TMI Blog2017 (4) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... In such cases, (unlike in cases where no such benefits are sought) the assessee has to necessarily claim the benefit while filing a return within the time, under Section 139 (1). These provisions are rather like limitation periods, which are statutes of repose (“Limitation is a statute of repose. The fourth proviso to Section 10B (1) is a qualifying proviso and it only seeks to limit the general provision in Section 10B (1) with a further stipulation or condition. As held in State of A.P. v. Nallamilli Ramli Reddi, (2001 (8) TMI 1396 - SUPREME COURT) Article 14 of the Constitution of India permits reasonable classification on fulfillment of two factors: (a) that the classification must be found on intelligible differentia which distinguishes persons grouped together from others who are left out of the group, and (b) that differentia must have a reasonable connection with the object sought to be achieved. As discussed earlier, the objective behind insertion of the impugned provisions was to defeat multiple claims of deductions and to ensure better tax compliance. Thus, the impugned provisions (fourth proviso to Section 10B (1) and Section 80A (5)) so inserted acknowledge the exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2002-03, set up Export Oriented Unit (EOU) as an independent unit. The profits derived therefrom were eligible for deduction under Section 10B of the Act. No deduction however, was claimed by the petitioner up to AY 2007-08. In the relevant assessment year (AY), the said entity earned profits of ₹ 2,43,53,757/- which were eligible to tax exemption. The petitioner failed to claim deduction in the belated income tax returns filed by it on 31.12.2008, (which was due on 30.09.2008) and only made claim for deduction under Section 10B in the subsequent revised return filed by him on 26.03.2010. The Petitioner claimed that it was precluded from filing his return of income within the time prescribed under Section 139(1) because: (a) there were some disputes among family members of the directors of the Petitioner company; and (b) due date of filing return by the assessee company was for the first time reduced by Finance Act, 2009 from 31st October following the close of the previous year to 30th September following. Accordingly, for AY 2008-09, the return was due on 30.09.2009 instead of the earlier due date of 31.10.2009, a fact the Petitioner claims it was unaware of. 3. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. 6. The assessee contended that due to a variety of reasons he failed to file return of income within the stipulated time given under Section139(1) of the Act e.g., due to non-completion of audit, documents impounded during search and not available in time, records lost due to floods, fire, etc. Again many reasons may preclude an assessee from making a claim of deduction under Section 10B of the Act. It was argued that in certain cases, the claim may subsequently become admissible due to the AO computing positive income of the eligible undertaking after making additions/ disallowances and also computing positive gross total income for the year, which is deemed to be sufficient to absorb the admissible deduction. In support of this, the learned senior counsel, Mr. Ajay Vohra cited Circular No. 14(SL35) of 1955, which required the officers of the department to assist taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. It was submitted that therefore it is incumbent for the revenue to draw the attention of the assessee to any refunds and reliefs to which they appear to be clearly entitled but which they have omitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject for which those provisions were introduced. The said provisions, inserted into the Act were done with the objective to curtail misuse of tax incentives available to assesees. The Petitioner submits that these are already achieved through the existing provisions of the Act. 10. The Petitioner argues that by operation of the impugned provisions, an assessee would be denied the legitimate claim of deduction under Section 10B, which would otherwise be available to it and that the impugned provisions do not take into consideration any bona fide lapse in filing the return. It is also argued that the revenue has several remedies under the statute to make amendment for its lapses, e.g., Sections 147, 154, 263, etc. These existing powers are adequate to address abuse or misuse of the exemption or deduction provisions. However, the imposition of conditions which act as rigid barriers and do not subserve the object of granting relief either under Section 80A or under Section 10-B but which impede the genuine claims of an assessee are unreasonable and inequitable and consequently arbitrary, in violation of Article 14. 11. It was contended that the said provisions also discriminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing return before due date was extended to persons who are claiming exemptions/deductions on business profits under other provisions of the Act to timely furnish those returns so as to enable the Department to carry out early examinations with respect to their claims. Hence the objective of this provision was to improve tax compliance. 