Income Tax Appellate Tribunal - Delhi
Inspop.Com Limited, Gurugram vs Dcit, Int. Tax, Gurgaon on 24 January, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHIBENCH 'D', NEW DELHI
Before Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 350/Del/2021 : Asstt. Year : 2017-18
Inspop.com Ltd., Vs DCIT,
Level 8, Tower-1A, International International Taxation
Tech Park Gurugram, ITPG Gurgaon
Developers Pvt. Ltd., IT/ITES SEZ,
Sector-59, Post Office-CRPG
Kadarpur, Gurugram,
Gurgaon-122098
(APPELLANT) (RESPONDENT)
PAN No. AACCI4282R
Assessee by : Sh. Manoj Kumar, CA &
Sh. Vijay Goel, CA
Revenue by : Sh. Gangadhar Panda, CIT DR
Date of Hearing: 02.11.2022 Date of Pronouncement: 24.01.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order dated 30.01.2021 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
2. Following grounds have been raised by the assessee:
"1. That the honorable DRP has erred in directing and learned AO has erred in law and on facts of the case in disallowing the deduction of Rs.22,95,684 claimed by the assessee u/s 10AA on illegal and untenable grounds when all the conditions contained under section 10AA have been fully met by the assessee for the relevant period. Hence the disallowance may be deleted.2 ITA No. 350/Del/2021
Inspop.com Ltd.
2. That the honorable DRP has erred in directing and learned AO has erred in law and on facts of the case in relying on the procedural provisions u/s 143(1) (a)
(v) for the disallowance of deduction otherwise allowable under the substantive provisions of section 10AA. Hence the disallowance may be deleted.
3. That the principles of natural justice have not been followed by the learned AO in respect of the Show Cause Notice dated 19 t h December 2019 which was issued on Thursday evening after 5 p.m. and the assessee was required to submit the reply by Sunday, the 22 n d December by 11 a.m. ignoring even the intervening Saturday. Time given for the purpose should be adequate so as to enable the assessee to make the representation. [Hon'ble Supreme Court in the case of Uma Nath Pandey vs. State of UP 2009(237) ELT 241 (SC)]. Hence the disallowance may be deleted.
4. That the learned AO despite citing the argument given by the assessee in the reply dated 29/11/19, did not give any specific reasoning for not accepting the arguments except merely reproducing the provisions of section 143(1). Thus, disallowance is bad in law and may be deleted. [Hon'ble Supreme Court in the case of Asst. Commissioner vs. Shukla & Brothers SLP (C) NO. 16466 OF 2009(SC)]
5. That the learned AO, in the draft order u/s 144C, neither did discuss any additions other than the disallowance of section 10AA deduction, nor did enclose the computation of tax and interest in ITNS-
150, but made an addition of Rs.2,24,852 in the income, which is bad in law, is against the principles of natural justice, to that extent the order is a non- speaking order and the addition is liable to be deleted."
3. The assessee, Inspop.Com Limited (Inspop UK), is a foreign company incorporated in the United Kingdom and is a 3 ITA No. 350/Del/2021 Inspop.com Ltd.
wholly owned subsidiary of Admiral Group plc., a London stock exchange listed company.
4. Inspop UK owns and operates a price comparison website for financial products in the United Kingdom by providing marketing and intermediary services under the brand name 'Confused.com' by allowing consumers to compare prices for a range of financial products like credit cards, loans, etc.
5. Inspop UK, in the financial year 2010-11, got a Letter of Approval (LOA) from the office of the Development Commissioner, NSEZ to set up a unit in Special Economic Zone in Gurugram (Haryana), for the business of export of IT-ITES services and based on the same established the place of business in India as a Branch Office on 22 n d February 2011 as per the certificate of establishment of place of business given by the Registrar of Companies. The date of commencement of business for the SEZ unit was 24th March 2011 and the LOA was valid for 5 years till 23rd March 2016. The LOA was further extended by the office of the Development Commissioner for next five years upto 23 r d March 2021.
6. The company has been regularly filing its Return of Income for all the assessment years in respect of the income attributable to its India Branch and has been assessed u/s 143(3) for three out of last five assessment years. The company has not claimed deduction u/s 10AA for this business.
7. In the financial year 2016-17, the company has again obtained the approval from the office of the Development Commissioner, NSEZ, to set up another New unit for the 4 ITA No. 350/Del/2021 Inspop.com Ltd.
business of IT-ITES. The business for the new unit was commenced on 26th December 2016 and the approval is valid till 25th December 2021.
8. The new unit has since been operating from a separately leased SEZ premises, doing business under a separate Framework Service Agreement (FSA) with the customer, with newly recruited employees, with newly purchased plant and machinery, with separate registrations under the Shops and Establishment Act, Provident Fund Act, ESI Act, separate TAN, Service Tax Registration, Import Export Code incorporating separate details of the new unit, separate invoicing, separate books of account and separate bank account. The bank account was opened on 10 t h April 2017 and all the invoices for the turnover of the relevant period of financial year 2016-17 were collected in this separate bank account in the months of May and June 2017. The company, purportedly complied with the conditions as given under section 10AA and being eligible to claim section 10AA deduction for the new unit starting from the year of establishment of the unit.
9. The company got its annual audit completed for the financial year. 2016-17 for which the auditors Deloitte Haskins & Sells LLP issued their audit report on 30th November 2017 only. Form 56F (Report under section 10A/AA), Forms 3CA (Report under section 44AB) and 3CD, and Form 3CEB (Report under section 92E) were all filed on 30 t h November 2017 but the Return of Income was filed on 28 t h February 2018.
