Income Tax Act, 1961 – Ss. 10B, 10B (5), 10B (8), 72, 32 (1) (ii-a), 80, 139 (1), 139 (5) – Return of income u/S 139 (1) – Revised return –Denial of claim of carrying forward of losses –Respondent assessee filed return of income, declaring loss and claiming exemption u/S. 10 B of IT Act along with a note that no loss is being carried forward – Subsequently, assessee filed a declaration before Assessing Officer (AO) stating that it does not want to avail the benefit u/10 B as per S. 10 B (8) and thereafter filed a revised return of income wherein exemption u/10 B was not claimed and claim for carry forward of losses was made – AO rejected the withdrawal of exemption u/S. 10 B – Respondent Assessee filed appeal before Commissioner of Income Tax (Appeals), which upheld the order passed by AO – Assessee filed appeal before ITAT, which ruled in favour of assessee, allowing the assessee’s claim for carrying forward of losses under Section 72 of the IT Act – Appellant revenue went in appeal before High Court, which dismissed the appeal –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) 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 – Held: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 mandatory –A revised return of income, under Section 139(5) cannot be filed to withdraw the claim and subsequently claiming the carried forward or set-off of any loss –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permitted to substitute the original return of income filed under section 139(1) of the IT Act – Also, if the claim is withdrawn post the date of filing of return, the accountant’s report under section 10B (5) would become falsified and would stand to be nullified.
Interpretation of Statutes – Taxing Statutes/Provisions – 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 - Literal construction of interpretation to be used in taxing statutes/provisions
Allowing the appeal, the Court
HELD: 1.1 The 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. 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. [Para 8][50-G-H; 51-A-B]
1.2 Filing a revised return under section 139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee. 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 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 set-off 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. 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. [Para 9][51-B-F]
1.3 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. [Para 10][52-B-C]
1.4 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. An assessee claiming exemption has to strictly and literally comply with the exemption provisions. 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”. The exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement. [Para 11 & 12][52-D-F, H]
1.5 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. 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. The orders passed by the High Court as well as ITAT taking a contrary view are 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 non-compliance of the twin conditions as provided under Section 10B (8) of the IT Act. [Para 14][53-C-F]
Commissioner of Income Tax v. Andhra Cotton Mills Limited, [1996] 219 ITR 404 (AP); Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana (2014)
6 SCC 444 : [2014] 5 SCR 855; Commissioner of
Customs (Import), Mumbai v. Dilip Kumar and Company and others [2018] 9 SCC 1 : [2018] 7 SCR 1191;
Telangana State Pollution Board v. CBDT (Writ Petition No. 4834/2020, decided on 26.07.2021); CIT v.
Yokogawa India Ltd. [2017] 2 SCC 1 : (2016) 9 SCR 163; Commissioner of Income Tax, Delhi-III, New Delhi v. Moser Baer India Limited, decided on 14.05.2008 in ITA No. 950/2007; – referred to.
Commissioner of Income Tax v. Shivanand Electronics ((1994) 209 ITR 63); CIT v. Rana Polycot Ltd. 2011 SCC OnLine P&H 17591; CIT v. Ramani Relators (P) Ltd., 2014 SCC OnLine Mad. 12717; – referred to. CIT, Maharashtra v. G.M. Knitting Industries Pvt. Ltd. (2016) 12 SCC 272– inapplicable.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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