DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE 1(1), CHENNAI vs. ASTROTECH STEELS PRIVATE LIMITED, CHENNAI

आयकर अपीलीय अिधकरण “सी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा� एवं माननीय �ी मनोज कुमार अ%वाल ,लेखा सद( के सम । BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.1150/Chny/2023 (िनधा)रण वष) / Assessment Year: 2018-19) DCIT M/s Astrotech Steels Private Limited बनाम/ Corporate Circle-1(1) 19, II Floor, Right Wing, Ghatala Towers, Chennai. Avenue Road, Nungambakkam Vs. Chennai-34. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAKCA-0128-L (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri P. Sajit Kumar (JCIT)- Ld. Sr. DR � थ�कीओरसे/Respondent by : Shri T. Vasudevan (Advocate) -Ld. AR सुनवाईकीतारीख/Date of final Hearing : 27-06-2024 घोषणाकीतारीख /Date of Pronouncement : 03-07-2024 आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member)

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requirement, the deduction as claimed u/s 10AA has rightly been denied to the assessee and Ld. CIT (A) erred in granting relief to the assessee. The Ld. AR, on the other hand, maintained that this being 6th year of deduction, the same could not be denied to the assessee. The Ld. AR also submitted that the copy of Form 56F was uploaded subsequently. The Ld. AR sought distinction in the facts of Pr. CIT Vs Wipro Ltd. (supra) by relying on the subsequent decision of Hon’ble Gujarat High Court in the case of CIT (E) vs. Gujarat Energy Development Agency (TCA No.35 of 2024 dated 15-01-2024). A copy of the same has been placed on record. The case was put up for clarification from time to time which was duly responded to by both the sides. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 4. From rectification order passed u/s 154 by CPC on 28-01-2021, it could be seen that the extended due date for filing of return of income for the assessee was 31-10-2018. The assessee has filed return of income on 16-10-2018 which is well within extended due date of filing of return of income. The assessee claimed deduction u/s 10AA. However, aforesaid deduction has been denied by CPC to the assessee while processing return of income u/s 143(1) since requisite Audit Report in Form No.56F was not filed along with return of income. The said report has apparently been filed by the assessee on 20-12-2018 which was much before CPC raised the issue of disallowance. 5. During appellate proceedings, the assessee submitted that it was not mandatory to file this form and it was a regulatory measure only.

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Reliance was placed on the decision of Hon'ble Madras High Court in the case of CIT Vs Jayanthilal Patel (2001) (248 ITR 199) and Hon’ble Delhi High Court in the case of CIT Vs. Web Commerce India Pvt. Ltd (2009) (318 ITR 135) to support the submissions. 6. The Ld. CIT(A), following the decision of Kolkata Tribunal in the case of DIC Fine Chemicals P. Ltd Vs. DCIT in ITA No.2502/Kol/2018 dated 12-06-2018 and the decision of Hyderabad Tribunal in ACIT vs. Hind Speed Technologies (ITA No.1600/Hyd/2014 dated 08-12-2017), concurred with the claim of the assessee and directed Ld. AO to allow the impugned deduction. Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication 7. From the facts, it is very much clear that the assessee has filed original return of income within extended due date. In this return, the assessee has claimed impugned deduction u/s 10AA. It could thus be seen that no new claim was made by the assessee and this claim was very much made at the time of filing or original return of income only which has been filed within extended due date. The only deficiency on the part of the assessee is that it has failed to file requisite Form No.56F along with the return of income. 8. The provisions of Sec.10AA provide for certain deduction to an assessee who begins to manufactures or produce certain article / things within prescribed period. The sub-section (8) of Sec.10AA provides that the provisions of sub-section (5) and (6) of Section 10A shall apply to such an undertaking. The sub-section (5) of Sec.10A, as referred therein, provide as under: -

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(5) The deduction under this section shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, the report of an accountant as defined in the explanation below sub- section (2) of Sec.288 before the specified date referred to in section 44AB, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