10. The Return of Income for the assessment year 2017-18 was filed on 28.02.2018 declaring a total income of 5 ITA No. 350/Del/2021 Inspop.com Ltd.
Rs.8,26,79,520 after claiming deduction under section 10AA of Rs.22,95,685 as per Form 56F.
11. The AO through the draft assessment order proposed to disallow the deduction u/s 10AA of Rs.22,95,684 on the ground that the Return of Income for the relevant year has not been filed by the due date of 30th November 2017. The AO has for this purpose, cited the provisions of sub clause (v) of clause (a) of sub section 1 of section 143. The AO has also cited in the draft order, the following from the reply dated 29.11.2019 filed by the assessee:
"Please take no te that section 10AA which allo ws deduction in respect of newly established units in Special Eco nomic Zones, nowhere in the entire section 10AA puts any condition to file the tax return by the due date only. The amendment in section 143( 1) by the F inance Act, 2016 with e ffect from 01.04.2017 (A ssessment Year 2017- 18) by way of sub-clause (v) in clause (a) which is only a procedural aspect, cannot be applied to deny the inte nded tax benefit otherwise available in the substantial provisio ns of the law specially when no such pre-co nditio n or limitatio n is perceive d by the legislature in the relevant substantial provisions."
12. The draft order in para 4 indicated an enclosure ITNS-150 to the said order giving detailed computation of tax and interest charged which was actually not enclosed.
13. The Appellant filed Objections against the draft assessment order before the Hon'ble Dispute Resolution Panel- 1, and the Hon'ble DRP vide order dated 11.12.2020 under section 144C(5) sustained the finding of the Ld AO and rejected the contention of the appellant.
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14. Resultantly, the final order passed by the Ld AO dated 30.01.2021 U/s 143(3) r.w.s 144C(13) is as follows:
Returned Income Rs. 8,26,79,520 Add: A ddition on account of disallo wance o f Rs. 22,95,684 Deduction claimed under section 10A A Assessed I ncome Rs. 8,49,75,204 However, in the computation sheet, the AO took the assessed
income at Rs. 8,52,00,03/- instead of Rs. 8,49,75,204/- thus resulting in further addition of Rs. 2,24,832.00.
15. Being aggrieved, the assessee preferred appeal before the ITAT against the assessment order along with computation under section 143(3) read with 144C(13).
16. Before us, it was argued by the ld. AR that the Assessee has fulfilled all the requisite conditions for claim of deduction under section 10AA of the Income Tax Act 1961 for the relevant assessment year. It was argued that the Audit Report in form 56F, form 3CA, form 3CD and form 3CEB were filed on the due date on 30.11.2017. The return of income for assessment year 2017-18 was due on 30.11.2017. The assessee failed to file the return of income for 2017-18 on 30.11.2017. The return of income for 2017-18 was filed by the assessee on 28.02.2018. The assessee has claimed that disallowance of deduction under section 10AA is proposed by the Assessing Officer by relying on the procedural provisions under section 143(1)(a)(v) of the Income Tax Act 1961 whereas the deduction is allowable to the assessee under the substantive provision of section 10AA of the Income Tax Act 1961 as the requisite conditions for claim of 7 ITA No. 350/Del/2021 Inspop.com Ltd.
deduction under section 10AA of Income Tax Act 1961 have been fulfilled by the assessee. It was argued that since there is no pre-condition in section 10AA of filing of return of income within due date for claiming deduction under section 10AA of the Income Tax Act 1961, therefore the claim of deduction of deduction under section 10 AA of the Income Tax 1961 should be allowed.
17. Heard the arguments of both the parties and perused the material available on record.
18. We have gone through the judgment of Hon'ble Supreme Court on CIT v National Taj Traders, 1980 AIR 485, 1980 SCR (2) 268 which has been relied by the ld. DRP wherein the Hon'ble Supreme Court observed as under:
"Two principles of construction are relating to casus o missus and the other in regard to reading the statute as a whole are well settle d. Unde r the first principle , a casus o missus canno t be supplie d by the court e xcept in the case of clear ne cessity and when reason for it is found in the four corners o f the statute itse lf but at the same time a casus omissus sho uld no t be readily infe rre d and For that purpose all the parts of a statute or sectio n must be construe d togethe r and every clause o f a section should be construed with reference to the context and other clauses the rof so that the construction to be put on a particular provision makes a consiste nt enactment of the who le statute . This would be more so if literal construction of a particular clause le ads manifestly absurd or anomalous results which could no t have been inte nde d by the Legislature."
19. The ld. DRP held that from the above quote of the judgment of the Hon'ble Supreme Court it is clear that an 8 ITA No. 350/Del/2021 Inspop.com Ltd.
omission in the statue cannot be inferred however all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. Therefore, all the relevant sections provided in the Income Tax Act 1961 are relevant for consideration while considering claim of the assessee for any deduction.
