Principal Commissioner of Income Tax-III, Bangalore and another Versus M/s Wipro Limited

Principal Commissioner of Income Tax-III, Bangalore and another Versus M/s Wipro Limited 

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1449 OF 2022
(Arising out of SLP(Civil) No. 7620/2021)
Principal Commissioner of Income Tax-III,
Bangalore and another …Appellants
Versus
M/s Wipro Limited …Respondent
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 30.11.2020 passed by the High Court of Karnataka at
Bengaluru in Income Tax Appeal No. 462/2017, by which the High Court
has dismissed the said appeal preferred by the Revenue and has
confirmed the judgment and order dated 25.11.2016 passed by the
Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore (for
short, ‘ITAT’), allowing the assessee’s claim for carry forward of losses
under Section 72 of the Income Tax Act, 1961 (for short, ‘IT Act’), the
Revenue has preferred the present appeal.
1
2. The respondent-assessee is a 100% export-oriented unit and
engaged in the business of running a call centre and IT Enabled and
Remote Processing Services. Assessee filed its return of income on
31.10.2001 for Assessment Year 2001-2002, declaring loss of
Rs.15,47,76,990/- and claimed exemption under Section 10B of the IT
Act. Along with the original return filed on 31.10.2001, the assessee
annexed a note to the computation of income in which the assessee
clearly stated that the company is a 100% export-oriented unit and
entitled to claim exemption under Section 10B of the IT Act and therefore
no loss is being carried forward. That thereafter, the assessee filed a
declaration dated 24.10.2002 before the Assessing Officer (AO) stating
that the assessee does not want to avail the benefit under Section 10B
of the IT Act for A.Y. 2001-02 as per Section 10B (8) of the IT Act. The
assessee filed the revised return of income on 23.12.2002 wherein
exemption under Section 10B of the IT Act was not claimed and the
assessee claimed carry forward of losses.
2.1 Assessing Officer passed an order dated 31.03.2004 rejecting the
withdrawal of exemption under Section 10B of the IT Act holding that the
assessee did not furnish the declaration in writing before the due date of
filing of return of income, which was 31.10.2001. Thereby, the AO made
the addition in respect of denial of claim of carrying forward of losses
under Section 72 of the IT Act.
2
2.2 Assessee filed an appeal before the Commissioner of Income Tax
(Appeals), New Delhi (for short, ‘CIT(A)’). By order dated 19.01.2009,
the CIT(A) upheld the order passed by the Assessing Officer making
addition in respect of denial of claim of carrying forward of losses under
Section 72 of the IT Act.
2.3 Aggrieved by the order passed by the CIT(A), the assessee filed
an appeal before the ITAT. Vide order dated 25.11.2016, the ITAT
decided the issue in favour of the assessee stating that the declaration
requirement under Section 10B (8) of the IT Act was filed by the
assessee before the AO before the due date of filing of return of income
as per Section 139(1) of the IT Act. ITAT allowed the assessee’s claim
for carrying forward of losses under Section 72 of the IT Act.
2.4 Feeling aggrieved and dissatisfied with the order passed by the
ITAT, allowing the assessee’s claim for carrying forward of losses under
Section 72 of the IT Act, the Revenue preferred an appeal before the
High Court. By the impugned judgment and order, the High Court has
dismissed the said appeal. Hence, the Revenue is before this Court by
way of present appeal.
3. Shri Balbir Singh, learned Additional Solicitor General of India
appearing for the Revenue has vehemently contended that in the
present case, as the conditions mentioned in Section 10B (8) of the IT
Act are not complied with, inasmuch as the declaration was not filed
3
before the due date of filing of return, both, the ITAT and the High Court
have committed a grave error in allowing the assessee’s claim for
carrying forward of losses under Section 72 of the IT Act.
