PRINCIPAL COMMISSIONER OF INCOME TAX-III, BANGALORE AND ANOTHER versus M/S WIPRO LIMITED on 11 July 2022

36

SUPREME COURT REPORTS

[2022] 17 S.C.R.

APRINCIPAL COMMISSIONER OF INCOME TAX-III,BANGALORE AND ANOTHER

v.

M/S WIPRO LIMITED

(Civil Appeal No. 1449 of 2022)

B

(Arising out of SLP (Civil) No. 7620/2021)

JULY 11, 2022

[M. R. SHAH AND B. V. NAGARATHNA, JJ.]

CIncome 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) – Revisedreturn –Denial of claim of carrying forward of losses –Respondentassessee filed return of income, declaring loss and claimingexemption u/S. 10 B of IT Act along with a note that no loss is beingcarried forward – Subsequently, assessee filed a declaration beforeDAssessing Officer (AO) stating that it does not want to avail thebenefit u/10 B as per S. 10 B (8) and thereafter filed a revisedreturn of income wherein exemption u/10 B was not claimed andclaim for carry forward of losses was made – AO rejected thewithdrawal of exemption u/S. 10 B – Respondent Assessee filedEappeal before Commissioner of Income Tax (Appeals), which upheldthe order passed by AO – Assessee filed appeal before ITAT, whichruled in favour of assessee, allowing the assessee’s claim forcarrying forward of losses under Section 72 of the IT Act – Appellantrevenue went in appeal before High Court, which dismissed theappeal –Whether, for claiming exemption under Section 10B (8) ofFthe IT Act, the assessee is required to fulfil the twin conditions,namely, (i) furnishing a declaration to the assessing officer in writingthat the provisions of Section 10B (8) may not be made applicableto him; and (ii) the said declaration to be furnished before the duedate of filing the return of income under sub-section (1) of SectionG139 of the IT Act – Held:For claiming the benefit under Section10B (8), the twin conditions of furnishing the declaration to theassessing officer in writing and that the same must be furnishedbefore 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 ofincome, under Section 139(5) cannot be filed to withdraw the claimH

and subsequently claiming the carried forward or set-off of anyloss –By filing the revised return of income, the assessee cannot bepermitted to substitute the original return of income filed undersection 139(1) of the IT Act – Also, if the claim is withdrawn postthe date of filing of return, the accountant’s report under section10B (5) would become falsified and would stand to be nullified.

Interpretation of Statutes – Taxing Statutes/Provisions – In ataxing statute the provisions are to be read as they are and they areto be literally construed, more particularly in a case of exemptionsought by an assessee - Literal construction of interpretation to beused in taxing statutes/provisions Allowing the appeal, the Court HELD: 1.1 The wording of the Section 10B (8) is very clearand unambiguous. For claiming the benefit under Section 10B(8), the twin conditions of furnishing the declaration to theassessing officer in writing and that the same must be furnishedbefore 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/orsatisfied. Both the conditions to be satisfied are mandatory. Itcannot be said that one of the conditions would be mandatory andthe other would be directory, where the words used for furnishingthe declaration to the assessing officer and to be furnished beforethe due date of filing the original return of income under sub-section (1) of section 139 are same/similar. It cannot be disputedthat in a taxing statute the provisions are to be read as they areand they are to be literally construed, more particularly in a caseof 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 ITAct claiming carrying forward of losses subsequently would nothelp the assessee. The revised return filed by the assessee undersection 139(5) can only substitute its original return under Section139(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 anyloss under Section 80 of the IT Act. The assessee can file a revisedreturn in a case where there is an omission or a wrong statement.But a revised return of income, under Section 139(5) cannot be AB

C

DEF

G

H

Afiled, to withdraw the claim and subsequently claiming the carriedforward or set-off of any loss. Filing a revised return under Section139(5) of the IT Act and taking a contrary stand and/or claimingthe exemption, which was specifically not claimed earlier whilefiling the original return of income is not permissible. By filingthe revised return of income, the assessee cannot be permittedBto substitute the original return of income filed under section139(1) of the IT Act. Claiming benefit under section 10B (8) andfurnishing the declaration as required under section 10B (8) inthe revised return of income which was much after the due dateof filing the original return of income under section 139(1) of theCIT Act, cannot mean that the assessee has complied with thecondition of furnishing the declaration before the due date of filingthe 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 sectionD10B (8) can be said to be co-terminus with filing of a return undersection 139(1), as a check has been put in place by virtue of section10B (5) to verify the correctness of claim of deduction at thetime of filing the return. If an assessee claims an exemption underthe Act by virtue of Section 10B, then the correctness of claimhas already been verified under section 10B (5). Therefore, ifEthe claim is withdrawn post the date of filing of return, theaccountant’s report under section 10B (5) would become falsifiedand would stand to be nullified. [Para 10][52-B-C]

