TaxTMI 
TaxTMI 
TaxTMI 
2007 (9) TMI 304
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....considered the notice of not claiming the exemption user s. 10A/10B submitted during the course of hearing and may not have confirmed the exemption under s. 10B. (3) The CIT(A) erred in law and facts of the case in not allowing the carry forward of unabsorbed depreciation and losses in view of exemption under s. 10A/10B. (4) The CIT(A) erred in law and facts of the case in including the earlier assessment years in which no exemption under s. 10B should be withdrawn and carry forward of unabsorbed losses and depreciation should be allowed. 3. The assessee company is engaged in manufacture of ophthalmic lenses. The assessee was having profit of Rs. 1,78,39,352 for asst. yr. 2001-02 and claimed exemption under s. 10A/10B of the IT Act. During the assessment proceedings, the AO noticed that the assessee has also claimed carry forward of unabsorbed depreciation and business (losses) amounting to Rs. 20,91,03,841. From the computation of total income, the AO noticed that the assessee claimed exemption under s. 10A/10B as per tax audit report submitted in Form 56G; it was certified that the assessee had claimed exemption under s. 10B of the IT Act, 1961. The assessee has also filed For....
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.... asst. yr. 1993-94 and it goes upto 2002-03 as the assessee company commenced production on 26th Feb., 1993. The assessee has not claimed exemption under s. 10B for the earlier year because there was no profit to the assessee company. It has claimed exemption under s. 10B for the current year as there was a profit of Rs. 1,78,39,352. Thus the AO allowed exemption claimed under s. 10B and rejected the benefit of carry forward of depreciation and business loss amounting to Rs. 20,91,03,841. The CIT(A) confirmed the order of the AO. 4. The learned Authorised Representative submitted that the assessee filed Form 56F on 19th Sept., 2003 claiming exemption under s. 10A but the same was rejected by the AO citing the provisions of s. 10A(8), stating that the assessee had to furnish to the AO, a declaration in writing that the provisions of this section may not be applicable to the assessee and such declaration should be filed before the due date for furnishing the return of income under s. 139(1). The learned Authorised Representative submitted that the assessee has filed letter dt. 19th Sept., 2003 requesting the AO regarding withdrawal of exemption under s. 10B. The learned Authorised R....
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....edings of the relevant assessment years, Revenue could not thrust exemption provided under s. 10B upon the assessee." The learned Authorised Representative also relied upon the judgment of the apex Court in the case of CIT vs. Mahendra Mills (2000) 159 CTR (SC) 381 : (2000) 243 ITR 56 (SC). The relevant finding of the apex Court is reproduced as below: "The language of the provisions of ss. 32 and 34 is specific and admits of no ambiguity. Sec. 32 allows depreciation as deduction subject to the provisions of s. 34. Sec. 34 provides that deduction under s. 32 shall be allowed only if prescribed particulars have been furnished. We have seen r. 5AA of the IT Rules, 1962 since deleted, provided for the particulars required for the purpose of deduction under s. 32. Even in the absence of r. 5AA, the return of income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a circular of the Board dt. 31st Aug., 1965, which provides that depreciation could not be allowed where the required particulars have not been furnished by the assessee and no claim for the depreci....
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....laimed by the assessee." The learned Authorised Representative submitted that in the light of the above decision of the Tribunal, Delhi Bench, the assessee may be permitted to withdraw the claim under s. 10B given by the AO. The learned Authorised Representative further submitted that the assessee commenced production in the previous year relevant to the asst. yr. 1993-94 and according to the provision of s. 10A. the claim is allowable upto asst. yr. 2000-01. It is also the submission of the learned Authorised Representative that in this case no claim has been made till this year i.e. asst. yr. 2000-01 from the inception. The assessee's first year of production is asst. yr. 1993-94. Therefore, "the 8 years" period begins with asst. yr. 1993-94 and ends with 2000-01. Upto asst. yr. 2000-01. the assessee has not got any benefit by virtue of s. 10A or 10B of the Act. Even on consideration of amended provisions of s. 10B applicable to period 1st April, 1999 to 31st March, 2001 where period of 8 assessment years has been substituted by 10 assessment years. The last eligible assessment year for the assessee is 2002-03. But that does not change the assessee's case as in earlier years the....
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.... has been rejected by the AO because he has rightly allowed exemption claimed under s. 10B. The learned Departmental Representative while arguing in the appeal, submitted that the assessee's claim was under s. 10A/10B. He submitted that the assessee is eligible for exemption under s. 10B and not under s. 10A. The learned Departmental Representative submitted that the assessee has started production from 26th Feb., 1993 which is an undisputed fact and the assessee's first year for claiming exemption under s. 10B is asst. yr. 1993-94 which has ended with asst. yr. 2000-01 on completion of eight years. However, this period of 8 years was extended to 10 years by subsequent amendment. The learned Departmental Representative further submitted that in asst. yrs. 1993-94, 1994-95 and 1995-96, the assessee did not make claim under s. 10B. He further submitted that the assessee has opted for exemption under s. 10B for asst. yrs. 1996-97, 1997-98, 1998-99, 1999-2000 and 2000-01 but same was not allowed. He submitted that in asst. yr. 2001-02, the assessee made claim under s. 10B but during assessment proceedings, same has been withdrawn. The learned Authorised Representative submitted that on....
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....n writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years." 6.1 Sec. 10B(8) provides that where the assessee before the due date for furnishing the return of income under sub-s. (1) of s. 139, furnished to the AO a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years. Now the question is whether this requirement of s. 10B(8) is mandatory or procedural. In the case under consideration, admittedly, the assessee has not filed declaration as required under s. 10B(8) before the stipulated period under s. 139(1) but filed it during the course of assessment proceedings. On going through the scheme of s. 10B it may appear that the assessee who is covered by the provisions of s. 10B had not given an option to avail or not to avail the tax concession provided under s. 10B at the time of filing of return of income as per provisions of s. 10B(8) cannot be deprived of its claim for the lapse only as a procedure of utilizing the option cannot be....
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....s that deduction under sub-s. (1) of s. 80J shall not be admissible to the assessee who did not file the auditors report. Their Lordships observed that the word 'shall' be read as 'may' and the requirement of filing of audit report be not treated as mandatory condition but in case audit report is filed after return was submitted but before assessment was framed then it should be treated as sufficient compliance with the condition. This reasoning of their Lordships is fully applicable to the facts of the case in hand as provisions of s. 10A(7) which provide the option to the assessee is not so rigorous as the provisions of sub-s. (6A) of s. 80J(1). In the case in hand the assessee has filed declaration in writing on 26th Nov., 1986 before assessment was completed then it shall be taken that he has utilized the option provided under s. 10A(7) of the Act and approach of the ITO to frame the assessment order under s. 143(3) r/w s. 10A of the Act was not justified." 6.2 The Gujarat High Court in the case of S.R. Koshti vs. CIT (2005) 193 CTR (Guj) 518 : (2005) 276 ITR 165 (Guj) held that the authorities under the Act are under an obligation to Act in accordance with law. Tax can be col....