3.1 It is submitted that in the present case, the original return of
income was filed on 31.10.2001, which was the due date for filing return
of income. The assessee filed a declaration on 24.10.2002 before the
AO stating that the assessee does not want to avail the benefit under
Section 10B of the IT Act for A.Y. 2001-02. That thereafter the assessee
filed the revised return of income on 23.12.2002 claiming carry forward
of losses under Section 72 of the IT Act. It is submitted that therefore
as the declaration required under Section 10B (8) of the IT Act was filed
beyond the due date of filing of return and hence the assessee was not
entitled to carry forward of losses under Section 72 of the IT Act. It is
submitted that in the present case, the ITAT has wrongly noted that the
declaration under Section 10B (8) of the IT Act was filed before the due
date.
3.2 It is further contended that the High Court has erred in observing
that the requirement under Section 10B (8) of the IT Act is a procedural
requirement.
3.3 It is submitted that the High Court has not properly appreciated the
consequences of not filing the declaration within the time as required
under Section 10B (5) and non-compliance of Sections 10B (5) and 10B
4
(8) of the IT Act. It is submitted that if the view taken by the High Court
is accepted, in that case, it shall nullify the provisions of Sections 10B (5)
and 10B (8) of the IT Act.
3.4 Shri Balbir Singh, learned ASG appearing on behalf of the
Revenue further submitted that in the present case the assessee filed
the revised return of income on 23.12.2002, wherein for the first time the
assessee did not claim the exemption under Section 10B of the IT Act
and claimed carrying forward of losses under Section 72 of the IT Act.
That such a claim could not have been made while submitting the
revised return of income. That the revised return of income can be filed
under Section 139(5) of the IT Act only to remove the omission and
mistake and/or correct the arithmetical error. It is submitted that the
revised return of income under Section 139(5) of the IT Act cannot be
filed for altogether a new claim. Reliance is placed on the decision of
the Andhra Pradesh High Court in the case of Commissioner of
Income Tax v. Andhra Cotton Mills Limited, [1996] 219 ITR 404 (AP).
That in the aforesaid decision, the Andhra Pradesh High Court has held
that a revised return under Section 139(5) can be filed only if there is an
omission or a wrong statement. That in the aforesaid case, the
assessee in the original return filed the P&L account containing provision
for depreciation and did not opt for the option of not providing details
regarding depreciation in its P&L account. Therefore, the High Court
5
held that the intention of the assessee was to withdraw the claim for
deduction of depreciation only to get a set-off and since particulars were
furnished along with the original return, the ITO was bound to allow the
deduction of depreciation in computing the income from business.
3.5 It is submitted that in the present case while filing the original
return of income, the assessee specifically declared a loss of Rs.
15,47,76,990/- and claimed exemption under Section 10B of the IT Act.
That as per the note annexed to the computation of income, annexed
with the original return of income, the assessee specifically stated that
“the company is registered as 100% export-oriented unit and is entitled
to claim exemption under Section 10B of the IT Act. No loss is therefore
being carried forward.”
3.6 It is submitted that as an afterthought the assessee filed a
declaration as required under Section 10B (5) belatedly and after the
due date mentioned in Section 10B (5) and claimed carry forward of
losses under Section 72 of the IT Act, withdrawing its claim for deduction
under Section 10B of the IT Act. It is contended that the High Court has
not properly appreciated the fact that by filing a declaration subsequently
and filing the revised return of income, the intent of the assessee was to
frustrate the purpose of Section 10B of the IT Act and file a declaration
under Section 10B (8) belatedly. It is submitted that the High Court has
not properly appreciated the fact that the assessee’s intention to file the
6
revised return was only as an afterthought and with the intention to
extend the period of filing the declaration beyond the period specified in
Section 10B (8) of the IT Act.
3.7 It is further submitted by learned ASG appearing on behalf of the
Revenue that the High Court has seriously erred in observing that the
requirement of submission of declaration under Section 10B (8) is
mandatory in nature, but the time limit within which the declaration is to
be filed is directory in nature, as the provision does not provide for any
adverse consequence for not filing of the declaration by the time limit. It
is submitted that the High Court has not properly appreciated and/or
considered the fact that non-filing of declaration before the due date, i.e.,
filing of the return of income would result in denial of the benefit under
Section 10B (8) of the IT Act. Therefore, it cannot be said that there is
no consequence of not filing of declaration before the due date of return
of income.