1.4 Section 10B (8) is an exemption provision which cannotbe compared with claiming an additional depreciation underFsection 32(1) (ii-a) of the Act. An assessee claiming exemptionhas to strictly and literally comply with the exemption provisions.Chapter III and Chapter VIA of the Act operate in different realmsand principles of Chapter III, which deals with “incomes whichdo not form a part of total income”, cannot be equated withGmechanism provided for deductions in Chapter VIA, which dealswith “deductions to be made in computing total income”. Theexemption provisions are to be strictly and literally complied withand the same cannot be construed as procedural requirement.[Para 11 & 12][52-D-F, H]

H

1.5 The High Court has committed a grave error inobserving and holding that the requirement of furnishing adeclaration under Section 10B (8) of the IT Act is mandatory, butthe time limit within which the declaration is to be filed is notmandatory but is directory. The same is erroneous and contraryto the unambiguous language contained in Section 10B (8) of theIT Act. The twin conditions of furnishing a declaration before theassessing officer and that too before the due date of filing theoriginal return of income under section 139(1) are to be satisfiedand both are mandatorily to be complied with. The orders passedby the High Court as well as ITAT taking a contrary view are setaside and it is held that the assessee shall not be entitled to thebenefit under Section 10B (8) of the IT Act on non-compliance ofthe twin conditions as provided under Section 10B (8) of the ITAct. [Para 14][53-C-F]

Commissioner of Income Tax v. Andhra Cotton MillsLimited, [1996] 219 ITR 404 (AP); Commissioner ofIncome Tax-III v. Calcutta Knitwears, Ludhiana (2014)6 SCC 444 : [2014] 5 SCR 855; Commissioner ofCustoms (Import), Mumbai v. Dilip Kumar and Companyand others [2018] 9 SCC 1 : [2018] 7 SCR 1191;Telangana State Pollution Board v. CBDT(Writ PetitionNo. 4834/2020, decided on 26.07.2021);CIT v.Yokogawa India Ltd.[2017] 2 SCC 1 : (2016) 9 SCR163; Commissioner of Income Tax, Delhi-III, New Delhiv. Moser Baer India Limited, decided on 14.05.2008 inITA No. 950/2007; – referred to.

Commissioner of Income Tax v. Shivanand Electronics((1994) 209 ITR 63); CIT v. Rana Polycot Ltd.2011SCC 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.

Case Law Reference

[2014] 5 SCR 855referred to[2018] 7 SCR 1191referred to[2016] 9 SCR 163referred to[2016] 12 SCC 272inapplicable Para 3.10Para 3.10Para 4.11Para 4.6

A

B

C

D

E

F

G

H

ACIVIL APPELLATE JURISDICTION : Civil Appeal No.1449of 2022.

From the Judgment and Order dated 30.11.2020 of the High Courtof Karnataka at Bengaluru in I.T.A. No.462 of 2017.

Balbir Singh, ASG, D. L. Chidananda, Adit Khorana, Ms. SwatiBGhildiyal, Shyam Gopal, Ms. Aakanksha Kaul, Ms. Preeti Rani, UdaiKhanna, Ms. Monica Benjamin, Ms. Surbhi Singh, Raj Bahadur Yadav, Prahlad Singh, Advs. for the Appellants.

S. Ganesh, Sr. Adv., Ms. Archana Sahadeva, Ms. Pragati Agrawal,Advs. for the Respondent.

CThe Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 30.11.2020 passed by the High Court of Karnataka atBengaluru in Income Tax Appeal No. 462/2017, by which the High CourtDhas dismissed the said appeal preferred by the Revenue and hasconfirmed the judgment and order dated 25.11.2016 passed by the IncomeTax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore (for short,‘ITAT’), allowing the assessee’s claim for carry forward of losses underSection 72 of the Income Tax Act, 1961 (for short, ‘IT Act’), the RevenueEhas preferred the present appeal.