20. We have gone through the provisions of the Act which have been inserted w.e.f. 01.04.2017. The said the provisions of section 143(1)(a) are as under:
"(1) Where a return has bee n made unde r section 139 or in response to a notice under sub-section (1) o f section 142 such return shall be processe d in the following manner, namely: --
(a) The total income or loss shall be compute d after making the following adj ustme nts, namely: --
(i) Any arithmetical e rror in the return; (ii) An incorrect claim, if such inco rrect claim is appare nt from any info rmation in the return;
(iii) Disallo wance o f lo ss claimed, if re turn o f the pre vio us year for which set o ff of loss is claimed was furnished beyond the due date specifie d unde r sub-sectio n ( 1) o f se ction 139;
(iv) Disallo wance of e xpenditure indicated in the audit report but not taken into account in computing the total income in the return;
(v) Disallo wance of deduction claimed unde r sections 10AA, 80-IA , 80-IAB, 80-IB, 80-IC, 80- I D or section 80-I E, if the return is furnished be yond the due date specified under sub-section ( 1) of section 139; o r 9 ITA No. 350/Del/2021 Inspop.com Ltd.
(vi) A ddition o f income appe aring in Form 26AS or Form 16A or Form 16 which has no t been included in computing the total income in the return."
21. Thus, it is clear from the provisions of the Income Tax Act 1961 which allows disallowance of deduction claimed under section 10AA of Income Tax Act 1961 if the return of income is furnished beyond the due date specified under section 139(1) of the Income Tax Act 1961. The assessee has filed return of income on 28.02.2018 as against due date of filing of return on 30.11.2017.
22. Reliance is being placed on the judgment of Hon'ble Supreme Court in the case PCIT-III, Bangalore Vs. M/s Wipro Ltd. in Civil Appeal No. 1449 of 2022 vide order dated 11.07.2022. The entire order of the Hon'ble Supreme Court is reproduced as under:
"...High Court has dismissed the said appe al preferred by the Revenue and has confirmed the judgment and orde r date d 25.11.2016 passe d by the Income Tax Appe llate Tribunal, Bangalore Bench 'C' , Bangalore ( for short, ' ITAT'), allowing the assessee's claim for carry fo rward of losses under Sectio n 72 o f the Income Tax Act, 1961 (fo r sho rt, 'IT Act').....10 ITA No. 350/Del/2021
Inspop.com Ltd.
2. The respo ndent-assessee is a 100% e xpo rt-o rie nted unit and engage d in the business of running a call ce ntre and I T Enable d 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 e xe mption unde r Section 10B of the IT Act. Along with the original return filed on 31.10.2001, the assessee annexe d a no te to the co mputation of inco me in which the assessee clearly state d that the company is a 100% export-oriented unit and entitle d to claim exemption under Section 10B of the IT Act and there fore no loss is being carried forward. That there after, the assessee file d a declaration date d 24.10.2002 be fore the Assessing Office r (AO) stating that the assessee does no t want to avail the benefit under Section 10B of the IT Act for A.Y . 2001-02 as per Sectio n 10B ( 8) of the IT Act. The assessee filed the re vise d return of income on 23.12.2002 where in exemptio n unde r Section 10B o f the IT Act was no t claimed and the assesse e claimed carry forward o f losses.
2.1 Assessing Officer passe d an order date d 31.03.2004 rejecting the withdrawal o f exe mption unde r Section 10B of the IT Act holding that the assessee did not furnish the declaratio n in writing before the due date o f filing of return of income, which was 31.10.2001. The reby, the AO made the addition in respe ct of de nial o f claim of carrying forward o f losses unde r Section 72 of the IT Act.
2.2 Assessee filed an appeal befo re the Commissioner of Income Tax (Appeals), Ne w Delhi ( for short, 'CIT(A)'). By order dated 19.01.2009, the CIT(A) upheld the orde r passe d by the Assessing Office r making additio n in respect of denial of claim of carrying forward o f losses unde r Section 72 of the IT Act.
2.3 Aggrie ved by the orde r passed by the CIT(A), the assessee filed an appeal be fore the ITAT. Vide order date d 25.11.2016, the ITAT 11 ITA No. 350/Del/2021 Inspop.com Ltd.
decide d the issue in favo ur of the assessee stating that the declaration requirement unde r Section 10B ( 8) of the IT Act was filed by the asse ssee before the AO be fore the due date of filing of return of income as pe r Section 139( 1) o f the IT Act. ITA T allowed the assessee's claim for carrying fo rward of losses under Section 72 o f the IT Act. 2.4 F eeling aggrie ved and dissatisfied with the o rder passed by the ITAT, allo wing the assessee's claim for carrying forward of losses unde r Section 72 o f the IT Act, the Reve nue prefe rre d an appeal befo re the High Co urt. By the impugned judgment and o rder, the High Court has dismisse d the said appeal. Hence, the Re venue is be fore this Co urt by way o f present appeal.
3. S hri Balbir Singh, learned A dditional Solicitor Ge neral of India appe aring for the Revenue has ve hemently contended that in the present case, as the conditions mentione d in Section 10B ( 8) of the IT Act are not complied with, inasmuch as the declaration was not file d be fore the due date of filing of re turn, both, the ITAT and the High Co urt have committed a grave error in allowing the assessee's claim for carrying fo rward of losses under Section 72 o f the IT Act.
3.1 I t is submitte d that in the present case, the original return of income was file d on 31.10.2001, which was the due date fo r filing return o f income. The assessee filed a declaration on 24.10.2002 before the A O stating that the asse ssee does no t want to avail the benefit under Section 10B of the IT Act for A.Y . 2001- 02. That there after the assessee filed the revised return of income on 23.12.2002 claiming carry fo rward of losses under Section 72 of the IT Act. It is submitted that there fore as the declaration re quired unde r Section 10B (8) of the IT Act was filed be yond the due date of filing of return and hence the assessee was not entitled to carry forward of losses unde r Section 72 of the IT Act. It is submitted that 12 ITA No. 350/Del/2021 Inspop.com Ltd.
in the present case, the ITAT has wrongly no ted that the declaration unde r Section 10B (8) of the IT Act was filed be fore the due date .
