TMI Blog2006 (11) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be read as 'all' as in that case the exemption granted in the earlier year have to be withdrawn in case the assessee file the declaration under section 10(7) say in third year of the block period of five years. We are inclined to hold that the requirement for filing the declaration as per the provisions of section 10B(7) of the Act is merely directory in nature and not mandatory. Thus, if such declaration is filed during the assessment proceedings it would be sufficient compliance with the provisions of section 10B(7) of the Act. It may be mentioned that similar view has been taken in case of Expo Packaging Ltd.[ 1994 (11) TMI 155 - ITAT AHMEDABAD-C] It may also be mentioned that the reliance placed by the Ld. DR upon the decision in the case of Goetze (India) Ltd. v. CIT [ 2006 (3) TMI 75 - SUPREME COURT] is misplaced inasmuch as the said decision has been given in the different context inasmuch as the income of the export processing zone are assessable as per provisions of section 10A/10B of the Act, which is a code itself. Thus, we are of the view that it is open to an assessee not to claim tax holiday benefit u/s 10A/10B of the Act for anyone year or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I were exempt under section 10B. The assessee filed another letter on 8-2-1999 wherein it was stated that the assessee was withdrawing its claim of deduction under section 10B with respect to the Floppy Unit II for assessment year 1996-97. It was added that since the Floppy Unit II had incurred losses it could not be covered by the provisions of section 10B which were meant to cover only profit and gains to the unit. The assessee also furnished a declaration stating that the exemption shall not be claimed in respect of Floppy Unit II in assessment year 1996-97 and in the coming years. The assessee also quoted decisions of Ahmedabad Bench in the case of ITO v. Expo Packaging [1995] 78 Taxman 212 stating that it was not mandatory to furnish declaration as required by sub-section (7) of section 10A and the declaration could also be filed by the assessee during the course of assessment proceedings. A reliance was also placed upon a decision in 63 ITD 293 (sic) emphasizing that the benefit under section 10B should not be restrict by a very rigid consideration of the different provision of the Act. The Assessing Officer referred to the provisions of sub-section (7) of section 10B accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions laid down in sub-section (2). Then I move onto sub-section (3) which provides that profits and gains of any five consecutive years specified by the assessee falling within a period of eight years beginning with the assessment year in which manufacturing etc. starts shall not be included in the income. It means that this section applies to a block of five consecutive assessment years selected by an assessee out of the initial eight years of the undertaking. This sub-section also reinforces my interpretation about loss making units inasmuch as whether an undertaking makes a profit or loss in any of those five consecutive assessment years, the block of five assessment years remain intact and the provisions of this sections shall apply to all the five consecutive assessment years constituting the block. Sub-section (7) gives an option to an assessee that before the due date for furnishing the return of his income under subsection (1) of section 139 to furnish to the Assessing Officer a declaration that the provisions of this section may not be made applicable to him and on doing so, the provisions of section 10B would not apply to him for any of the relevant assessment years. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us the Ld. Counsel for the assessee has submitted that section 10B of the Act, prior to its substitution by the Finance Act, 2000 with effect from 1-4-2001 was inserted by Finance Act, 1988 with effect from 1-4-1989 as a special provision in respect of new established 100 per cent EOUs. He has referred to the relevant provisions of the said section prior to its amendment by the Income-tax (Second Amendment) Act, 1998 with effect from 1-4-1999. He has submitted that sub-section (1) of section 10B of the Act provides that any profits and gains derived by an assessee from a 100 per cent EOU shall not be included in the total income of the assessee. Sub-section (3) of section 10B as applicable up to assessment year 1998-99, provided that the profits as aforesaid shall not be included in the total income of the assessee in respect of any five consecutive assessment years falling within the block of eight years, beginning with the previous year in which the undertaking begins to manufacture or produce articles or things. Sub-section (7) provided that where the assessee furnishes a declaration to opt out of the provisions of section 10B before the due date of furnishing the return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature to have qualified the expression five consecutive assessment years in sub-section (3) and the expression of the relevant assessment years in sub-section (7) of section 10B of the Act by the word any . According to the Ld. Counsel, the Legislature has deliberately qualified the expression five consecutive assessment years in sub-section (3) and the expression of the relevant assessment years in sub-section (7) of section 10B by the word any so as to confer on the assessee the flexibility to opt out of the provision of section 10B during any of the years in which the assessee is eligible to claim exemption under that section. If the intention of the Legislature had been to deny the benefit of exemption under section 10B of the Act, once the declaration filed under sub-section (7) of that section, the Legislature would have unambiguously and unequivocally stated that provision of section shall not apply to him for all the relevant assessment years or alternatively that provision of section shall not apply to him for each of the relevant assessment years . Thus, if the interpretation/ contention of the lower authorities were to be accepted, the simultaneous use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the case of Navin Bharat Industries Ltd. v. Dy. CIT [2004] 90 ITD 1 (Mum.) (TM). 