TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 386
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....appeal is contrary to law, erroneous and unsustainable on the facts of the case. 2. The NFAC erred in confirming the denial of deduction under sec.10AA of the Act in an amount of Rs.75,71,621. 3. The NFAC failed to appreciate that the filing of the Form 56F along with the return of income is procedural in nature and not a mandatory requirement, other than the first year of claim and hence the denial of deduction u/s.10AA was unsustainable in law. 4. The NFAC further failed to appreciate that the deduction claimed u/s.10AA for the preceding two asst. years had been accepted and the non-filing of Form 56F along with the return in this year (i.e., 3rd year) was merely a venial breach not warranting the denial of deduction to the assessee. 5. The NFAC further failed to appreciate that the deduction u/s.10AA was allowed by the ADIT for 4 years i.e., (2014-15, 2015-16, 2017-18, 2018-19) and the belated filing of Form 56F for the A.Y 2016-17 cannot be a reason for disallowing the claim u/s.10AA of the Act. 6. The NFAC further failed to appreciate that the inadvertent omission to file Form 56F along with return of income was made good by filing the same on 01.3.2022 and soug....
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....eduction claimed u/s.10AA of the Act, and thus, rejected arguments of the assessee and sustained additions made towards disallowance of deduction claimed u/s.10AA of the Act. The relevant findings of the Ld.CIT(A) are as under: 8. I have carefully considered the facts of the case, the intimation u/s.143(1) and the written submission of the assessee. In the intimation u/s.143(1) dated 24.04.2017, the ADIT (CPC) made disallowance of deduction of Rs.75,71,621/- claimed u/s.10AA of the Act, in view of the failure of the assessee to furnish the audit report in Form 56F in support of the said deduction along with the return of income filed on 16.10.2016. In the written submission, the assessee contended that the requirement to file the audit report in Form 56F along with the return of income is merely a procedural/directory requirement and not a mandatory requirement for allowing the said deduction. The assessee contended that since the audit report in Form 56F was belatedly filed on 01.03.2022, subsequent to filing the return of income, the deduction claimed u/s 10AA is required to be allowed. The assessee placed reliance on the decisions of Hon'ble Supreme Court in the cases of M....
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....e return of income, that the twin conditions of furnishing the declaration to the AO and furnishing of the same before the due date for filing the return of income u/s.139(1) are mandatory and they cannot be treated as directory. The Hon'ble Supreme Court held that it cannot be disputed that in a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee. The Hon'ble Supreme Court held that the submission on behalf 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 purely procedural time requirement regarding the filing of the declaration under section 10B (8) as being mandatory has no substance and that the exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement. The relevant portion of the said decision of the Hon'ble Supreme Court is extracted as under: 5. We have heard Shri Balbir Singh, learned ASG appearing on behalf of the Revenue and Shri S. Ganesh, learned Senior Advocate appearing on be....
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....in nature, but the time limit within which the declaration is to be filed is directory in nature. 8. While considering the issue involved, whether the time limit within which the declaration is to be filed as provided under Section 10B (8) is mandatory or directory, Section 10B (8) is required to be referred to, which reads as under: "10B (8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of Section 139, furnishes to the Assessing Officer 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." On a plain reading of Section 10B (8) of the IT Act as it is, i.e., "where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of Section 10B may not be made applicable to him, the provisions of Section 10B shall not apply to him for any of the relevant assessment years", we note that the w....
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....riginal return of income under section 139(1) of the IT Act, cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under section 139(1) of the Act. As observed hereinabove, for claiming the benefit under section 10B (8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income are mandatory in nature. 10. 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. Even the submission made on behalf of the assessee that filing of the declaration subsequently and may be during the assessment proceedings would have made no difference also has no substance. The significance of filing a declaration under section 10B (8) can be said to be co-terminus with filing of a return under section 139(1), as a check has been put in plac....
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....e petition against the decision of the Delhi High Court in the case of Moser Baer (supra) has been dismissed as withdrawn due to there being low tax effect and the question of law has specifically been kept open. Therefore, withdrawal of the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) cannot be held against the revenue. 14. 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. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is ....
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....ubmitted that in the said case before the Hon'ble Supreme Court was on the issue of u/s.10B(8) of the Act, whereas in the present case, the assessee has claimed deduction u/s.10AA of the Act, and both provisions are operating under different facts and circumstances. Therefore, the AO and the Ld.CIT(A) are grossly erred in following the decision of the Hon'ble Supreme Court to deny the benefit of deduction u/s.10AA of the Act. In this regard, he relied upon the decision of ITAT Delhi Benches in the case of Xavient Software Solutions (India) Pvt. Ltd. v. DCIT, Circle-3, Noida reported in 2018 (4) TMI 992. 6. The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submitted that as per latest decision of the Hon'ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., filing of Audit Report as required under the law is mandatory for claiming any deduction. Since, the assessee did not file the Audit Report as required under the provisions of Sec.10AA(8) of the Act, the AO has rightly disallowed deduction and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The asses....
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....f filing the return of income under sub-section (1) of Section 139 of the IT Act. 6. 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 retur....
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....onditions 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 subsection (1) of section 139 are same/similar. It cannot be disputed that in a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee. 9. In such a situation, filing a revised return under section 139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee. In the present case, the assessee filed its original return under section 139(1) and not under section 139(3). 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), in order to avail the benefit of carrying forward or set-off of any loss under Section 80 of the IT Act. The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return ....
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....ed upon the decision of this Court in the case of G.M. Knitting Industries Pvt. Ltd. (supra), relied upon by the learned counsel appearing on behalf of the assessee is concerned, Section 10B (8) is an exemption provision which cannot be compared with claiming an additional depreciation under section 32(1) (ii-a) of the Act. As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. Therefore, the said decision shall not be applicable to the facts of the case on hand, while considering the exemption provisions. Even otherwise, Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with "incomes which do not form a part of total income", cannot be equated with mechanism provided for deductions in Chapter VIA, which deals with "deductions to be made in computing total income". Therefore, none of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim under Section 10B (8) of the IT Act. 12. Even the submission on behalf of the assessee that the assessee had a substant....
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.... shall be no order as to costs. 8. The decision rendered by the Hon'ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., which was rendered with reference to sec.10B(8) of the Act, squarely applicable to the facts and circumstances of the case. The plain language used in sec.10A(5) of the Act, is also clear and unambiguous that the condition of filing Audit Report in Form No.56F along with return of income is mandatory for allowing any deduction. In this case, there is no dispute with regard to the fact that the assessee did not satisfy the mandatory condition prescribed u/s.10AA(8) of the Act r.w.s.10A(5) of the Act. Since, the assessee did not file the Audit Report in Form No.56F as required under the law, in our considered view, the AO has rightly disallowed deduction claimed u/s.10AA of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld the additions made by the AO. 9. As regards the case law relied upon by the assessee in the case of Xavient Software Solutions (India) Pvt. Ltd. v. DCIT, we find that the latest decision of the Hon'ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., prevails overall other decisions rendered prior to the judgment o....