3.8 It is contended that the High Court has materially erred in following
and relying upon the decision of the Delhi High Court in the case of
Commissioner of Income Tax, Delhi-III, New Delhi v. Moser Baer
India Limited, decided on 14.05.2008 in ITA No. 950/2007, wherein it
was considering the requirement of Section 10B (7) of the IT Act.
3.9 It is next contended that there is a clear distinction between the
provisions seeking exemption and the provisions for deduction. That
7
Chapter III of the IT Act deals with exemptions. However, Chapter VIA
deals with deductions. That Section 10B of the IT Act is an exemption
provision and the condition for seeking an exemption is required to be
complied with strictly with the provision.
3.10 Learned ASG submitted that as held by this Court in a catena of
cases that a taxing statute should be strictly construed and that the
machinery provisions must be so construed to effectuate the object and
purpose of statute and that the exemption provisions must be construed
strictly and by a strict interpretation. Reliance is placed on the judgments
of this Court in the case of Commissioner of Income Tax-III v.
Calcutta Knitwears, Ludhiana (2014) 6 SCC 444 and Commissioner
of Customs (Import), Mumbai v. Dilip Kumar and Company and
others (2018) 9 SCC 1.
3.10 Making the above submissions and relying upon the aforesaid
decisions, it is prayed to allow the present appeal.
4. The present appeal is vehemently opposed by Shri S. Ganesh,
learned Senior Advocate appearing on behalf of the respondent –
assessee.
4.1 Learned counsel appearing on behalf of the assessee has
submitted that the only question of law which arises in the present case
is with regard to the interpretation of Section 10B (8) of the IT Act, viz.,
whether the requirement of submission of the declaration before the last
8
date for submission of the return is mandatory or directory. It is
submitted that on a true interpretation of Sections 10B (5) and 10B (8) of
the IT Act, the High Court has rightly observed and held that the
requirement of filing a declaration is mandatory in nature, while the time
limit in filing the declaration is directory in nature. It is submitted that the
High Court has rightly held the requirement of filing the declaration by
the time limit directory as non-filing of the declaration within the time limit
does not envisage any consequence. It is urged that the High Court has
rightly relied upon the decision of the Delhi High Court in the case of
Moser Baer (supra). It is submitted that the issues of validity of the
revised return of income; whether the respondent was entitled to carry
forward its losses under Sections 10B and 80 of the IT Act; and whether
the assessee had duly complied with Section 80 and Section 10B (5) of
the IT Act were not raised before the High Court.
4.2 It is submitted that apart from the above, even on merits also, the
Revenue has no case. This is because Section 80 of the IT Act only
requires that an assessee claiming carry forward of loss should file a
return showing the loss before the last date for submitting the return. It
is submitted that in the instant case the assessee filed the original return
in time declaring the loss and thereby complied with Section 80 of the IT
Act.
9
4.3 It is further submitted that though it was not necessary for the
exercise of option under Section 10B (8) of the IT Act, the assessee filed
a revised return only to bring to the notice of the AO the factum of
exercise of option under Section 10B. Even if the revised return had not
been filed and instead, the assessee had submitted the declaration in
writing to the AO during the assessment proceedings, it would have
made no difference whatsoever to the exercise of option under Section
10B (8) of the IT Act. It is submitted that therefore the validity of the
revised return is wholly immaterial and irrelevant.
4.4 It is further submitted that the accountant’s certificate under
Section 10B (5) is required only if the assessee claims the deduction
under Section 10B. This certificate only certifies the profit/loss of
Section 10B unit and the amount of deduction under Section 10B (1), if
any. The certificate, if already submitted, becomes irrelevant if the claim
is withdrawn under Section 10B. In any event, the contents of this
certificate regarding profit/loss are not in any way affected by the
withdrawal of the Section 10B claim. It is submitted that in the present
case, the loss set out in Section 10B certificate remained exactly the
same after withdrawal of the claim made under Section 10B and the
respondent making the claim for carry forward of loss. It is submitted
that there was no claim for any deduction under Section 10B (1) at any
time.
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4.5 It is submitted that the incontrovertible position set out in
paragraphs 4.2 to 4.4 above is the precise reason why these points were
not even attempted to be raised, either before the ITAT or before the
High Court, and are sought to be raised before this Court for the first
time and without disclosing the correct and complete facts.