Considering this provision, CPC has denied impugned deduction to the assessee. In the present case, the assessee admittedly has violated this mandatory condition of claiming benefit u/s 10AA. 9. The above condition, in our considered opinion, is directory and not mandatory in nature since filing of requisite form could be said to be procedural requirement and therefore, technical default in filing of the same would not jeopardize the claim of the assessee. It could be seen that the assessee has fulfilled all the other requirements to lay claim on this deduction in this year. In fact, it is the sixth year of claiming of impugned deduction. 10. The objective of requirement of Filing of Form 56F, in our considered opinion, is to enable the revenue to ascertain that the deduction has correctly been claimed by the assessee in accordance with law. The mere technical failure to comply with this condition would not, therefore, result into denial of deduction to the assessee. The assessee has already filed this form on 20-12-2018 as against prescribed date of 31-10-2018. 11. The Ld. Sr. DR has referred to the case of Hon’ble Supreme Court in the case of Pr. CIT Vs Wipro Ltd. (2022) 140 Taxmann.com 223 (SC). In this decision, the facts were that the assessee claimed exemption u/s 10B in the return of income. The assessee declared loss. Along with original return of income, it annexed a note stating that it was

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eligible to claim exemption u/s 10B and therefore, no loss was being carried forward. However, before Ld. AO, the assessee contended that it did not want to avail the benefit u/s 10B of the Act in terms of Sec.10B (8) of the Income Tax Act. The assessee also revised its return of income where this exemption was not claimed u/s 10B and the assessee claimed carry-forward of loss. The Ld. AO rejected the withdrawal of such exemption holding that the assessee did not furnish the declaration in writing before the due date of filing of return of income, which was 31- 10-2001. Finally, Ld. AO denied carry forward of loss u/s 72. The Ld. CIT(A) upheld the action of Ld. AO. The Tribunal decided this issue in assessee’s favour by observing that the requisite declaration as required u/s 10B (8) was filed by the assessee before due date as specified u/s 139(1). The Hon’ble High Court dismissed the appeal of the revenue and the revenue preferred furrier appeal to Hon’ble Supreme Court. It was submitted on behalf of the revenue that the requisite declaration as required under Sec.10B(8) was filed beyond the due date of filing of return income and therefore, the assessee was not entitled to claim carry forward of losses u/s 72. The Tribunal wrongly noted that such declaration was filed before the due date. It was also contended that Hon’ble High Court erred in observing that the requirement of Sec.10B (8) was a procedural requirement. Further, Hon’ble High Court did not properly appreciated the consequences of not filing the declaration within the time as required under Sec. 10B(5) and non-compliance of sections 10B(5) and 10B(8) of the Act. If the view taken by High Court is accepted, then it shall nullify the provisions of Sec. 10B(5) and 10B(8) of the Act. A plea was also raised by the revenue that High Court erred in

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observing that the requirement of submission of declaration u/s 10B(8) was mandatory in nature but the time limit within which the declaration could be filed was directory in nature since the provision does not provide for any adverse consequence for not filing of the declaration by the time limit. It was further submitted that the High Court did not properly appreciate and/or considered the fact that non-filing of declaration before the due date, i.e., filing of the return of income would result in denial of the benefit u/s 10B(8) of the Act. Therefore, it could not be said that there was no consequence of not filing the declaration before the due date of return of income. It was further submitted that a taxing statute was to be strictly construed and that the machinery provisions must be so construed to effectuate the object and purpose of statute and that the exemption provisions must be construed strictly and by a strict interpretation. Per contra, on behalf of the assessee, it was contended that on a true interpretation of Sec.10B (5) and 10B(8) of the Act, the High Court has rightly observed and held that the requirement of filing the declaration was mandatory in nature, while the time limit for filing the declaration was directory in nature. It was submitted that the High Court had rightly held the requirement of filing the declaration by the time limit was directory as non-filing of the declaration within the time limit would not envisage any consequence. Another submission was that the accountant's certificate u/s 10B(5) would be required only if the assessee claims the deduction u/s 10B. This certificate only certifies the profit / loss of Section 10B unit and the amount of deduction u/s 10B(1), if any. The certificate, if already submitted, becomes irrelevant if the