2. The respondent-assessee is a 100% export-oriented unit andengaged in the business of running a call centre and IT Enabled andRemote Processing Services. Assessee filed its return of income on31.10.2001 for Assessment Year 2001-2002, declaring loss ofFRs.15,47,76,990/- and claimed exemption under Section 10B of the ITAct. Along with the original return filed on 31.10.2001, the assesseeannexed a note to the computation of income in which the assesseeclearly stated that the company is a 100% export-oriented unit and entitledto claim exemption under Section 10B of the IT Act and therefore noloss is being carried forward. That thereafter, the assessee filed aGdeclaration dated 24.10.2002 before the Assessing Officer (AO) statingthat the assessee does not want to avail the benefit under Section 10Bof the IT Act for A.Y. 2001-02 as per Section 10B (8) of the IT Act. Theassessee filed the revised return of income on 23.12.2002 whereinexemption under Section 10B of the IT Act was not claimed and theHassessee claimed carry forward of losses.

2.1 Assessing Officer passed an order dated 31.03.2004 rejectingthe withdrawal of exemption under Section 10B of the IT Act holdingthat the assessee did not furnish the declaration in writing before the duedate of filing of return of income, which was 31.10.2001. Thereby, theAO made the addition in respect of denial of claim of carrying forwardof losses under Section 72 of the IT Act.

2.2 Assessee filed an appeal before the Commissioner of IncomeTax (Appeals), New Delhi (for short, ‘CIT(A)’). By order dated19.01.2009, the CIT(A) upheld the order passed by the Assessing Officermaking addition in respect of denial of claim of carrying forward oflosses under Section 72 of the IT Act.

2.3 Aggrieved by the order passed by the CIT(A), the assesseefiled an appeal before the ITAT. Vide order dated 25.11.2016, the ITATdecided the issue in favour of the assessee stating that the declarationrequirement under Section 10B (8) of the IT Act was filed by the assesseebefore the AO before the due date of filing of return of income as perSection 139(1) of the IT Act. ITAT allowed the assessee’s claim forcarrying forward of losses under Section 72 of the IT Act.

2.4 Feeling aggrieved and dissatisfied with the order passed bythe ITAT, allowing the assessee’s claim for carrying forward of lossesunder Section 72 of the IT Act, the Revenue preferred an appeal beforethe High Court. By the impugned judgment and order, the High Courthas dismissed the said appeal. Hence, the Revenue is before this Courtby way of present appeal.

3. Shri Balbir Singh, learned Additional Solicitor General of Indiaappearing for the Revenue has vehemently contended that in the presentcase, as the conditions mentioned in Section 10B (8) of the IT Act arenot complied with, inasmuch as the declaration was not filed before thedue date of filing of return, both, the ITAT and the High Court havecommitted a grave error in allowing the assessee’s claim for carryingforward of losses under Section 72 of the IT Act.

3.1 It is submitted that in the present case, the original return ofincome was filed on 31.10.2001, which was the due date for filing returnof income. The assessee filed a declaration on 24.10.2002 before theAO stating that the assessee does not want to avail the benefit underSection 10B of the IT Act for A.Y. 2001-02. That thereafter the assesseefiled the revised return of income on 23.12.2002 claiming carry forward AB

C

D

E

F

G

H

Aof losses under Section 72 of the IT Act. It is submitted that therefore asthe declaration required under Section 10B (8) of the IT Act was filedbeyond the due date of filing of return and hence the assessee was notentitled to carry forward of losses under Section 72 of the IT Act. It issubmitted that in the present case, the ITAT has wrongly noted that thedeclaration under Section 10B (8) of the IT Act was filed before the dueBdate.

3.2 It is further contended that the High Court has erred inobserving that the requirement under Section 10B (8) of the IT Act is aprocedural requirement.C3.3 It is submitted that the High Court has not properly appreciatedthe consequences of not filing the declaration within the time as requiredunder 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 Courtis accepted, in that case, it shall nullify the provisions of Sections 10B (5)and 10B (8) of the IT Act.D

3.4 Shri Balbir Singh, learned ASG appearing on behalf of theRevenue further submitted that in the present case the assessee filedthe revised return of income on 23.12.2002, wherein for the first timethe assessee did not claim the exemption under Section 10B of the ITAct and claimed carrying forward of losses under Section 72 of the ITEAct. That such a claim could not have been made while submitting therevised return of income. That the revised return of income can be filedunder Section 139(5) of the IT Act only to remove the omission andmistake and/or correct the arithmetical error. It is submitted that therevised return of income under Section 139(5) of the IT Act cannot beFfiled for altogether a new claim. Reliance is placed on the decision ofthe Andhra Pradesh High Court in the case of Commissioner of IncomeTax v. Andhra Cotton Mills Limited, [1996] 219 ITR 404 (AP). Thatin the aforesaid decision, the Andhra Pradesh High Court has held that arevised return under Section 139(5) can be filed only if there is an omissionor a wrong statement. That in the aforesaid case, the assessee in theGoriginal return filed the P&L account containing provision for depreciationand did not opt for the option of not providing details regarding depreciationin its P&L account. Therefore, the High Court held that the intention ofthe assessee was to withdraw the claim for deduction of depreciationonly to get a set-off and since particulars were furnished along with the H

original return, the ITO was bound to allow the deduction of depreciationin computing the income from business.