4.6 It is further submitted by Shri S. Ganesh, learned counsel
appearing on behalf of the assessee that on interpretation of Section
10B (8) of the IT Act, the case is squarely covered by the judgment of
this Court in the case of CIT, Maharashtra v. G.M. Knitting Industries
Pvt. Ltd. (2016) 12 SCC 272. It is submitted that the case involved a
claim for additional depreciation on plant and machinery under Section
32(1) (ii-a) of the IT Act. That provision gave the assessee the option to
claim additional depreciation, over and above the usual or ordinary
depreciation mandatorily allowed under Section 32(1) of the IT Act. This
option had to be exercised by the assessee by filing a statutory Form 3-
AA along with the Return of Income, which gave details of the plant and
machinery and also a certificate that the claim for additional depreciation
was correctly made. Therefore, if the said Form 3-AA was not filed with
the Return, it was a clear indication that the assessee had opted not to
claim additional depreciation. In the case of G.M. Knitting (supra), the
assessee did not file Form 3-AA along with the return of income, but
chose to file the Form much later, but before the passing of the
11
assessment order, which may be passed as long as 26 months after the
return was filed as provided under Section 153(1) of the IT Act. The
Revenue rejected the form on the ground that it had not been filed along
with the return of income and declined to grant additional depreciation as
claimed by the assessee. It is submitted that this Court held that the
requirement that Form 3-AA should be submitted along with return was
only directory and that therefore even though the Form had been
submitted long after the filing of the return, the assessee was entitled to
claim additional depreciation under Section 32(1)(ii-a) of the IT Act.
4.7 It is submitted that exactly the same principle applies to the
interpretation of Section 10B (8) of the IT Act. Section 10B (8) enables
an assessee to exclude the applicability of the deduction under Section
10B by filing a declaration to that effect before the last date in which the
return of income is required to be filed. It is submitted that as held in
G.M. Knitting (supra), the requirement that the Form should be
submitted by a certain deadline is directory, though the submission of the
Form itself may be regarded as mandatory. It is urged that the present
case stands on a far stronger footing and on a far higher pedestal as
compared to G.M. Knitting (supra). This is because Section 10B (8)
specifically and unequivocally gives the assessee a statutory right to
exercise his option and to decide not to avail of the benefit of section
10B (8) in a particular Assessment Year. For the purpose of Section
12
32(1)(ii-a) of the IT Act, by permitting the assessee to file the Form 3-AA
long after the return, this Court has in effect permitted the assessee to
make one option at the time of filing the return and change the option
long thereafter, at any time before the assessment is made. That if such
change of option could be permitted under Section 32(1)(ii-a), the case
for permitting it is far stronger under Section 10B (8) where the statute
itself expressly and unequivocally gives the assessee the right to change
his option. It is submitted that the basic premise is that a substantive
claim, which the assessee considers to be more beneficial, must be
allowed to be made until the conclusion of assessment and the time
within which any form which enables the claim should be filed, is only
directory.
4.8 It is further submitted that this Court in G.M. Knitting (supra) has
specifically approved the judgment of the Bombay High Court in the case
of Commissioner of Income Tax v. Shivanand Electronics ((1994)
209 ITR 63). That judgment dealt with an assessee’s claim for deduction
under Section 80HHC. Section 80HHC specifically prohibited the grant
of deduction under Section 80HHC unless the stipulated audit report was
filed along with the return of income. The assessee filed the required
audit report long after the return. The Bombay High Court held that
while the filing of the audit report was mandatory, the requirement that it
should be filed along with the return was only directory, notwithstanding
13
the peremptory language of the prohibition in Section 80HHC (5). It is of
vital importance to note that there is no such prohibition in Section 10B.
Further, as already pointed out, Section 10B (8) itself expressly gives the
assessee the right to opt out of section 10B. This substantive statutory
right cannot in law be nullified by construing the purely procedural time
element requirement regarding the filing of the declaration under Section
10B (8) as mandatory. Reliance is placed on the judgment of the
Telangana High Court in the case of Telangana State Pollution Board
v. CBDT (Writ Petition No. 4834/2020, decided on 26.07.2021).