14. Section 80A (5), along with Section 80A (4) was introduced by the 2009 amendment, with the intention of avoiding multiple deductions in respect of the same profits. With this objective in mind, the legislature imposed three conditions for claiming deduction under S.10A, 10AA, 10B, 10BA, or Chapter VI-A: (i) If a deduction in respect of any amount was allowed u/s 10A, 10AA or 10B or 10BA or under provisions of Chapter VI-A under the head C. Deductions in respect of certain incomes in any assessment year, then the same deduction in respect of the same profit gains shall not be allowed under any other provisions of the Act for such assessment year (Section 80A(4)); (ii) The aggregate deduction under various provisions shall not exceed the profit and gains of undertaking or unit or enterprise or the business profit, as the case m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature ( Special Courts Bill, 1978, Re [1979}1 SCC 380 , seven bench; R. K. Garg v. Union of India [1981]4 SCC 675 , five judge Bench). It was further held in R. K. Garg's case [1981]4 SCC 675 that laws relating to economic activities or those in the field of taxation enjoy greater latitude than laws touching civil right such as freedom of speech, religion, etc. Such legislation may not be struck down merely on account of crudities and inequities inasmuch as such legislations are designed to take care of complex situation and complex problems which do not admit of solutions through any doctrinaire approach or strait-jacket formula. 17. The revenue contends that the intention of the legislature should be kept in mind, to understand the rationale behind the impugned provisions. The benefits that are provided to assessees under Sections 10A, 10AA, 10B, 10BA and Chapter VIA-C, would otherwise form a major source of tax revenue for the Government. Any deductions sought or exemptions claimed are to be properly scrutinized to check for genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State has a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attach on the ground that it taxes some person or objects and not others; it is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that would be violative of Article 14. It is well settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. The decision in State of A.P. v. Nallamilli Ramli Reddy, (2001) 7 SCC 708 , was relied on by the revenue to contend that what Article 14 of the Constitution prohibits is class legislation and not classification for the purpose of legislation . The test of permissible classification is twofold; (i) that the classification must be founded on intelligible differentia which distinguishes persons grouped together from others who are left out of the group, and (ii) that differentia must have a rational connection with the object sought to be achieved. Thus, it is not required under Article 14 to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under Section 139(1) if it so deems fit. The petitioners contention is that the Board s power under Section 119(2) is merely discretionary. 22. The next argument of the petitioner is with regard to Circular No. 14(SL-35) of 1955 issued by the CBSE (Central Board of Revenue) which allows filing of a belated claim of depreciation when no claim for such depreciation has been made in the return of income. The court had held, in Mahendra Mills (supra) that the circular [I]mposes merely a duty on the officers of the department to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs. The Officer is required no more than to assist the assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not wish to claim that... Furthermore, this court notices that the petitioner is silent about Circular No. 29D (XIX 14) of 1965, which states that where the required particulars have not been furnished by the assessee and no claim for depreciation has been made in the return, the Income Tax Officer should estimate the income without allowing depreciation. Read cumulatively, bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may be seemingly painful or even discriminatory. Commenting on the Courts approach to challenges posed by such legislation, especially in the context of a challenge to Article 14, it was held in Ajoy Kumar Banerjee Ors. Etc v Union Of India Ors AIR 1984 SC 1130 that: The legislature however is free to recognise the degree of harm or evil and to make provisions for the same. In making dissimilar provisions for one group of public sector undertakings does not per se make a law discriminatory as such. It is well-settled that courts will not sit as super-legislature and strike down a particular classification on the ground that any under- inclusion namely that some others have been left untouched so long as there is no violation of constitutional restraints. 24. The Court is also unpersuaded by the petitioner s contention that the impugned provisions fail to pass muster under the classification test, as to be valid under Article 14 of the Constitution of India. This argument overlooks the fact that those claiming benefits of deduction and those who are not, although no doubt both taxpayers, are clearly apart. Thus, it is open to legislate and prescribe differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit the general provision in Section 10B (1) with a further stipulation or condition. As held in State of A.P. v. Nallamilli Ramli Reddi, (2001) 7 SCC 708 , Article 14 of the Constitution of India permits reasonable classification on fulfillment of two factors: (a) that the classification must be found on intelligible differentia which distinguishes persons grouped together from others who are left out of the group, and (b) that differentia must have a reasonable connection with the object sought to be achieved. As discussed earlier, the objective behind insertion of the impugned provisions was to defeat multiple claims of deductions and to ensure better tax compliance. Thus, the impugned provisions (fourth proviso to Section 10B (1) and Section 80A (5)) so inserted acknowledge the existence of persons owning 100% EOUs and seek to limit their time to claim deductions under the Act. The cases of State of U.P. v. Kamla Palace, AIR 2000 SC 617 and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector ETIO, AIR 2007 SC 1984 , are authorities which held that the legislature can devise classes for the purposes of taxing or not taxing, exempting or not exempting, g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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