3.5 It is submitted that in the present case while filing the originalreturn of income, the assessee specifically declared a loss of Rs.15,47,76,990/- and claimed exemption under Section 10B of the IT Act.That as per the note annexed to the computation of income, annexedwith the original return of income, the assessee specifically stated that“the company is registered as 100% export-oriented unit and is entitledto claim exemption under Section 10B of the IT Act. No loss is thereforebeing carried forward.”

3.6 It is submitted that as an afterthought the assessee filed adeclaration as required under Section 10B (5) belatedly and after thedue date mentioned in Section 10B (5) and claimed carry forward oflosses under Section 72 of the IT Act, withdrawing its claim for deductionunder Section 10B of the IT Act. It is contended that the High Court hasnot properly appreciated the fact that by filing a declaration subsequentlyand filing the revised return of income, the intent of the assessee was tofrustrate the purpose of Section 10B of the IT Act and file a declarationunder Section 10B (8) belatedly. It is submitted that the High Court hasnot properly appreciated the fact that the assessee’s intention to file therevised return was only as an afterthought and with the intention toextend the period of filing the declaration beyond the period specified inSection 10B (8) of the IT Act.

3.7 It is further submitted by learned ASG appearing on behalf ofthe Revenue that the High Court has seriously erred in observing thatthe requirement of submission of declaration under Section 10B (8) ismandatory in nature, but the time limit within which the declaration is tobe filed is directory in nature, as the provision does not provide for anyadverse consequence for not filing of the declaration by the time limit. Itis submitted that the High Court has not properly appreciated and/orconsidered 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 benefitunder Section 10B (8) of the IT Act. Therefore, it cannot be said thatthere is no consequence of not filing of declaration before the due dateof return of income.

3.8 It is contended that the High Court has materially erred infollowing and relying upon the decision of the Delhi High Court in the AB

CD

EF

G

H

Acase of Commissioner of Income Tax, Delhi-III, New Delhi v. MoserBaer India Limited, decided on 14.05.2008 in ITA No. 950/2007,wherein it was considering the requirement of Section 10B (7) of the ITAct.

3.9 It is next contended that there is a clear distinction betweenBthe provisions seeking exemption and the provisions for deduction. ThatChapter III of the IT Act deals with exemptions. However, ChapterVIA deals with deductions. That Section 10B of the IT Act is an exemptionprovision and the condition for seeking an exemption is required to becomplied with strictly with the provision.

C3.10 Learned ASG submitted that as held by this Court in a catenaof cases that a taxing statute should be strictly construed and that themachinery provisions must be so construed to effectuate the object andpurpose of statute and that the exemption provisions must be construedstrictly and by a strict interpretation. Reliance is placed on the judgmentsof this Court in the case of Commissioner of Income Tax-III v.DCalcutta Knitwears, Ludhiana (2014) 6 SCC 444 and Commissionerof Customs (Import), Mumbai v. Dilip Kumar and Company andothers (2018) 9 SCC 1.

Making the above submissions and relying upon the aforesaiddecisions, it is prayed to allow the present appeal.E4. The present appeal is vehemently opposed by Shri S. Ganesh,learned Senior Advocate appearing on behalf of the respondent –assessee.

4.1 Learned counsel appearing on behalf of the assessee hasFsubmitted that the only question of law which arises in the present caseis with regard to the interpretation of Section 10B (8) of the IT Act, viz.,whether the requirement of submission of the declaration before the lastdate for submission of the return is mandatory or directory. It is submittedthat on a true interpretation of Sections 10B (5) and 10B (8) of the ITAct, the High Court has rightly observed and held that the requirementGof filing a declaration is mandatory in nature, while the time limit in filingthe declaration is directory in nature. It is submitted that the High Courthas rightly held the requirement of filing the declaration by the time limitdirectory as non-filing of the declaration within the time limit does notenvisage any consequence. It is urged that the High Court has rightlyrelied upon the decision of the Delhi High Court in the case of MoserH

Baer (supra). It is submitted that the issues of validity of the revisedreturn of income; whether the respondent was entitled to carry forwardits losses under Sections 10B and 80 of the IT Act; and whether theassessee had duly complied with Section 80 and Section 10B (5) of theIT 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 onlyrequires that an assessee claiming carry forward of loss should file areturn showing the loss before the last date for submitting the return. Itis submitted that in the instant case the assessee filed the original returnin time declaring the loss and thereby complied with Section 80 of the ITAct.

