2017 (12) TMI 1575 - HC - Income Tax

Eligibility to deduction u/s 10B - deduction only for period of 10 consecutive assessment years beginning with the Assessment year relevant to the previous in which the undertaking commences its manufacturing - Held that - On plain reading of Section 10B(1) two things which emerge are that the benefit will start from the date of manufacturing and admittedly in this case manufacturing activity started on 12.3.2001 in that view of the matter the benefit will follow for the year 2001-02 and not for the year 2010-11. Admittedly 10 years is taken to be consecutive and if the exemption or benefit of Sub-section (8) as claimed by the assessee he has made declaration prior to filing of return letter in 2013 and mentioning in return will not help the assessee. In our considered opinion declaration is not there and so called declaration in the return is not permissible because Section 8 envisaged that declaration is to be made prior to filing of the return which has not been done therefore in that view of the matter the issue is answered in favour of the department and against the assessee.

Summary

Issues:
- Interpretation of Section 10B(1) for deduction eligibility
- Validity of declaration under Section 10B(8) for exemption
- Application of judicial precedents on declaration and deduction options

Interpretation of Section 10B(1) for deduction eligibility:
The appellant challenged the tribunal's decision denying deduction u/s 10B in the 11th assessment year. The appellant contended that as per Section 10B(1), the deduction is allowed for 10 consecutive assessment years starting from the year the manufacturing commenced. The manufacturing in this case began on 12.3.2001, making the appellant eligible for the deduction from A.Y. 2001-02 to A.Y. 2010-11. The court emphasized that the benefit starts from the manufacturing date, not the subsequent years, thus ruling in favor of the department.

Validity of declaration under Section 10B(8) for exemption:
The appellant argued that the tribunal and CIT(A) erred in not considering the absence of a declaration by the assessee before filing the return, as required by Section 10B(8). The court highlighted that Section 10B(8) mandates a written declaration to the Assessing Officer before the return filing date. The court found no valid declaration in this case, emphasizing that a declaration post-return filing is impermissible. Consequently, the court favored the department's stance against the appellant.

Application of judicial precedents on declaration and deduction options:
The respondent supported the tribunal's decision based on the Madras High Court's ruling in CIT vs. Tamil Nadu Jai Bharath Mills Ltd. The court referred to various judicial precedents, including the Delhi High Court and Supreme Court decisions, to emphasize the importance of validly exercising options before return filing. The court highlighted that the law does not specify a particular mode of option exercise but requires it before return submission. Considering the legal interpretations and circular guidelines, the court upheld the tribunal's decision, dismissing the appeals and supporting the respondent's stance on the issue.

In conclusion, the court analyzed the provisions of Section 10B, emphasized the significance of timely declarations, and applied relevant judicial precedents to decide in favor of the department, disallowing the appellant's claim for deduction in the 11th assessment year. The judgment underscored the importance of strict adherence to statutory requirements and clarified that the court's role is to interpret tax laws, not provide charitable interpretations as desired by the assessee.