Twin Conditions In Section 10B (8) Income Tax Act Has To Be Fulfilled To Claim Exemption Relief: Supreme Court

For claiming the benefit under Section 10B (8) of the Income Tax 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, the Supreme Court observed in a judgment delivered yesterday. 

Section 10B (8) IT Act

The Section 10B (8) IT Act reads as follows: 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.

Background

In this case, the High Court of Karnataka  dismissed an said appeal preferred by the Revenue and confirmed the judgment passed by the Income Tax Appellate Tribunal, Bangalore Bench allowing the assessee's claim for carry forward of losses under Section 72 of the Income Tax Act, 1961. It 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. Aggrieved with this ruling, the Revenue approached the Apex Court by filing appeal.

Issues

The appeals raised the following issue : Whether, for claiming exemption under Section 10B (8) of the IT Act, the assessee is required to fulfil the twin conditions, namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of Section 10B (8) may not be made applicable to him; and (ii)  the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of Section 139 of the IT Act ?

Both the conditions to be satisfied are mandatory.

Perusing Section 10B(8), the bench comprising Justices MR Shah and BV Nagarathna observed thus: 

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.

Allowing the appeal, the bench observed that the High Court 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 answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on noncompliance of the twin conditions as provided under Section 10B (8) of 23 the IT Act.", it said.

Case details

Principal Commissioner of Income Tax-III Bangalore vs Wipro Limited | 2022 LiveLaw (SC) 583 | CA 1449 OF 2022 | 11 July 2022

Coram: Justices MR Shah and BV Nagarathna 

Counsel: ASG Balbir Singh for appellant,  Sr. Adv S. Ganesh for respondent

Headnotes

Income Tax Act, 1961 ; Section 10B(8) - 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  (Para 14)

Interpretation of Statutes - Taxation Laws - 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 - An assessee claiming exemption has to strictly and literally comply with the exemption provisions. (Para 8,11)

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