4.3 It is further submitted that though it was not necessary for theexercise of option under Section 10B (8) of the IT Act, the assesseefiled a revised return only to bring to the notice of the AO the factum ofexercise of option under Section 10B. Even if the revised return had notbeen filed and instead, the assessee had submitted the declaration inwriting to the AO during the assessment proceedings, it would havemade no difference whatsoever to the exercise of option under Section10B (8) of the IT Act. It is submitted that therefore the validity of therevised return is wholly immaterial and irrelevant.

4.4 It is further submitted that the accountant’s certificate underSection 10B (5) is required only if the assessee claims the deductionunder Section 10B. This certificate only certifies the profit/loss of Section10B unit and the amount of deduction under Section 10B (1), if any. Thecertificate, if already submitted, becomes irrelevant if the claim iswithdrawn under Section 10B. In any event, the contents of this certificateregarding profit/loss are not in any way affected by the withdrawal ofthe Section 10B claim. It is submitted that in the present case, the lossset out in Section 10B certificate remained exactly the same afterwithdrawal of the claim made under Section 10B and the respondentmaking the claim for carry forward of loss. It is submitted that therewas no claim for any deduction under Section 10B (1) at any time.

4.5 It is submitted that the incontrovertible position set out inparagraphs 4.2 to 4.4 above is the precise reason why these points werenot even attempted to be raised, either before the ITAT or before theHigh Court, and are sought to be raised before this Court for the firsttime and without disclosing the correct and complete facts.

A

BC

D

E

F

G

H

A4.6 It is further submitted by Shri S. Ganesh, learned counselappearing on behalf of the assessee that on interpretation of Section10B (8) of the IT Act, the case is squarely covered by the judgment ofthis Court in the case of CIT, Maharashtra v. G.M. Knitting IndustriesPvt. Ltd. (2016) 12 SCC 272. It is submitted that the case involved aclaim for additional depreciation on plant and machinery under SectionB32(1) (ii-a) of the IT Act. That provision gave the assessee the option toclaim additional depreciation, over and above the usual or ordinarydepreciation mandatorily allowed under Section 32(1) of the IT Act.This option had to be exercised by the assessee by filing a statutoryForm 3-AA along with the Return of Income, which gave details of theCplant and machinery and also a certificate that the claim for additionaldepreciation was correctly made. Therefore, if the said Form 3-AA wasnot filed with the Return, it was a clear indication that the assessee hadopted not to claim additional depreciation. In the case of G.M. Knitting(supra), the assessee did not file Form 3-AA along with the return ofincome, but chose to file the Form much later, but before the passing ofDthe assessment order, which may be passed as long as 26 months afterthe return was filed as provided under Section 153(1) of the IT Act. TheRevenue rejected the form on the ground that it had not been filed alongwith the return of income and declined to grant additional depreciationas claimed by the assessee. It is submitted that this Court held that theErequirement that Form 3-AA should be submitted along with return wasonly directory and that therefore even though the Form had been submittedlong after the filing of the return, the assessee was entitled to claimadditional depreciation under Section 32(1)(ii-a) of the IT Act.

4.7 It is submitted that exactly the same principle applies to theFinterpretation of Section 10B (8) of the IT Act. Section 10B (8) enablesan assessee to exclude the applicability of the deduction under Section10B by filing a declaration to that effect before the last date in which thereturn of income is required to be filed. It is submitted that as held inG.M. Knitting (supra), the requirement that the Form should be submitted by a certain deadline is directory, though the submission of the FormGitself may be regarded as mandatory. It is urged that the present casestands on a far stronger footing and on a far higher pedestal as comparedto G.M. Knitting (supra). This is because Section 10B (8) specificallyand unequivocally gives the assessee a statutory right to exercise hisoption and to decide not to avail of the benefit of section 10B (8) in aHparticular Assessment Year. For the purpose of Section 32(1)(ii-a) of

the IT Act, by permitting the assessee to file the Form 3-AA long afterthe return, this Court has in effect permitted the assessee to make oneoption at the time of filing the return and change the option long thereafter,at any time before the assessment is made. That if such change ofoption could be permitted under Section 32(1)(ii-a), the case for permittingit is far stronger under Section 10B (8) where the statute itself expresslyand unequivocally gives the assessee the right to change his option. It issubmitted that the basic premise is that a substantive claim, which theassessee considers to be more beneficial, must be allowed to be madeuntil the conclusion of assessment and the time within which any formwhich enables the claim should be filed, is only directory.