3.2 It is further conte nded that the High Court has erre d in observing that the requirement unde r Section 10B ( 8) of the IT Act is a procedural requirement.
3.3 It is submitte d that the High Court has not properly appreciated the conse quences of not filing the declaratio n within the time as require d under S ection 10B ( 5) and no n-compliance of Sectio ns 10B ( 5) and 10B (8) of the IT Act. It is submitted that if the view taken by the High Court is accepte d, in that case, it shall nullify the provisio ns o f Sections 10B ( 5) and 10B ( 8) o f the IT A ct.
3.4 Shri Balbir Singh, learned A SG appearing on behalf of the Revenue further submitted that in the prese nt case the assessee filed the revised return o f income on 23.12.2002, wherein for the first time the assessee did not claim the exemption unde r Section 10B o f the IT Act and claimed carrying forward of losses unde r Section 72 of the IT Act. That such a claim could no t have been made while submitting the re vised re turn o f income. That the revise d return of income can be filed unde r Section 139( 5) o f the IT Act only to remo ve the omission and mistake and/ or correct the arithmetical error. It is submitted that the re vised re turn o f income unde r Section 139(5) o f the IT Act canno t be filed fo r altoge ther a new claim. Reliance is place d on the decision o f the Andhra Pradesh High Court in the case o f Commissioner o f I ncome Tax v. Andhra Cotto n Mills Limited, [ 1996] 219 IT R 404 (A P) . That in the aforesaid decision, the Andhra Pradesh High Court has he ld that a re vise d return under Section 139(5) can be filed only if the re is an omissio n or a wrong statement. T hat in the aforesaid case , the assessee in the original return filed the P&L account containing provisio n for depreciation and did no t opt for the option of not providing details regarding depreciation in its P&L account. The refore , the High Co urt 13 ITA No. 350/Del/2021 Inspop.com Ltd.
held that the inte ntio n of the assessee was to withdraw the claim for deductio n of depreciation o nly to get a set-o ff and since particulars were furnishe d alo ng with the original re turn, the ITO was bound to allo w the de duction of depreciatio n in computing the income from business.
3.5 I t is submitte d that in the present case while filing the o riginal return 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 pe r the no te anne xed to the computation of income, anne xed with the original return o f income, the assessee specifically state d that "the company is registe red as 100% export-orie nted unit and is entitled to claim exemption unde r Section 10B of the IT Act. No loss is there fore being carried forward."
3.6 I t is submitted that as an afterthought the assessee filed a declaration as re quire d unde r Sectio n 10B (5) be late dly and after the due date mentioned in Sectio n 10B (5) and claimed carry forward of losses unde r Section 72 o f the IT Act, withdrawing its claim for deductio n unde r S ection 10B of the IT Act. It is conte nded that the High Co urt has not prope rly appre ciate d the fact that by filing a declaration subsequently and filing the revised return of income, the inte nt o f the assessee was to frustrate the purpose of Section 10B o f the IT Act and file a declaratio n under Sectio n 10B ( 8) belate dly. I t is submitted that the High Co urt has no t prope rly appreciate d the fact that the asse ssee's inte ntion to file the revised return was o nly as an afte rthought and with the intention to e xte nd the period of filing the declaration be yond the pe riod specified in S ection 10B (8) of the IT Act.
3.7 It is further submitte d by le arne d ASG appearing o n behalf of the Revenue that the High Court has seriously e rre d in observing that the requirement o f submission of declaration under S ection 10B ( 8) is mandatory in nature, but the time limit within which the 14 ITA No. 350/Del/2021 Inspop.com Ltd.
declaration is to be filed is directo ry in nature , as the provisio n does not pro vide for any adve rse consequence fo r not filing of the declaration by the time limit. It is submitted that the High Co urt has not prope rly appre ciate d and/o r considere d the fact that non- filing o f declaration be fore the due date, i.e ., filing of the re turn of income would result in de nial of the be nefit under Section 10B (8) o f the IT Act. There fore , it canno t be said that there is no consequence o f not filing o f declaratio n be fore the due date o f return o f income.
3.8 It is conte nded that the High Court has mate rially erred in following and relying upo n the decision of the Delhi High Court in the case of Commissio ner of Income Tax, De lhi-III, New Delhi v. Moser Baer I ndia Limite d, decided on 14.05.2008 in ITA No. 950/2007, where in it was conside ring the re quirement of Section 10B ( 7) of the IT Act.
3.9 It is ne xt co ntended that there is a clear distinctio n between the provisio ns seeking exemptio n and the provisio ns for deduction. That Chapter III of the IT Act deals with exemptions. However, Chapte r VIA deals with deductions. That S ection 10B o f the IT Act is an exemptio n pro vision and the condition for seeking an exemptio n is require d to be co mplied with strictly with the pro visio n.
3.10 Le arne d AS G submitted that as held by this Court in a catena o f cases that a taxing statute should be strictly construe d and that the machine ry provisions must be so construed to e ffectuate the object and purpose o f statute and that the exemption pro visions must be construed strictly and by a strict interpre tation. Re liance is placed o n the judgments of this Co urt in the case of Commissio ner of Income Tax-III v. Calcutta Knitwe ars, Ludhiana (2014) 6 SCC 444 and Commissio ner of Customs (Import) , Mumbai v. Dilip Kumar and Company and othe rs ( 2018) 9 S CC 1.
