No exemption can be claimed u/s 10B(8) by furnishing declaration in revised ITR much after due date of filing ITR u/s 139(1)

While hearing an appeal by the Revenue against the High Court’s directions allowing the Assessee to exemption under Section 10B of the Income Tax Act 1961, the Supreme Court of India observed that the wordings of Section 10B(8) specifying the two conditions to be met for claiming exemption, were very unambiguously required that – i) the claimant furnish a written declaration addressed to the Assessing Officer and ii) that such declaration be furnished before due date of filing Income Tax Return.

Emphasizing that neither of the conditions could be deemed to be directory in nature, the High Court clarified that in a taxing statute, the provisions had to be read as they were and were to be construed literally, more so in cases involving claims for exemption.

A Division Bench of Justice MR Shah and Justice BV Nagarathna observed that filing a revised return claiming carry forward of losses under Section 72 of the Act and forfeiting claim for exemption under Section 10B, would not hold the Assessee as having satisfied the condition of Sec 10B(8).

As the Assessee had filed original ITR under Section 139(1) of the Act and not under Section 139(3) of the Act, the Revenue’s submission that the revised ITR filed under Section 139(5) only could substitute the original ITR filed under Section 139(1), added the Bench.

The Bench accepted the Revenue’s contention that an original ITR filed under Section 139(1) could not be converted into a revised ITR filed under Section 139(3) of the Act, to avail benefit of carry forward of losses.

The Appellant-Revenue was represented by AOR Raj Bahadur Yadav, whereas the Respondent-Assessee was represented by AOR Archana Sahadeva.

Briefly, the Assessee is a 100% export-oriented-unit and engaged in running a call centre and providing IT-enabled Remote Processing Services. The Assessee filed Income Tax Return (ITR) for the relevant period, declaring loss of about Rs. 15.47 Crores, and claiming exemption under Section 10B of the Income Tax Act, 1961. The Assessee also annexed a note declaring that no loss was being carried forward.

Subsequently, the Assessee submitted another declaration stating that it did not intend to avail exemption under Section 10B. A revised return was filed, wherein the exemption under Section 10B was not claimed, but carry forward of losses was claimed.

On assessment, the Assessing Officer (AO) rejected the withdrawal of exemption under Section 10B on grounds that the declaration to that effect had not been submitted before the due date for filing ITR. The AO also denied claim for carry forward of losses under Section 72 of the Act.

On appeal, such findings of the AO were sustained by the Commissioner of Income Tax (Appeals) (CIT(A)). On further appeal, the Income Tax Appellate Tribunal (ITAT) resolved the issue in favor of the Assessee, noting that the Assessee had satisfied the requirements of Section 10B(8), namely of filing the declaration to withdraw claim for exemption under Section 10B, before the due date of filing ITR. Hence the Assessee’s claim for carry forward of losses under Section 72 was allowed. The High Court subsequently sustained the findings of the ITAT.

On hearing the contentions of both parties, the Bench observed that while the Assessee could file a revised ITR in case of an omission or a wrong statement, the Assessee cannot file revised ITR under Section 139(5) to withdraw a claim for carry forward and then subsequently claim the carry forward or set off of loss.

The Bench reiterated that filing a revised return under Section 139(5) and taking a contrary stand and claiming the exemption, which was specifically not claimed earlier while filing the original return of income, was not permissible. By filing the revised return of income, the assessee cannot be permitted to substitute the original return of income filed under section 139(1).

Therefore, claiming exemption under Section 10B(8) and furnishing declaration in revised ITR, much after the due date of filing original ITR under Section 139(1), could not be taken to mean that the Assessee had complied with the condition of furnishing the declaration before the due date of furnishing the declaration before the due date of filing original ITR under Section 139(1).

With these observations, the Bench concluded that the High Court committed an error in holding that the Assessee had complied with the conditions laid down in Section 10B and that the High Court’s findings ran contrary to the unambiguous language of Section 10B.

Cause title: Principal Commissioner of Income Tax-III Bangalore Vs M/s Wipro Ltd [Civil Appeal No. 1449 of 2022 / 2023-Enterslice-13-SC-IT]

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