4.8 It is further submitted that this Court in G.M. Knitting (supra)has specifically approved the judgment of the Bombay High Court in thecase of Commissioner of Income Tax v. Shivanand Electronics((1994) 209 ITR 63). That judgment dealt with an assessee’s claim fordeduction under Section 80HHC. Section 80HHC specifically prohibitedthe grant of deduction under Section 80HHC unless the stipulated auditreport was filed along with the return of income. The assessee filed therequired audit report long after the return. The Bombay High Court heldthat while the filing of the audit report was mandatory, the requirementthat it should be filed along with the return was only directory,notwithstanding the peremptory language of the prohibition in Section80HHC (5). It is of vital importance to note that there is no such prohibitionin Section 10B. Further, as already pointed out, Section 10B (8) itselfexpressly gives the assessee the right to opt out of section 10B. Thissubstantive statutory right cannot in law be nullified by construing thepurely procedural time element requirement regarding the filing of thedeclaration under Section 10B (8) as mandatory. Reliance is placed onthe judgment of the Telangana High Court in the case of TelanganaState Pollution Board v. CBDT (Writ Petition No. 4834/2020, decidedon 26.07.2021).

4.9 It is further submitted by the learned counsel appearing onbehalf of the assessee that the submission on behalf of the revenue thatby the impugned judgment and order and the interpretation by the HighCourt, the statutory option expressly given by Section 10B (8) is in effectnullified and that Section 10B (8) is rewritten by introducing in it aprohibition similar to Section 80HHC(5), though the legislature did notenact any such prohibition and it completely overlooks and ignores the AB

C

D

E

F

G

H

Alegislative background of section 10B has no substance. It is urged thatas such the issue involved in the present case is directly covered by thedecision of the Delhi High Court in the case of Moser Baer (supra),against which a special leave petition was preferred in this Court andthe same was dismissed as withdrawn. That the decision of Moser Baer (supra) has been subsequently followed in the case of CIT v. RanaBPolycot Ltd. 2011 SCC OnLine P&H 17591. That both thesejudgments are on Section 10B itself and they clearly and unequivocallystated that while the submission of the declaration is mandatory, therequirement that it should be submitted before the due date of return isonly directory and Section 10B deduction could not be disallowed if theCdeclaration was filed before the assessment was made.

4.10 Shri Ganesh, learned counsel appearing on behalf of theassessee has submitted that there are a large number of judgments dealingwith other sections of the IT Act which expressly provide that a particulardeduction would not be allowed if a particular report or certificate ofDdeclaration was not filed along with the return of income. It is submittedthat in each of the cases, it is held that the requirement of submission ofthe document is mandatory, but the stipulation that it should be filedalong with the return of income is only directory. Shri Ganesh, learnedcounsel has referred to the following decisions:

Ei)Moser Baer (supra);

ii)RanaPolycot Ltd. (supra);

iii)G.M. Knitting Industries Pvt. Ltd. (supra);

iv)CIT v. Panama Chemical Works, 2006 SCC OnLineMP 704;F

v)CIT v. Punjab Financial Corp. ILR 2002 (1) P&H 438;

vi) CITv.Hardeodas Aggarwala Trust; 1991 SCC OnLineCal.414;

vii)CIT v. Gupta Fabs, 2005 SCC OnLine P&H 1315;G

viii)Murali Export House v. CIT, 1995 SCC OnLine Cal.286;

ix)CIT v. Berger Paints India Ltd., 2002 SCC OnLine Cal.869; and H

x)CIT v. Ramani Relators (P) Ltd., 2014 SCC OnLineMad. 12717.

It is submitted that therefore on the principle of stare decisis, thisCourt may not interfere with the impugned judgment and order passedby the High Court.

4.11 Now so far as the submission on behalf of the Revenue thatSection 10B is an exemption provision, it is vehemently submitted by thelearned counsel appearing on behalf of the assessee that as held by thisCourt in the case of CIT v. Yokogawa India Ltd. (2017) 2 SCC 1,Section 10B is a deduction provision and not an exemption provision.

4.12 Making the above submissions and relying upon the aforesaiddecisions, it is prayed to dismiss the present appeal.

5. We have heard Shri Balbir Singh, learned ASG appearing onbehalf of the Revenue and Shri S. Ganesh, learned Senior Advocateappearing on behalf of the assessee at length and perused the materialon record.