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3.10 Making the above submissions and relying upo n the afo resaid decisions, it is prayed to allow the present appeal.
4. The present appeal is vehemently o ppose d by S hri S . Ganesh, learned Senior A dvocate appearing on behalf of the respondent - assessee.
4.1 Le arned counsel appe aring on behalf of the assessee has submitted that the only question of law which arises in the prese nt case is with regard to the interpretatio n of Section 10B ( 8) of the IT Act, viz., whethe r the re quirement of submission o f the declaration before the last date fo r submissio n of the re turn is mandatory or directory. It is submitte d that on a true interpre tation of Sections 10B ( 5) and 10B (8) of the IT A ct, the High Court has rightly observe d and held that the requirement of filing a declaratio n is mandatory in nature, while the time limit in filing the declaration is directory in nature. It is submitte d that the High Co urt has rightly held the require ment of filing the declaration by the time limit directory as non-filing o f the declaratio n within the time limit does not envisage any conseque nce. It is urged that the High Court has rightly relied upon the decisio n o f the Delhi High Court in the case o f Moser Baer (supra). It is subm itte d that the issues o f validity o f the revise d return of income; whethe r the respo ndent was entitle d to carry fo rward its losses under Sectio ns 10B and 80 of the IT Act; and whethe r the assessee had duly com plie d with Sectio n 80 and Section 10B ( 5) o f the IT Act we re not raise d be fore the High Court.
4.2 I t is submitte d that apart from the abo ve, even on merits also , the Revenue has no case. This is because Sectio n 80 of the IT Act only re quires that an assessee claiming carry forward of loss sho uld file a return showing the loss be fore 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 the reby complied with Sectio n 80 of the IT Act.
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4.3 I t is furthe r submitted that tho ugh it was no t ne cessary for the exercise of o ption unde r Sectio n 10B (8) o f the IT Act, the assessee filed a revised re turn only to bring to the notice of the AO the factum of e xercise o f o ption unde r Sectio n 10B. Even if the revised re turn had not been file d and instead, the assessee had submitte d the declaration in writing to the AO during the assessment proceedings, it would have made no difference whatsoeve r to the exercise o f optio n unde r Section 10B ( 8) o f the IT Act. It is submitted that there fore the validity of the revise d return is wholly immaterial and irre levant.
4.4 It is further submitted that the accountant's ce rtificate unde r Section 10B (5) is re quire d only if the assessee claims the deductio n unde r Section 10B. This certificate only certifies the profit/ loss of Section 10B unit and the amount of deduction unde r Section 10B (1) , if any. The certificate , if alre ady submitted, becomes irre levant if the claim is withdrawn under Section 10B. In any eve nt, the co ntents of this certificate regarding profit/ loss are not in any way affected by the withdrawal of the Section 10B claim. It is submitted that in the prese nt case, the loss set out in Section 10B certificate re mained exactly the same after withdrawal of the claim made under Section 10B and the respondent making the claim for carry forward of loss. It is subm itte d that there was no claim fo r any de duction under Section 10B (1) at any time.
4.5 It is submitted that the inco ntro vertible position set out in paragraphs 4.2 to 4.4 abo ve is the precise reason why these po ints were not e ven attempted to be raised, e ithe r befo re the ITAT or before the High Court, and are sought to be raise d before this Court for the first time and without disclosing the co rrect and comple te facts.
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4.6 It is furthe r submitted by S hri S . Ganesh, learne d counsel appe aring on be half of the assessee that on interpretation of Section 10B ( 8) of the IT Act, the case is squarely covere d by the judgment of this Court in the case o f CIT, Maharashtra v. G.M . Knitting Industries Pvt. Ltd. (2016) 12 SCC 272. It is submitte d that the case invo lve d a claim for additio nal de preciation o n plant and machinery unde r Section 32( 1) ( ii-a) of the IT Act. That provision gave the assessee the optio n to claim additio nal de preciation, over and abo ve the usual or ordinary depreciation mandatorily allowed under Section 32( 1) o f the IT Act. This option had to be e xercised by the assessee by filing a statutory Fo rm 3- AA along with the Return of I ncome, which gave details of the plant and machine ry and also a certificate that the claim for additional de preciation was correctly made . Therefo re, if the said Form 3-AA was not file d with the Return, it was a clear indication that the assessee had opted not to claim additional depreciation. In the case of G.M. K nitting (supra) , the assessee did not file Form 3-AA along with the return of income, but chose to file the Form much later, but be fore the passing of the assessment order, which may be passe d as long as 26 months after the return was filed as pro vide d under Se ction 153(1) of the IT Act. The Revenue rejecte d the form on the ground that it had not been file d along with the re turn of income and decline d to grant additional depreciation as claimed by the assessee. It is submitte d that this Court held that the requirement that Form 3-AA should be submitted along with re turn was only directory and that therefo re even though the Form had bee n submitted lo ng afte r the filing of the return, the assessee was e ntitled to claim additional depreciation under Section 32( 1)(ii-a) of the IT Act.
