TWIN CONDITIONS IN SECTION 10B (8) OF INCOME TAX ACT HAVE TO BE FULFILLED TO CLAIM EXEMPTION RELIEF: SUPREME COURT

The Supreme Court in the case Principal Commissioner of Income Tax-III Bangalore vs Wipro Limited observed that for claiming the benefits under Section 10B (8) of the Income Tax Act, the twin conditions under Section 139(1) of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income are to be satisfied and both are mandatorily to be complied with, the top court observed in the judgement delivered.

The Court observed that Section 10B (8) of the IT Act, states that 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 for any of the relevant assessment years, shall not apply to him.

BACKGROUND OF THE CASE:

Karnataka High Court dismissed a 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 losses forward of under Section 72 of the Income Tax Act, 1961. Further, it is 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 the original return of income is directory, furnishing the same before the due date of filing. The Revenue approached the Apex Court by filing appeal, Aggrieved with this ruling.

ISSUE RAISED

The following issues were raised:

Under Section 10B (8) of the IT Act, for claiming exemption weather, the assessee is required to fulfil the twin conditions, namely, firstly, that the provisions of Section 10B (8) may not be made applicable to him by furnishing a declaration to the assessing officer in writing and secondly, the said declaration to be furnished under sub-section (1) of Section 139 of the IT Act, before the due date of filing the return of income

Both the conditions are mandatory to be satisfied.

The bench comprising of Justice MR Shah and the Justice BV Nagarathna observed, while perusing section 10B(8) that the benefits under Section 10B (8) and the twin conditions of furnishing the declaration to the assessing officer in writing and that under sub-section (1) of section 139 of the IT Act, the same must be furnished before the due date of filing the return of income are required to be fulfilled and/or satisfied. Therefore,

Both the conditions are mandatory to be satisfied. It cannot be said the other condition would be directory and that one of the conditions would be mandatory. Further, where the words to be used for furnishing the declaration to the assessing officer and to be furnished before the due date of filing the original return of income are same/similar under subsection (1) of section 139 of the IT Act. The bench stated 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 and more particularly in a case of exemption sought by an assessee.

Further, the bench observed that a grave error is committed by the High Court 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, while allowing the appeal.

Accordingly, the bench allowed the appeal.