The short question which is posed for consideration of this Courtis, whether, for claiming exemption under Section 10B (8) of the IT Act,the assessee is required to fulfil the twin conditions, namely, (i) furnishinga declaration to the assessing officer in writing that the provisions ofSection 10B (8) may not be made applicable to him; and (ii) the saiddeclaration to be furnished before the due date of filing the return ofincome under sub-section (1) of Section 139 of the IT Act.

6. In the present case, the High Court as well as the ITAT haveobserved and held that for claiming the so-called exemption relief underSection 10B (8) of the IT Act, furnishing the declaration to the assessingofficer is mandatory but furnishing the same before the due date of filingthe original return of income is directory. In the present case, when theassessee submitted its original return of income under Section 139(1) ofthe IT Act on 31.10.2001, which was the due date for filing of the originalreturn of income, the assessee specifically and clearly stated that it is acompany and is a 100% export-oriented unit and entitled to claimexemption under Section 10B of the IT Act and therefore no loss isbeing carried forward. Along with the original return filed on 31.10.2001,the assessee also annexed a note to the computation of income clearlystating as above. However, thereafter the assessee filed the revisedreturn of income under Section 139(5) of the IT Act on 23.12.2002 and A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

Afiled a declaration under Section 10B (8) which admittedly was after thedue date of filing of the original return under Section 139(1), i.e.,31.10.2001.

7. It is the case on behalf of the Revenue that as there was a non-compliance of twin conditions under Section 10B (8) of the IT Act, namely,Bthe declaration under Section 10B (8) was not submitted along with theoriginal return of income, the assessee shall not be entitled to theexemption/benefit under Section 10B (8) of the IT Act. According to theRevenue, furnishing of declaration under Section 10B (8) before the duedate of filing original return of income is also mandatory. On the otherhand, it is the case on behalf of the assessee, which has been acceptedCby the High Court, that the requirement of submission of declarationunder Section 10B (8) is mandatory in nature, but the time limit withinwhich the declaration is to be filed is directory in nature.

8. While considering the issue involved, whether the time limitwithin which the declaration is to be filed as provided under Section 10BD(8) is mandatory or directory, Section 10B (8) is required to be referredto, which reads as under:

“10B (8) Notwithstanding anything contained in the foregoingprovisions of this section, where the assessee, before the duedate for furnishing the return of income under sub-section (1) ofESection 139, furnishes to the Assessing Officer a declaration inwriting that the provisions of this section may not be madeapplicable to him, the provisions of this section shall not apply tohim for any of the relevant assessment years.”

On a plain reading of Section 10B (8) of the IT Act as it is, i.e.,F“where the assessee, before the due date for furnishing the return ofincome under sub-section (1) of section 139, furnishes to the AssessingOfficer a declaration in writing that the provisions of Section 10B maynot be made applicable to him, the provisions of Section 10B shall notapply to him for any of the relevant assessment years”, we note that theGwording of the Section 10B (8) is very clear and unambiguous. Forclaiming the benefit under Section 10B (8), the twin conditions offurnishing the declaration to the assessing officer in writing and that thesame must be furnished before the due date of filing the return of incomeunder sub-section (1) of section 139 of the IT Act are required to befulfilled and/or satisfied. In our view, both the conditions to be satisfiedHare mandatory. It cannot be said that one of the conditions would be mandatory and the other would be directory, where the words used forfurnishing the declaration to the assessing officer and to be furnishedbefore the due date of filing the original return of income under sub-section (1) of section 139 are same/similar. It cannot be disputed that ina taxing statute the provisions are to be read as they are and they are tobe literally construed, more particularly in a case of exemption sought byan assessee.

9. In such a situation, filing a revised return under section 139(5)of the IT Act claiming carrying forward of losses subsequently wouldnot help the assessee. In the present case, the assessee filed its originalreturn under section 139(1) and not under section 139(3). Therefore, theRevenue is right in submitting that the revised return filed by the assesseeunder section 139(5) can only substitute its original return under Section139(1) and cannot transform it into a return under Section 139(3), inorder to avail the benefit of carrying forward or set-off of any loss underSection 80 of the IT Act. The assessee can file a revised return in acase where there is an omission or a wrong statement. But a revisedreturn of income, under Section 139(5) cannot be filed, to withdraw theclaim and subsequently claiming the carried forward or set-off of anyloss. Filing a revised return under Section 139(5) of the IT Act andtaking a contrary stand and/or claiming the exemption, which wasspecifically not claimed earlier while filing the original return of incomeis not permissible. By filing the revised return of income, the assesseecannot be permitted to substitute the original return of income filed undersection 139(1) of the IT Act. Therefore, claiming benefit under section10B (8) and furnishing the declaration as required under section 10B (8)in the revised return of income which was much after the due date offiling the original return of income under section 139(1) of the IT Act,cannot mean that the assessee has complied with the condition offurnishing the declaration before the due date of filing the original returnof income under section 139(1) of the Act. As observed hereinabove,for claiming the benefit under section 10B (8), both the conditions offurnishing the declaration and to file the same before the due date offiling the original return of income are mandatory in nature.

