TMI Blog2022 (7) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstance. As observed hereinabove, the exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement. 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) 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) - We hold that for claiming the benefit u/s 10B (8) 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) on non-compliance of the twin conditions as provided u/s 10B (8) as observed hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 (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 remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but before the passing of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Polycot Ltd. 2011 SCC OnLine P H 17591. That both these judgments are on Section 10B itself and they clearly and unequivocally stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming 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. 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 31.10.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laration 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 substit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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