4.7 It is submitte d that e xactly the same principle applies to the inte rpretatio n o f Section 10B (8) of the IT Act. Section 10B (8) enables an assessee to exclude the applicability of the deduction unde r Section 10B by filing a declaration to that effect befo re the 18 ITA No. 350/Del/2021 Inspop.com Ltd.
last date in which the return of income is require d to be filed. It is submitted that as held in G.M. Knitting (supra), the re quirement that the Form should be submitted by a certain de adline is directory, though the subm ission of the Form itself may be regarded as mandatory. It is urged that the present case stands on a far stronge r footing and on a far highe r pe destal as compared to G.M . Knitting (supra). This is because Sectio n 10B ( 8) spe cifically and unequivocally gives the assessee a statuto ry right to exercise his optio n and to decide not to avail of the bene fit of section 10B ( 8) in a particular Assessment Year. Fo r the purpose of Section 32( 1)(ii-a) of the IT Act, by permitting the assessee to file the F orm 3-AA long afte r the re turn, this Court has in effect permitted the assessee to make one optio n at the time of filing the return and change the optio n lo ng there after, at any time before the assessment is made. That if such change of option co uld be pe rmitted under Section 32( 1)(ii-a) , the case fo r pe rmitting it is far stronger unde r Sectio n 10B ( 8) where the statute itse lf e xpre ssly and une quivocally gives the assessee the right to change his optio n. I t is submitted that the basic premise is that a substantive claim, which the assessee conside rs to be more beneficial, must be allowed to be made until the conclusio n of assessment and the time within which any fo rm which enables the claim should be filed, is only directo ry.
4.8 It is further submitted that this Court in G.M . Knitting (supra) has spe cifically approve d the judgment of the Bombay High Court in the case of Co mmissioner of Income Tax v. Shivanand Electronics (( 1994) 209 ITR 63). That judgment dealt with an assessee's claim for de duction under Section 80HHC. Sectio n 80HHC specifically prohibite d the grant of deduction unde r Section 80HHC unless the stipulate d audit report was filed along with the return o f income. The asse ssee file d the re quire d audit re port lo ng afte r the return. T he Bombay High Court he ld that while the filing of the audit report was mandatory, the requirement that it sho uld be 19 ITA No. 350/Del/2021 Inspop.com Ltd.
filed alo ng with the re turn was o nly directory, no twithstanding the perempto ry language of the pro hibition in Section 80HHC ( 5). It is o f vital impo rtance to note that the re is no such prohibition in Sectio n 10B. Furthe r, as already po inte d out, Sectio n 10B (8) itself expre ssly gives the assessee the right to opt out of section 10B. This substantive statutory right cannot in law be nullified by construing the pure ly proce dural time element requirement regarding the filing of the declaration under Section 10B (8) as mandatory. Reliance is place d on the judgment of the Telangana High Court in the case o f Telangana State Pollution Board v. CBDT (Writ Petition No . 4834/ 2020, decide d on 26.07.2021) .
4.9 It is furthe r submitted by the learned co unse l appe aring o n behalf of the asse ssee that the submission on behalf of the reve nue that by the impugned judgment and orde r and the interpre tation by the High Co urt, the statuto ry option e xpressly given by Sectio n 10B ( 8) is in effect nullified and that Section 10B (8) is rewritten by introducing in it a pro hibition similar to Sectio n 80HHC(5) , though the legislature did not enact any such pro hibition and it comple tely overlooks and ignores the legislative background of section 10B has no substance . It is urged that as such the issue involve d in the present case is directly co vere d by the decision o f the Delhi High Court in the case of Moser Baer ( supra), against which a special leave petition was pre ferred in this Court and the same was dismisse d as withdrawn. That the decision o f Moser Baer (supra) has been subseque ntly fo llo wed in the case of CIT v. Rana 20 ITA No. 350/Del/2021 Inspop.com Ltd.
Polycot Ltd. 2011 SCC Online P& H 17591. That both these judgments are on Section 10B itself and the y clearly and unequivocally stated that while the submission of the declaratio n is mandatory, the requirement that it should be submitte d be fore the due date of return is only directory and Section 10B deduction could not be disallo wed if the declaration was filed be fore the assessment was made.
4.10 Shri Ganesh, learne d counsel appe aring on behalf of the assessee has submitted that there are a large number of judgments dealing with othe r sectio ns of the IT Act which e xpressly pro vide that a particular deduction wo uld not be allo wed if a particular repo rt o r certificate of declaration was not filed along with the return o f income. 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 file d along with the return of income is only directory. Shri Ganesh, le arned counsel has referre d to the following decisions:
i) Moser Bae r (supra); ii) Rana Po lyco t Ltd. (supra); iii) G.M. Knitting I ndustries Pvt. Ltd. (supra); iv) CIT v. Panama Chemical Works, 2006 S CC OnLine MP 704 v) CIT v. Punjab F inancial Corp. ILR 2002 (1) P&H 438; vi) CIT v. Hardeo das Aggarwala Trust; 1991 SCC OnLine Cal. 414 vii) CIT v. Gupta Fabs, 2005 SCC OnLine P&H 1315; viii) Murali Export Ho use v. CIT, 1995 SCC OnLine Cal. 286; ix) CIT v. Be rge r Paints India Ltd., 2002 S CC OnLine Cal.869; and x) CIT v. Ramani Relato rs (P) Ltd., 2014 S CC OnLine Mad. 12717. 21 ITA No. 350/Del/2021 Inspop.com Ltd.
It is submitted that therefo re on the principle of stare decisis, this Court may no t interfere with the impugned judgment and order passed by the High Co urt.