10. Even the submission on behalf of the assessee that it was notnecessary to exercise the option under section 10B (8) of the IT Act andeven without filing the revised return of income, the assessee could havesubmitted the declaration in writing to the assessing officer during the AB

C

D

E

F

G

H

Aassessment proceedings has no substance and the same cannot beaccepted. Even the submission made on behalf of the assessee thatfiling of the declaration subsequently and may be during the assessmentproceedings would have made no difference also has no substance. Thesignificance of filing a declaration under section 10B (8) can be said tobe co-terminus with filing of a return under section 139(1), as a checkBhas been put in place by virtue of section 10B (5) to verify the correctnessof claim of deduction at the time of filing the return. If an assesseeclaims an exemption under the Act by virtue of Section 10B, then thecorrectness of claim has already been verified under section 10B (5).Therefore, if the claim is withdrawn post the date of filing of return, theCaccountant’s report under section 10B (5) would become falsified andwould stand to be nullified.

11. Now so far as the reliance placed upon the decision of thisCourt in the case of G.M. Knitting Industries Pvt. Ltd. (supra), reliedupon by the learned counsel appearing on behalf of the assessee isDconcerned, Section 10B (8) is an exemption provision which cannot becompared with claiming an additional depreciation under section 32(1)(ii-a) of the Act. As per the settled position of law, an assessee claimingexemption has to strictly and literally comply with the exemptionprovisions. Therefore, the said decision shall not be applicable to thefacts of the case on hand, while considering the exemption provisions.EEven otherwise, Chapter III and Chapter VIA of the Act operate indifferent realms and principles of Chapter III, which deals with “incomeswhich do not form a part of total income”, cannot be equated withmechanism provided for deductions in Chapter VIA, which deals with“deductions to be made in computing total income”. Therefore, none of Fthe decisions which are relied upon on behalf of the assessee oninterpretation of Chapter VIA shall be applicable while considering theclaim under Section 10B (8) of the IT Act.

12. Even the submission on behalf of the assessee that the assesseehad a substantive statutory right under Section 10B (8) to opt out ofGSection 10B which cannot be nullified by construing the purely proceduraltime requirement regarding the filing of the declaration under Section10B (8) as being mandatory also has no substance. As observedhereinabove, the exemption provisions are to be strictly and literallycomplied with and the same cannot be construed as proceduralrequirement.H

13. So far as the submission on behalf of the assessee that againstthe decision of the Delhi High Court in the case of Moser Baer(supra),a special leave petition has been dismissed as withdrawn and the revenuecannot be permitted to take a contrary view is concerned, it is to benoted that the special leave petition against the decision of the DelhiHigh Court in the case of Moser Baer(supra) has been dismissed aswithdrawn due to there being low tax effect and the question of law hasspecifically been kept open. Therefore, withdrawal of the special leavepetition against the decision of the Delhi High Court in the case of MoserBaer(supra)cannot be held against the revenue.

14. In view of the above discussion and for the reasons statedabove, we are of the opinion that the High Court has committed a graveerror in observing and holding that the requirement of furnishing adeclaration under Section 10B (8) of the IT Act is mandatory, but thetime limit within which the declaration is to be filed is not mandatory butis directory. The same is erroneous and contrary to the unambiguouslanguage contained in Section 10B (8) of the IT Act. We hold that forclaiming the benefit under Section 10B (8) of the IT Act, the twinconditions of furnishing a declaration before the assessing officer andthat too before the due date of filing the original return of income undersection 139(1) are to be satisfied and both are mandatorily to be compliedwith. Accordingly, the question of law is answered in favour of theRevenue and against the assessee. The orders passed by the High Courtas well as ITAT taking a contrary view are hereby set aside and it is heldthat 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 providedunder Section 10B (8) of the IT Act, as observed hereinabove. Thepresent Appeal is accordingly Allowed. However, in the facts andcircumstances of the case, there shall be no order as to costs.

Ankit Gyan and Amarendra Kumar

Appeal allowed.

(Assisted by : Adnan Khan, LCRA)

A

B

C

D

E

F

G

H