The above judgement was passed by Hon’ble Supreme Court in the case of Principal Commissioner of Income Tax-III, Bangalore and another Versus M/s Wipro Limited (CIVIL APPEAL NO. 1449 OF 2022 Dt. 11.07.2022).
In the judgement it was held by Hon’ble Supreme court that the exemptions once claimed u/s 10B of the Income Tax Act cannot be withdrawn in revised return and thus the loss not claimed in original return cannot be claimed now.
Facts of the case:
The respondent-assessee is a 100% export-oriented unit and engaged in the business of running a call centre and IT Enabled and Remote Processing Services. Assessee filed its return of income on 31.10.2001 for Assessment Year 2001-2002, declaring loss of Rs.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.
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.
Revenue’s contention:
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 remove the omission and mistake and/or correct the arithmetical error. It is submitted that the revised return of income under Section 139(5) of the IT Act cannot be filed for altogether a new claim. Reliance is placed on the decision of the Andhra Pradesh High Court in the case of Commissioner of Income Tax v. Andhra Cotton Mills Limited, [1996] 219 ITR 404 (AP).
That Section 10B of the IT Act is an exemption provision and the condition for seeking an exemption is required to be complied with strictly with the provision.
Assessee’s contention:
Learned counsel appearing on behalf of the assessee has submitted that the only question of law which arises in the present case is with regard to the interpretation of Section 10B (8) of the IT Act, viz., whether the requirement of submission of the declaration before the last date for submission of the return is mandatory or directory. It is submitted that on a true interpretation of Sections 10B (5) and 10B (8) of the IT Act, the High Court has rightly observed and held that the requirement of filing a declaration is mandatory in nature, while the time limit in filing the declaration is directory in nature. It is submitted that the High Court has rightly held the requirement of filing the declaration by the time limit directory as non-filing of the declaration within the time limit does not envisage any consequence. It is urged that the High Court has rightly relied upon the decision of the Delhi High Court in the case of Moser Baer decided on 14.05.2008 in ITA No. 950/2007. It is submitted that the issues of validity of the revised return of income; whether the respondent was entitled to carry forward its losses under Sections 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.
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.
It is submitted that in each of the cases, it is held that the requirement of submission of the document is mandatory, but the stipulation that it should be filed along with the return of income is only directory. Shri Ganesh, learned counsel has referred to the following decisions:
i) Moser Baer (supra);
ii) Rana Polycot Ltd. (supra);
iii) G.M. Knitting Industries Pvt. Ltd. (supra);
iv) CIT v. Panama Chemical Works, 2006 SCC OnLine MP 704;
v) CIT v. Punjab Financial Corp. ILR 2002 (1) P&H 438;
vi) CIT v. Hardeodas Aggarwala Trust; 1991 SCC OnLine Cal.414;
vii) CIT v. Gupta Fabs, 2005 SCC OnLine P&H 1315;
viii) Murali Export House v. CIT, 1995 SCC OnLine Cal. 286;
ix) CIT v. Berger Paints India Ltd., 2002 SCC OnLine Cal. 869; and
x) CIT v. Ramani Relators (P) Ltd., 2014 SCC OnLine Mad. 12717.
Judgement:
The short question which is posed for consideration of this Court is, whether, for claiming 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.
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 31.10.2001, the assessee also annexed a note to the computation of income clearly stating as above. However, thereafter the assessee filed the revised return of income under Section 139(5) of the IT Act on 23.12.2002 and filed a declaration under Section 10B (8) which admittedly was after the due date of filing of the original return under Section 139(1), i.e., 31.10.2001.
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 sub-section (1) of section 139 are same/similar.
Therefore, the Revenue is right in submitting that the revised return filed by the assessee under section 139(5) can only substitute its original return under Section 139(1) and cannot transform it into a return under Section 139(3).
The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or set-off of any loss.
By filing the revised return of income, the assessee cannot be permitted to substitute the original return of income filed under section 139(1) of the IT Act.
Even the submission on behalf of the assessee that it was not necessary to exercise the option under section 10B (8) of the IT Act and even without filing the revised return of income, the assessee could have submitted the declaration in writing to the assessing officer during the assessment proceedings has no substance and the same cannot be accepted.
In view of the above discussion and for the reasons stated above, 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) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory.
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In our opinion this judgement only talks about not claiming a loss since the assessee cannot withdraw his exemption later. In this judgement no comment has been made that assessee cannot make a fresh claim of deduction in revised return. However, this judgement is being portrayed in a very different manner.
However, the judgement on revised return u/s 139(5) that it can only be used to rectify an omission or wrong statement and cannot substitute the original return is not satisfactory and also not in line with the Landmark judgement of Allahbad High court in case Dhampur Sugar Mills 1973 (90 ITR 236 All) wherein it has been held that:
“It will still retain the character of an original return, but once a revised return is filed, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment.”.
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