHACHALA, ADV., FOR R3 & R4 Sri K.V.ARAVIND, ADV., FOR R3 & R4 ) THESE WRIT PETITIONS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA WITH A PRAYER TO HOLD THAT THE IMPUGNED AMENDMENTS/PROVISIONS OF THE FINANCE ACT, 2011 IN 5 ANNEX.E ARE ILLEGAL, ARBITRARY, UNREASONABLE, UNFAIR AND VIOLATIVE OF VARIOUS ARTICLES OF CONSTITUTION PARTICULARY ARTICLES 14, 77, 109 AND 110 AND ALSO VIOLATIVE OF THE DOCTRINE OF PROMISSORY ESTOPPEL. W.P.No.23199/2011 BETWEEN : --------------- M/S. SUBEX LIMITED ADARSH TECH PARK, OUTER RING ROAD, DEVARABISANAHALLI, BANGALORE-560037 REP BY ITS FOUNDER CHAIRMAN, MANAGING DIRECTOR & CEO Sri. SUBASH MENON AGED ABOUT 44 YEARS S/O JAYAPALA MENON. ... PETITIONER (By Sri. CHYTHANYA K.K., ADV.) AND : ------- 1.UNION OF INDIA REP BY THE SECRETARY TO THE MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI. 2. COMMISSIONER OF INCOME-TAX-3 BENGALURU, KARNATAKA STATE. 3. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12 (3), BENGALURU, KARNATAKA STATE. ... RESPONDENTS 6 (By Sri.KALYAN BASAVARAJ, ASG FOR R1 &R2 Sri K.V.ARAVIND, ADV., FOR R3 & R4) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA WITH A PRAYER TO DECLARE THE NEWLY INSERTED PROVISO TO SECTION 115JB (6) BY FINANCE ACT 2011 AS ULTRA VIRES SECTION 27 OF THE SEX ACT READ WITH THE SECOND SCHEDULE THERETO & HENCE, UNENFORCEABLE VIDE ANN-A. W.P.No.39358/2012 BETWEEN : ---------------- M/S RAJESH EXPORTS LIMITED REP BY ITS CHAIRMAN, SRI.RAJESH METHA, S/O. JASVANTRAI METHA, AGED ABOUT 49 YEARS, NO.4, BATAVIA CHAMBERS, KUMARA KRUPA ROAD, KUMARA PARK EAST, BANGALORE-560 001. ... PETITIONER (By Sri.A. SHANKAR, ADV.) AND : -------- 1.UNION OF INDIA THROUGH THE SECRETARY MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110 001. 7 2.MINISTRY OF FINANCE THROUGH THE SECRETARY DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110 001. 3.MINISTRY OF COMMERCE & INDUSTRY THROUGH THE SECRETARY, DEPARTMENT OF COMMERCE, UDYOG BHAVAN, NEW DELHI-110 107. 4.CENTRAL BOARD OF DIRECT TAXES, THROUGH THE SECRETARY, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI-110 001. 5.THE COMMISSIONER OF INCOME-TAX, BANGALORE-III, C.R.BUILDING, QUEENS ROAD, BANGALORE-560 001. ... RESPONDENTS (R1, R2, R4 AND R5 ARE SERVED) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA WITH A PRAYER TO HOLD THAT THE IMPUGNED AMENDMENTS/ PROVISIONS OF THE FINANCE ACT 2011 IN ANN-C ARE ILLEGAL, ARBITRARY, UNREASONABLE, UNFAIR & VIOLATIVE OF VARIOUS ARTICLES OF CONSTITUTION PARTICULARLY ARTICLES 14, 19 (1)(g) 21, 77, 109 & 110 & 8 ALSO VIOLATIVE OF THE DOCTRINE OF PROMINSSORY ESTOPPLES & DOCTRINE OF LEGITIMATE EXPECTATION. THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS THIS DAY, NAGAMOHAN DAS, J PASSED THE FOLLOWING; O R D E R In these writ petitions the petitioners have prayed to declare the newly inserted proviso to Section 115JB(6) and 115-O(6) of the Income Tax Act in the second schedule to the Special Economic Zones Act 2005 (for short ‘SEZ Act’) as ultra vires, arbitrary, unfair and violative of Article 14 of Constitution of India. 2. In the month of April 2000, the Government of India announced Special Economic Zone scheme with a view to provide international competitive environment for exports. The object of the scheme include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and package of incentives to attract foreign and domestic investments for promoting export lead growth. The scheme was implemented through various notifications 9 and circulars issued by the concerned ministries/departments from time to time. This system of issuing notifications and circulars resulted in certain practical problems and does not lend enough confidence among the investors. In order to overcome the problems of the present scheme and to give a long term and stable policy frame work the Central Act for Special Economic Zones had been found necessary. Accordingly the Special Economic Zone Bill was introduced in the parliament. The Bill was passed in the Loksabha on 09.05.2005 and in Rajyasabha on 11.05.2005. The President of India gave his assent to the Bill on 23.06.2005. Thus the Special Economic Zones Act, 2005 (for short ‘SEZ Act’)came into force. Section 7 of the SEZ Act specifies that any goods or services exported or imported from the domestic tariff area by any unit in a special economic zone shall be exempted from payment of taxes, duties or cess subject to prescribed terms, conditions and limitations. Section 26 of the SEZ Act specifies certain concessions under the Customs Act, Customs Tariff Act, Central Excise Act, Central Excise Tariff Act, Domestic Tariff Area, Service Tax Act under Chapter V of the Finance Act, 1994, Securities Transaction Tax leviable under Finance Act, 2004 etc. Section 27 of the 10 SEZ Act specifies that provisions of Income Tax Act, 1961 to apply to SEZ units and developers subject to modifications specified in Schedule-II. Under the SEZ Act the following profit linked deductions and incentive relating to Income Tax are allowed to SEZ units: (i) Under the existing provisions of Section 10AA of the IT Act, a deduction of hundred per cent is allowed in respect of profits and gains derived by a unit located in Special Economic Zone (SEZ) from the export of articles or things or from services for the first five consecutive assessment years; of fifty per cent for further five assessment years; and thereafter, of fifty per cent of the ploughed back export profit for the next five years. (ii) Further, under Section 80-IAB the IT Act, a deduction of hundred per cent is allowed in respect of profits and gains derived by an undertaking from the business of development of an SEZ notified on or after 1 st April, 2005 from the total income for any ten consecutive assessment years out of fifteen years beginning from the year in which the SEZ has been notified by the Central Government. In addition to the above, the following incentives were also available in respect of SEZs before the Finance Act, 2011. 11 (i) The provisions of sub-section (6) of Section 115JB of the IT Act allowed for an exemption from payment of minimum alternate tax (for short “MAT”) on book profit in respect of the income accrued or arising on or after 1 st April 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone (SEZ), as the case may be.