For Claiming Benefit U/s. 10B(8) Of IT Act, Furnishing Declaration Before Due Date Of Filing Original Return Is Mandatory - SC

ASG Shri Balbir Singh appeared on behalf of the Revenue and Senior Advocate Shri S Ganesh appeared on behalf of the Assessee.

In this case, the Assessee filed its return of income and declared a loss, and claimed exemption under Section 10B of the IT Act. The Assessee annexed a note to the computation of income and stated that the company is a 100% export-oriented unit and entitled to claim an exemption under Section 10B of the IT Act and therefore no loss is being carried forward.

Thereafter, the Assessee filed a declaration dated before the Assessing Officer stating that the Assessee does not want to avail the benefit under Section 10B of the IT Act. The Assessee filed the revised return of income, 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 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. Thereby, the AO made the addition in respect of denial of claim of carrying forward of losses under Section 72 of the IT Act.

The Assessee filled an appeal before the Commissioner of Income Tax. The order passed by the Assessing officer was upheld, making addition in respect of denial of claim of carrying forward of losses under Section 72 of the IT Act.

Aggrieved, the Assessee approached the ITAT, and the issue was decided in favour of the Assessee, stating that the declaration requirement under Section 10B (8) of the IT Act was filed by the Assessee before the AO before the due date of filing of return of income as per Section 139(1) of the IT Act. ITAT allowed the Assessee's claim for carrying forward of losses under Section 72 of the IT Act.

The Revenue approached the High Court but the appeal was dismissed. The Revenue approached the Supreme Court.

The Supreme Court held that Section 10B(8) of the IT Act is clear and unambiguous. To that end, it opined that "For claiming the benefit under Section 10B (8), the twin conditions of furnishing the declaration to the assessing officer in writing and that the same must be furnished before the due date of filing the return of income under sub-section (1) of section 139 of the IT Act are required to be fulfilled and/or satisfied. 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 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."

Noting that the Assessee filed its original return under Section 139(1) and not under Section 139(3), the Court held 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.

Therefore, the Supreme Court held that the High Court had 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 Appeal was allowed and there were no orders to costs.