4.9 It is further submitted by the learned counsel appearing on behalf
of the assessee that the submission on behalf of the revenue that by the
impugned judgment and order and the interpretation by the High Court,
the statutory option expressly given by Section 10B (8) is in effect
nullified and that Section 10B (8) is rewritten by introducing in it a
prohibition similar to Section 80HHC(5), though the legislature did not
enact any such prohibition and it completely overlooks and ignores the
legislative background of section 10B has no substance. It is urged that
as such the issue involved in the present case is directly covered by the
decision of the Delhi High Court in the case of Moser Baer (supra),
against which a special leave petition was preferred in this Court and the
same was dismissed as withdrawn. That the decision of Moser Baer
(supra) has been subsequently followed in the case of CIT v. Rana
14
Polycot Ltd. 2011 SCC OnLine P&H 17591. That both these
judgments are on Section 10B itself and they clearly and unequivocally
stated that while the submission of the declaration is mandatory, the
requirement that it should be submitted before the due date of return is
only directory and Section 10B deduction could not be disallowed if the
declaration was filed before the assessment was made.
4.10 Shri Ganesh, learned counsel appearing on behalf of the assessee
has submitted that there are a large number of judgments dealing with
other sections of the IT Act which expressly provide that a particular
deduction would not be allowed if a particular report or certificate of
declaration was not filed along with the return of income. It is submitted
that in each of the cases, it is held that the requirement of submission of
the document is mandatory, but the stipulation that it should be filed
along with the return of income is only directory. Shri Ganesh, learned
counsel has referred to the following decisions:
i) Moser Baer (supra);
ii) Rana Polycot Ltd. (supra);
iii) G.M. Knitting Industries Pvt. Ltd. (supra);
iv) CIT v. Panama Chemical Works, 2006 SCC OnLine MP
704;
v) CIT v. Punjab Financial Corp. ILR 2002 (1) P&H 438;
vi) CIT v. Hardeodas Aggarwala Trust; 1991 SCC OnLine
Cal.414;
vii) CIT v. Gupta Fabs, 2005 SCC OnLine P&H 1315;
viii) Murali Export House v. CIT, 1995 SCC OnLine Cal. 286;
ix) CIT v. Berger Paints India Ltd., 2002 SCC OnLine Cal.
869; and
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x) CIT v. Ramani Relators (P) Ltd., 2014 SCC OnLine Mad.
12717.
It is submitted that therefore on the principle of stare decisis, this
Court may not interfere with the impugned judgment and order passed
by the High Court.
4.11 Now so far as the submission on behalf of the Revenue that
Section 10B is an exemption provision, it is vehemently submitted by the
learned counsel appearing on behalf of the assessee that as held by this
Court in the case of CIT v. Yokogawa India Ltd. (2017) 2 SCC 1,
Section 10B is a deduction provision and not an exemption provision.
4.12 Making the above submissions and relying upon the aforesaid
decisions, it is prayed to dismiss the present appeal.
5. We have heard Shri Balbir Singh, learned ASG appearing on
behalf of the Revenue and Shri S. Ganesh, learned Senior Advocate
appearing on behalf of the assessee at length and perused the material
on record.
The short question which is posed for consideration of this Court
is, whether, for claiming exemption under Section 10B (8) of the IT Act,
the assessee is required to fulfil the twin conditions, namely, (i)
furnishing a declaration to the assessing officer in writing that the
provisions of Section 10B (8) may not be made applicable to him; and (ii)
16
the said declaration to be furnished before the due date of filing the
return of income under sub-section (1) of Section 139 of the IT Act.
6. In the present case, the High Court as well as the ITAT have
observed and held that for claiming the so-called exemption relief under
Section 10B (8) of the IT Act, furnishing the declaration to the assessing
officer is mandatory but furnishing the same before the due date of filing
the original return of income is directory. In the present case, when the
assessee submitted its original return of income under Section 139(1) of
the IT Act on 31.10.2001, which was the due date for filing of the original
return of income, the assessee specifically and clearly stated that it is a
company and is a 100% export-oriented unit and entitled to claim
exemption under Section 10B of the IT Act and therefore no loss is being
carried forward. Along with the original return filed on 31.10.2001, the
assessee also annexed a note to the computation of income clearly
stating as above. However, thereafter the assessee filed the revised
return of income under Section 139(5) of the IT Act on 23.12.2002 and
filed a declaration under Section 10B (8) which admittedly was after the
due date of filing of the original return under Section 139(1), i.e.,
31.10.2001.