4.11 Now so far as the subm ission on be half of the Reve nue that Sectio n 10B is an exemptio n pro vision, it is vehemently submitted by the learne d counsel appearing on behalf of the assessee that as held by this Co urt in the case of CI T v. Yokogawa India Ltd. ( 2017) 2 SCC 1, Section 10B is a de duction provisio n and not an exemption provisio n. 4.12 Making the above submissions and relying upon the aforesaid decisio ns, it is praye d to dismiss the present appeal.
5. We have heard Shri Balbir S ingh, learned AS G appe aring o n behalf of the Reve nue and Shri S. Ganesh, learned Senior Advocate appe aring on behalf o f the assessee at length and peruse d the material on reco rd.
The short questio n which is posed for conside ration o f this Co urt is, whethe r, fo r claim ing e xemption under Section 10B (8) of the IT Act, the assessee is required to fulfill the twin conditio ns, namely, (i) furnishing a declaration to the asse ssing o fficer in writing that the provisio ns of Section 10B ( 8) may not be made applicable to him; and (ii) the said declaration to be furnished be fore the due date of filing the return of income unde r sub-section ( 1) of Section 139 o f the IT Act.
6. I n the prese nt case, the High Court as we ll as the ITAT have observe d and he ld that for claiming the so-called exemptio n relief unde r Section 10B (8) of the IT Act, furnishing the de claration to the assessing o fficer is mandatory but furnishing the same before the due date of filing the original re turn of income is directory. In the present case, when the assessee submitted its original return of income under Section 139( 1) o f the IT Act on 31.10.2001, which was 22 ITA No. 350/Del/2021 Inspop.com Ltd.
the due date for filing of the o riginal return of income , the assessee specifically and clearly state d that it is a company and is a 100% export-oriented unit and entitle d to claim exemption under Section 10B o f the IT Act and the refo re no loss is being carried forward. Along with the original re turn filed on 31.10.2001, the assessee also anne xed a note to the computatio n of income clearly stating as above . Ho wever, thereafte r the asse ssee filed the revised return of income under Section 139( 5) o f the IT Act on 23.12.2002 and file d a declaration under Section 10B (8) which adm itte dly was afte r the due date of filing of the original return unde r Section 139(1) , i.e., 31.10.2001.
7. It is the case on behalf of the Re venue that as the re was a non- compliance of twin conditions unde r Section 10B (8) of the IT Act, namely, the declaratio n unde r Section 10B ( 8) was not submitte d along with the original return o f income, the assessee shall no t be entitle d to the e xemptio n/be nefit unde r Section 10B (8) of the IT Act. According to the Reve nue, furnishing of declaration unde r Section 10B (8) befo re the due date o f filing original return o f income is also mandatory. On the other hand, it is the case on be half of the assessee, which has bee n accepted by the High Court, that the requirement o f submission o f 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 .
8. While considering the issue involved, whethe r the time limit within which the declaratio n is to be filed as pro vide d under Section 10B ( 8) is mandatory or directo ry, S ection 10B ( 8) is require d to be referred to , which reads as under:
"10B ( 8) Notwithstanding anything contained in the forego ing provisio ns of this section, where the assessee, befo re the due date for furnishing the return of income unde r sub-section (1) of Section 139, furnishes to the Assessing Officer a declaratio n in writing that 23 ITA No. 350/Del/2021 Inspop.com Ltd.
the pro visions o f this section may no t be made applicable to him, the provisio ns of this section shall no t apply to him for any o f the relevant assessme nt ye ars." On a plain reading of Section 10B ( 8) of the IT Act as it is, i.e ., "whe re the assessee, be fore the due date for furnishing the return o f income unde r sub-section (1) of sectio n 139, furnishes to the Assessing Office r a declaratio n in writing that the provisio ns of Section 10B may no t be made applicable to him , the provisio ns of Section 10B shall not apply to him for any o f the relevant assessme nt ye ars", we note that the wording of the Section 10B ( 8) is very clear and unambiguous. Fo r claiming the bene fit unde r Section 10B (8) , the twin conditio ns of furnishing the declaration to the assessing o ffice r in writing and that the same must be furnishe d before the due date of filing the return of income unde r sub-section (1) of sectio n 139 of the IT Act are require d to be fulfille d and/o r satisfie d. In o ur view, bo th the co nditio ns to be satisfied are mandatory. It canno t be said that o ne of the conditio ns would be mandatory and the othe r would be directory, whe re the words used fo r furnishing the declaratio n to the assessing o fficer and to be furnished before the due date of filing the original re turn of income unde r sub-sectio n (1) of section 139 are same/similar. It canno t be dispute d that in a taxing statute the provisions are to be read as the y are and they are to be literally co nstrued, more particularly in a case of exemption sought by an assessee."
9. I n such a situation, filing a revise d re turn under section 139( 5) o f the IT Act claiming carrying forward o f losses subsequently would not help the asse ssee. In the pre sent case , the assessee file d its original return under sectio n 139( 1) and not under section 139(3) . Therefo re, the Revenue is right in submitting that the revised return filed by the asse ssee unde r sectio n 139( 5) can only substitute its original re turn under Sectio n 139( 1) and cannot transform it into a return unde r Section 139( 3) , in orde r to avail the be nefit of carrying forward or set-o ff of any loss unde r Section 80 o f the IT Act. The 24 ITA No. 350/Del/2021 Inspop.com Ltd.