10. The ld. DR, on the other hand has submitted that the assessee had claimed the exemption under section 10B of the Act in the initial assessment year i.e., 1994-95 and in its letter dated 8-1-1999 it claimed that income of floppy unit is exempt under section 10B of the Act. Thus, any subsequent claim to opt out of the provision of section 10B must be made by way of filing revised return of income within the period prescribed under section 139(1) of the Act in view of decision of the Apex Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323. Since the subsequent claim to opt out of the provisions of section 10B was not made within period prescribed under section 139(1), the assessee cannot claim the same during the assessment proceedings. He has further argued that in view of the rule of the harmonious construction, the ld. CIT(A) was justified to hold that in case the assessee does not want to avail of the exemption under section 10B, then he has to file a declaration before the due date of filing the return for the first assessment year. Thus, he has supported the order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ria of section 10B of the Act. Since the assessee has claimed the exemption under section 10B in assessment year 1994-95, thus the assessee has opted for availing the exemption for block of five consecutive assessment years starting from 1994-95. Hence the assessee cannot opt out of this provision in the year under consideration and as such the provision of section 10B shall apply to assessee from assessment years 1994-95 to 1998-99. Thus he has held that the issue whether the requirement of filing the application for opting out of section 10B along with return of income was mandatory or not, was not relevant. 13. The questions that arise for consideration in these appeals are whether it is open to the assessee to opt out of the provisions of section 10B of the Act for anyone of the relevant assessment years falling within the block of five years by filing a declaration under section 10B of the Act and whether the declaration under section 10B(7) of the Act can be filed for the first time during the relevant assessment proceeding or not? 14. The section 10B of the Act is code itself. It contains scheme of taxation formulated by Government of taxability of units set up in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption to units set up in Software Technology Park (STP unit). The scheme of section 10A and the language of the said section is pari materia with the section 10B of the Act. It may be mentioned that up to assessment year 1986-87, the exemption under section 10A of the Act was available for the first year in which undertaking began manufacturing/production i.e., initial year and four years immediately succeeding the initial year. If the assessee wanted to opt out of section 10A of the Act, the assessee was mandated to file declaration in that regard in the initial assessment year. It is in the context of said provision of section 10A [viz., sub-sections (3) and (7)] the Circular No. 308 was issued by CBDT requiring the assessee to file declaration in the first year itself. Section 10A was, thereafter amended by Taxation Law (Amendment Miscellaneous Provisions) Act, 1986 with effect from1-4-1987to the effect that exemption was available for any five consecutive assessment years falling within the period of 8 years. It was further provided that assessee may furnish the declaration stating that the provision of section 10A of the Act may not be made applicable to him before the due d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the claim by filing a revised return. 17. In the case of Navin Bharat Industries Ltd v. Dy. CIT [2004] 90 ITD 1 (Mum.) (TM) the Tribunal has found that the benefit of section 10A of the Act was available to the assessee for five years. The assessee claimed benefit for three years. For the rest of the years, the assessee did not claim the benefit of section 10A. The assessee opted to get the profits of new industrial undertaking assessed under the normal provision. The Tribunal has held that they find no provision in the Act by which the assessee can be forced to avail the benefit for five years. If the assessee wants to put the income under normal computation procedure, there appears to be no bar for doing so. If the benefit is conferred on the assessee, he cannot be forced to avail the same. 18. As regards the second question we are inclined to hold that the requirement for filing the declaration as per the provisions of section 10B(7) of the Act is merely directory in nature and not mandatory. Thus, if such declaration is filed during the assessment proceedings it would be sufficient compliance with the provisions of section 10B(7) of the Act. It may be mentioned that sim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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