7. It is the case on behalf of the Revenue that as there was a noncompliance of twin conditions under Section 10B (8) of the IT Act,
namely, the declaration under Section 10B (8) was not submitted along
17
with the original return of income, the assessee shall not be entitled to
the exemption/benefit under Section 10B (8) of the IT Act. According to
the Revenue, furnishing of declaration under Section 10B (8) before the
due date of filing original return of income is also mandatory. On the
other hand, it is the case on behalf of the assessee, which has been
accepted by the High Court, that the requirement of submission of
declaration under Section 10B (8) is mandatory in nature, but the time
limit within which the declaration is to be filed is directory in nature.
8. While considering the issue involved, whether the time limit within
which the declaration is to be filed as provided under Section 10B (8) is
mandatory or directory, Section 10B (8) is required to be referred to,
which reads as under:
“10B (8) Notwithstanding anything contained in the foregoing
provisions of this section, where the assessee, before the due date for
furnishing the return of income under sub-section (1) of Section 139,
furnishes to the Assessing Officer a declaration in writing that the
provisions of this section may not be made applicable to him, the
provisions of this section shall not apply to him for any of the relevant
assessment years.”
On a plain reading of Section 10B (8) of the IT Act as it is, i.e.,
“where the assessee, before the due date for furnishing the return of
income under sub-section (1) of section 139, furnishes to the Assessing
Officer a declaration in writing that the provisions of Section 10B may not
be made applicable to him, the provisions of Section 10B shall not apply
to him for any of the relevant assessment years”, we note that the
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wording of the Section 10B (8) is very clear and unambiguous. For
claiming the benefit under Section 10B (8), the twin conditions of
furnishing the declaration to the assessing officer in writing and that the
same must be furnished before the due date of filing the return of income
under sub-section (1) of section 139 of the IT Act are required to be
fulfilled and/or satisfied. In our view, both the conditions to be satisfied
are mandatory. It cannot be said that one of the conditions would be
mandatory and the other would be directory, where the words used for
furnishing the declaration to the assessing officer and to be furnished
before the due date of filing the original return of income under subsection (1) of section 139 are same/similar. It cannot be disputed that in
a taxing statute the provisions are to be read as they are and they are to
be literally construed, more particularly in a case of exemption sought by
an assessee.
9. In such a situation, filing a revised return under section 139(5) of
the IT Act claiming carrying forward of losses subsequently would not
help the assessee. In the present case, the assessee filed its original
return under section 139(1) and not under section 139(3). Therefore, the
Revenue is right in submitting that the revised return filed by the
assessee under section 139(5) can only substitute its original return
under Section 139(1) and cannot transform it into a return under Section
139(3), in order to avail the benefit of carrying forward or set-off of any
19
loss under Section 80 of the IT Act. The assessee can file a revised
return in a case where there is an omission or a wrong statement. But a
revised return of income, under Section 139(5) cannot be filed, to
withdraw the claim and subsequently claiming the carried forward or setoff of any loss. Filing a revised return under Section 139(5) of the IT Act
and taking a contrary stand and/or claiming the exemption, which was
specifically not claimed earlier while filing the original return of income is
not permissible. By filing the revised return of income, the assessee
cannot be permitted to substitute the original return of income filed under
section 139(1) of the IT Act. Therefore, claiming benefit under section
10B (8) and furnishing the declaration as required under section 10B (8)
in the revised return of income which was much after the due date of
filing the original return of income under section 139(1) of the IT Act,
cannot mean that the assessee has complied with the condition of
furnishing the declaration before the due date of filing the original return
of income under section 139(1) of the Act. As observed hereinabove, for
claiming the benefit under section 10B (8), both the conditions of
furnishing the declaration and to file the same before the due date of
filing the original return of income are mandatory in nature.