assessee can file a revised return in a case whe re there is an omission or a wrong statement. But a re vised return of income, unde r Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carrie d forward or set- off of any loss. Filing a revised re turn under Section 139( 5) o f the IT Act and taking a contrary stand and/or claiming the e xemptio n, which was specifically no t claimed earlier while filing the original return o f income is no t pe rmissible. By filing the re vise d return of income, the assessee canno t be pe rmitted to substitute the original return of income filed unde r section 139( 1) o f the IT Act. Therefore , claiming benefit under section 10B (8) and furnishing the declaration as require d under section 10B ( 8) in the revised re turn o f income which was much after the due date of filing the original return of income unde r sectio n 139(1) o f the IT Act, cannot mean that the assessee has complied with the condition o f furnishing the declaratio n be fore the due date of filing the original return of income unde r sectio n 139(1) of the Act. As observed here inabove , for claiming the benefit unde r sectio n 10B (8) , both the conditions of furnishing the declaration and to file the same before the due date of filing the original return o f income are mandatory in nature .
10. Even the submission o n behalf of the assessee that it was no t necessary to exe rcise the o ption unde r sectio n 10B (8) o f the IT Act and e ven without filing the revised return of income, the assessee could have submitte d the declaration in writing to the assessing o fficer during the assessment procee dings has no substance and the same cannot be accepted. Eve n the submissio n made on behalf of the assesse e that filing of the declaration subsequently and may be during the assessment pro ceedings would have made no difference also has no substance. The significance o f filing a declaration under section 10B ( 8) can be said to be co- terminus with filing of a return unde r section 139(1) , as a check has been put in place by virtue o f section 10B ( 5) to verify the 25 ITA No. 350/Del/2021 Inspop.com Ltd.
correctness of claim of deductio n at the time of filing the return. If an assessee claim s an e xemption under the Act by virtue of Section 10B, then the correctness of claim has already been verified unde r sectio n 10B (5) . There fore , if the claim is withdrawn post the date o f filing of re turn, the acco untant's re port unde r section 10B ( 5) would become falsified and would stand to be nullified.
11. Now so far as the reliance place d upon the decisio n of this Court in the case of G.M . Knitting Industries Pvt. Ltd. (supra), re lied upon by the learned counsel appearing on be half o f the assessee is concerne d, Sectio n 10B ( 8) is an e xemptio n provision which canno t be compared with claiming an additional de preciation unde r section 32( 1) ( ii- a) of the Act. As per the settled position of law, an assessee claiming exemptio n has to strictly and lite rally comply with the exemption provisions. There fore, the said decision shall no t be applicable to the facts of the case on hand, while conside ring the exemptio n provisions. Eve n otherwise, Chapter III and Chapter VIA of the Act o perate in different realms and principles of Chapte r III, which de als with "incomes which do not form a part of total income", canno t be e quated with mechanism provided fo r deductio ns in Chapter VIA , which deals with "deductio ns to be made in computing total income". The refore , no ne of the decisio ns which are re lied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while conside ring the claim unde r Section 10B ( 8) of the IT Act.
12. Eve n the submission on be half of the assessee that the assessee had a substantive statutory right under Section 10B (8) to opt out of Section 10B which cannot be nullified by construing the pure ly procedural time requirement regarding the filing o f the declaration unde r Section 10B (8) as be ing mandato ry also has no substance . As observe d here inabove, the exemption provisions are to be strictly 26 ITA No. 350/Del/2021 Inspop.com Ltd.
and literally complie d with and the same cannot be construed as procedural require ment.
13. So far as the submission on behalf of the assesse e that against the decisio n of the Delhi High Co urt in the case of Moser Bae r (supra), a special leave pe tition has been dismissed as withdrawn and the reve nue canno t be permitted to take a co ntrary vie w is concerne d, it is to be note d that the special leave petitio n against the decision o f the Delhi High Co urt in the case of Moser Baer (supra) has been dismisse d as withdrawn due to there being low tax effect and the questio n of law has specifically be en kept open. Therefo re, withdrawal of the special le ave petitio n against the decision o f the Delhi High Court in the case o f Mose r Bae r (supra) canno t be he ld against the re venue .
14. In vie w of the abo ve discussion and fo r the reasons state d above , we are of the opinio n that the High Court has committed a grave erro r in o bserving and holding that the re quirement of furnishing a declaratio n under Section 10B ( 8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is no t mandatory but is directory. The same is erroneo us and contrary to the unambiguous language containe d in Section 10B (8) of the IT Act. We hold that for claimin g the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declar ation before the assessing off icer and that too before the due date of f iling the original return of income under section 139(1) are to be satisfied an d both are mandatorily to be complied with. Accordingly, the question o f law is answere d in favour o f the Reve nue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are he reby set aside and it is held that the asse ssee shall no t be entitled to the benefit under Section 10B ( 8) of the IT Act on non- compliance of the twin conditions as provide d under Section 10B ( 8) 27 ITA No. 350/Del/2021 Inspop.com Ltd.
of the IT Act, as observe d here inabove . The present Appe al is accordingly Allowe d. Ho weve r, in the facts and circumstances o f the case, there shall be no o rde r as to costs."
.....................................J. [M .R. S HAH] NEW DELHI; ......................................J. JULY 11, 2022. [B.V. NA GARATHNA]
23. Thus, based on the provisions of the Act applicable to the instant year and the judgment of Hon'ble Supreme Court in the case of National Taj Traders (supra) and Wipro Ltd. (supra), we decline to interfere with the order of the ld. DRP.
24. In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 24/01/2023.
Sd/- Sd/-
(Saktijit Dey) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 24/01/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR