PR COMMISSIONER OF INCOME TAX - III vs M/S WIPRO LIMITED

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.462 OF 2017 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-III

BMTC COMPLEX, KORAMANGALA

BANGALORE. 2. DEPUTY COMMISSIONER OF INCOME TAX

CIRCLE-9(1), BANGALORE. ... APPELLANTS (BY SRI. E.I. SANMATHI, ADV.,) AND: M/S. WIPRO LIMITED (WIPRO SPECTRA MIND SERVES LTD.,) DODDAKANNELLI, SARJAPUR ROAD BANGALORE-560076 JPAN: AAE-CS-1943-B. ... RESPONDENT (BY SRI. S. GANESH, SR. COUNSEL FOR SMT. ANAGHA NAIR, ADV., FOR SRI. R.B. KRISHNA, ADV.,) - - - THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 25.11.2016 PASSED IN ITA NO.2402/DEL/2010 FOR THE ASSESSMENT YEAR 2001-02, PRAYING TO:

2 (I) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. (II) SET ASIDE THE APPELLATE ORDER DATED 25-11-2016 PASSED BY THE ITAT, 'C' BENCH, BENGALURU IN APPEAL PROCEEDINGS ITA NO.2402/DEL/2010 AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, INTEREST OF JUSTICE. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2001-02. The appeal was admitted by a bench of this Court vide order dated 05.07.2018 on the following substantial question of law: Whether in the given facts and circumstances of the case, the Tribunal is correct in law in holding that the assessee is claim of carry forward of losses under section 72 of the Act even when the assessee had filed declaration as required under section 10B(8) of Act after due date of filing original return of income date is over and therefore,

3 the assessee cannot claim the benefit of carry forward of losses and provisions of section 10B(8) are contravened? 2. The factual background, in which the aforesaid substantial question of law arises for consideration, needs mention. The assessee is a software company. The assessee had filed the return for the Assessment Year 2001-02 on 31.10.2001 i.e., on the due date prescribed under Section 139(1) of the Act. In the return, exemption under Section 10B of the Act was claimed, thereafter, by a communication dated 24.10.2002, filed before the Assessing Officer, the exemption was withdrawn before completion of the assessment i.e., 31.03.2004. Subsequently, revised return was filed on 23.12.2002, in which exemption under Section 10B of the Act was not claimed. In the return of income, loss of Rs.15,47,76,990/- was declared. The case was selected for scrutiny and notice under Section 143(2) of the Act was issued and an order

4 of assessment was passed on 31.03.2004 by making various additions. One such addition was made in respect of denial of claim of carrying forward of losses under Section 72 of the Act.

The assessee in respect of the denial of the aforesaid claim filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 19.01.2009 partly allowed the appeal preferred by the assessee. Being aggrieved, the assessee as well as the revenue filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 25.11.2016 has partly allowed both the appeals and has granted the relief to the assessee in respect of its claim for carrying forward of losses under Section 72 of the Act. In the aforesaid factual background, the revenue is in appeal before us.

Learned counsel for the revenue submitted that the tribunal erred in holding that the assessee is entitled to claim of carrying forward of losses under Section 72 of the Act even when the assessee had filed the declaration as required under Section 10B(8) of the Act after due date of filing original return of income was over. It ought to have been appreciated by the tribunal that the assessee cannot claim the benefit of carrying forward of losses as the provisions of Section 10B(8) of the Act were contravened. On the other hand, learned Senior counsel for the assessee while inviting the attention of this court to Section 10B(8) of the Act contended that as per the aforesaid provision, submission of declaration is mandatory, whereas, date of submission of declaration is a directory requirement and the assessee had complied with the requirement of submission of declaration before completion of the assessment and therefore, the tribunal has rightly held the assessee to be entitled for benefit of carrying

6 forward of losses under Section 72 of the Act. In support of aforesaid submissions, learned Senior counsel has referred to judgment of Delhi High Court dated 14.05.2008 in COMMISSIONER OF INCOME TAX, DELHI-III, NEW DELHI VS. MOSER BAER INDIA LTD., 'COMMISSIONER OF INCOME TAX VS. RANA POLYCOT LTD.', 347 ITR 466 (P&H) and decision of Supreme Court in 'COMMISSIONER OF INCOME TAX VS. G.M.KNITTING INDUSTRIES (P.) LTD.', 376 ITR 456 (SC).

We have considered the submissions made by learned counsel for the parties and have perused the record. Section 10B of the Act deals with special provisions in respect of newly established 100% export oriented undertakings. Before proceeding further, it is apposite to take note of Section 10B(8) of the Act, which is reproduced below for facility of reference:

(8) Notwithstanding anything contained in the foregoing provisions of this section,

7 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 year.

Thus from perusal of aforesaid provision, it contains twin requirements viz., the filing of a declaration and submission of such a declaration.

The constitution bench of the Supreme Court in SARDAR AMRJIT SING KALARA VS. PRAMOD GUPTA, (2003) 3 SCC 272 has held that procedural laws have always been viewed as handmaid of justice and not to hamper the cause of justice. It has further been held that technical objection which tend to be stumbling blocks to defeat and delay substantial and effective justice should be viewed strictly for being discouraged except when mandate of law inevitably

8 necessitates it. (ALSO SEE: SAMBHAJI VS. GANGABAI, (2008) 17 SCC 117, RAJENDRA PRASAD GUPTA VS. PRAKASH CHANDRA MISHRA (2011) 11 SCALE 469 and RAMJI GUPTA AND ORS. VS. GOPI KRISHAN AGRAWAL (D) AND ORS. AIR 2013 SC 3099). In STATE OF BIHAR AND ORS. VS. BIHAR RAJYA BHOOMI VIKAS BANK SAMITHI, (2018) 9 SCC 472, it has been held that if infraction of procedural provision does not provide for any consequences, such a provision has to be construed as directory. In the instant case, Section 10B of the Act does not provide for non compliance of submission of declaration. Therefore, the requirement of submission of declaration in terms of Section 10B(8) of the Act has to be treated as mandatory whereas, the requirement of submission of declaration by a time limit has to be treated as directory as the provision does not provide for any consequence by non filing of the declaration by the time limit. In any case, in the instant case, the

9 declaration has been filed before the completion of assessment. Similar view has been taken by High Court of Delhi In Moser Baer India Ltd. with which we respectfully concur.

In view of preceding analysis, the substantial question of law framed a bench of this court is answered against the revenue and in favour of the assessee. In the result, we do not find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss

PR COMMISSIONER OF INCOME TAX - III vs. M/S WIPRO LIMITED