10. Even the submission on behalf of the assessee that it was not
necessary to exercise the option under section 10B (8) of the IT Act and
even without filing the revised return of income, the assessee could have
20
submitted the declaration in writing to the assessing officer during the
assessment proceedings has no substance and the same cannot be
accepted. Even the submission made on behalf of the assessee that
filing of the declaration subsequently and may be during the assessment
proceedings would have made no difference also has no substance. The
significance of filing a declaration under section 10B (8) can be said to
be co-terminus with filing of a return under section 139(1), as a check
has been put in place by virtue of section 10B (5) to verify the
correctness of claim of deduction at the time of filing the return. If an
assessee claims an exemption under the Act by virtue of Section 10B,
then the correctness of claim has already been verified under section
10B (5). Therefore, if the claim is withdrawn post the date of filing of
return, the accountant’s report under section 10B (5) would become
falsified and would stand to be nullified.
11. Now so far as the reliance placed upon the decision of this Court in
the case of G.M. Knitting Industries Pvt. Ltd. (supra), relied upon by
the learned counsel appearing on behalf of the assessee is concerned,
Section 10B (8) is an exemption provision which cannot be compared
with claiming an additional depreciation under section 32(1) (ii-a) of the
Act. As per the settled position of law, an assessee claiming exemption
has to strictly and literally comply with the exemption provisions.
Therefore, the said decision shall not be applicable to the facts of the
21
case on hand, while considering the exemption provisions. Even
otherwise, Chapter III and Chapter VIA of the Act operate in different
realms and principles of Chapter III, which deals with “incomes which do
not form a part of total income”, cannot be equated with mechanism
provided for deductions in Chapter VIA, which deals with “deductions to
be made in computing total income”. Therefore, none of the decisions
which are relied upon on behalf of the assessee on interpretation of
Chapter VIA shall be applicable while considering the claim under
Section 10B (8) of the IT Act.
12. Even the submission on behalf of the assessee that the assessee
had a substantive statutory right under Section 10B (8) to opt out of
Section 10B which cannot be nullified by construing the purely
procedural time requirement regarding the filing of the declaration under
Section 10B (8) as being mandatory also has no substance. As
observed hereinabove, the exemption provisions are to be strictly and
literally complied with and the same cannot be construed as procedural
requirement.
13. So far as the submission on behalf of the assessee that against the
decision of the Delhi High Court in the case of Moser Baer (supra), a
special leave petition has been dismissed as withdrawn and the revenue
cannot be permitted to take a contrary view is concerned, it is to be
noted that the special leave petition against the decision of the Delhi
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High Court in the case of Moser Baer (supra) has been dismissed as
withdrawn due to there being low tax effect and the question of law has
specifically been kept open. Therefore, withdrawal of the special leave
petition against the decision of the Delhi High Court in the case of Moser
Baer (supra) cannot be held against the revenue.
14. In view of the above discussion and for the reasons stated above,
we are of the opinion that the High Court has committed a grave error in
observing and holding that the requirement of furnishing a declaration
under Section 10B (8) of the IT Act is mandatory, but the time limit within
which the declaration is to be filed is not mandatory but is directory. The
same is erroneous and contrary to the unambiguous language contained
in Section 10B (8) of the IT Act. We hold that for claiming the benefit
under Section 10B (8) of the IT Act, the twin conditions of furnishing a
declaration before the assessing officer and that too before the due date
of filing the original return of income under section 139(1) are to be
satisfied and both are mandatorily to be complied with. Accordingly, the
question of law is answered in favour of the Revenue and against the
assessee. The orders passed by the High Court as well as ITAT taking a
contrary view are hereby set aside and it is held that the assessee shall
not be entitled to the benefit under Section 10B (8) of the IT Act on noncompliance of the twin conditions as provided under Section 10B (8) of
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the IT Act, as observed hereinabove. The present Appeal is accordingly
Allowed. However, in the facts and circumstances of the case, there
shall be no order as to costs.
……………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………..J.
JULY 11, 2022. [B.V. NAGARATHNA]
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