2019 (5) TMI 1067 - HC - Income Tax

ITR-6 e-filing glitch blocking s.10AA deduction and loss carry-forward: eligible unit profits computed separately; manual filing allowed

Where the e-filing utility for Form ITR-6 did not permit claiming deduction under s.10AA unless losses of an ineligible unit were set off, the HC held ... Discrepancy in the online filing of Form ITR- 6 - software of the Department did not permit the Petitioner’s claim u/s 10AA without setting off the loss of the ineligible unit - seeking direction to the Respondents to accept the Petitioner’s return of income for AY (AY) 2017-18 manually - HELD THAT:- The issues arising from transiting to an online system have been dealt with earlier by the Courts. In each such instance, when faced with the situation of a software glitch that prevents an Assessee from either filing a return or claiming a benefit, the Courts have repeatedly had to permit the manual filing of return/claims and have directed the Respondents to act on such manual filing of returns. Once such instance is in Tara Exports vs. Union of India [2018 (9) TMI 1474 - MADRAS HIGH COURT] In the present case, since it is not in dispute that prior to AY 2018-2019 the computation of the Profits and Gains of the eligible unit by giving the deduction under Section 10AA would have to be independent of the computation of Profit and Gains of the ineligible unit, it is obvious that in the present case which concerns AY (AY) 2017-2018, the Petitioner should be permitted to carry forward the losses of its ineligible unit. Accordingly, a direction is issued to the Respondent to either accept the manual return of the Petitioner or alter the software to permit it to again file online its returns claiming the carry forward of losses of its ineligible unit for the AYs in question. Either of these two options should be completed by 31st May, 2019. Issues:1. Difficulty in carrying forward business losses due to programming issue in online filing.2. Discrepancy in online filing software not accepting deduction under Section 10AA.3. Petitioner's request for manual filing and carry forward of losses.4. Legal position regarding the amendment in Section 10AA and its applicability.5. Court's direction to Respondents for manual filing or software alteration.Analysis:Issue 1: The Petitioner faced a programming difficulty preventing the carry forward of business losses due to online filing. The Petitioner engaged in manufacturing BOPP films and had units in both DTA and SEZ. The eligible unit qualified for deduction under Section 10AA since AY 2014-15.Issue 2: The Petitioner reported income for AY 2017-18, but the online filing software did not accept the deduction under Section 10AA without setting off losses from the ineligible unit. This resulted in the denial of carry forward of losses, reducing the losses to 'Nil'.Issue 3: The Petitioner approached the AO and CBDT regarding the discrepancy, highlighting the hardship faced. Despite reminders and representations, the issue persisted, leading to the filing of the present petition for direction.Issue 4: The Respondents acknowledged the amendment in Section 10AA effective from April 1, 2018, clarifying the deduction should be from the total income of the assessee. The Court affirmed that pre-2018-19, the law explained by the Supreme Court applied, emphasizing the need to correct the E-filing software to align with legal requirements.Issue 5: The Court directed the Respondents to accept manual returns or modify the software to enable online filing with carry forward of losses for the relevant AYs by May 31, 2019. The decision cited precedents where Courts permitted manual filing in case of software glitches affecting return filing or benefit claims.In conclusion, the Court's judgment addressed the programming issue hindering the Petitioner's ability to carry forward losses, emphasizing the need for software compliance with legal provisions. The direction to allow manual filing or software modification aimed to resolve the Petitioner's hardship and ensure accurate income computation for the relevant assessment years.