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claim is withdrawn u/s 10B. In any event, the contents of this certificate regarding profit / loss are not in any way affected by the withdrawal of the Sec.10B claim. It was submitted that in the present case, the loss set out in Sec.10B certificate remained exactly the same after withdrawal of the claim made u/s 10B and the respondent making the claim for carry forward of loss. It was also submitted that there was no claim for any deduction u/s 10B(1) at any time. The assessee also referred to various case laws including the decision of Hon’ble Supreme Court in the case of CIT v. G.M. Knitting Industries (P.) Ltd. (376 ITR 456) and submitted that the principle laid down therein would apply to the interpretation of Sec.10B(8) also. The provisions of Sec.10B(8) enables an assessee to exclude the applicability of the deduction u/s 10B by filing a declaration to that effect before the last date in which the return of income is required to be filed. It was further submitted that as held in G.M. Knitting Industries (P.) Ltd. (supra), the requirement that the Form should be submitted by a certain deadline is directory, though the submission of the Form itself may be regarded as mandatory. Further, the basic premise is that a substantive claim, which the assessee considers to be more beneficial, must be allowed to be made until the conclusion of assessment and the time within which any form which enables the claim should be filed, is only directory. The assessee also relied on various other similar case laws. Another argument was that Sec.10B was a deduction provision and not an exemption provision as held by Hon’ble Supreme Court in the case of CIT v. Yokogawa India Ltd. (77 Taxmann.com 241).

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After considering rival submissions, Hon’ble Court concurred with the submissions of the revenue and finally distinguishing the case laws as relied upon by the assessee held as under: - 5. We have heard Shri Balbir Singh, learned ASG appearing on behalf of the Revenue and Shri S. Ganesh, learned Senior Advocate appearing on behalf of the assessee at length and perused the material on record. The short question which is posed for consideration of this Court is, 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. 6. In the present case, the High Court as well as the ITAT have observed and 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. In the present case, when the assessee submitted its original return of income under section 139(1) of the IT Act on 31- 10-2001, which was the due date for filing of the original return of income, the assessee specifically and clearly stated that it is a company and is a 100% export-oriented unit and entitled to claim exemption under section 10B of the IT Act and therefore no loss is being carried forward. Along with the original return filed on 31-10-2001, the assessee also annexed a note to the computation of income clearly stating as above. However, thereafter the assessee filed the revised return of income under section 139(5) of the IT Act on 23-12- 2002 and filed a declaration under section 10B (8) which admittedly was after the due date of filing of the original return under section 139(1), i.e., 31-10-2001. 7. It is the case on behalf of the Revenue that as there was a non-compliance of twin conditions under section 10B (8) of the IT Act, namely, the declaration under section 10B (8) was not submitted along with the original return of income, the assessee shall not be entitled to the exemption/benefit under section 10B (8) of the IT Act. According to the Revenue, furnishing of declaration under section 10B (8) before the due date of filing original return of income is also mandatory. On the other hand, it is the case on behalf of the assessee, which has been accepted by the High Court, that the requirement of submission of declaration under section 10B (8) is mandatory in nature, but the time limit within which the declaration is to be filed is directory in nature. 8. While considering the issue involved, whether the time limit within which the declaration is to be filed as provided under section 10B (8) is mandatory or directory, Section 10B (8) is required to be referred to, which reads as under: "10B (8) 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." On a plain reading of section 10B (8) of the IT Act as it is, i.e., "where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139,

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furnishes to the Assessing Officer a declaration in writing that the provisions of section 10B may not be made applicable to him, the provisions of section 10B shall not apply to him for any of the relevant assessment years". We note that the wording of the section 10B (8) is very clear and unambiguous. 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 sub-section (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. 9. In such a situation, filing a revised return under section 139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee. In the present case, the assessee filed its original return under section 139(1) and not under section 139(3). Therefore, the Revenue is right in submitting 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. The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or set-off of any loss. Filing a revised return under section 139(5) of the IT Act and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is 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) of the IT Act. Therefore, claiming benefit under section 10B (8) and furnishing the declaration as required under section 10B(8) in the revised return of income which was much after the due date of filing the original return of income under section 139(1) of the IT Act, cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under section 139(1) of the Act. As observed hereinabove, for claiming the benefit under section 10B (8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income are mandatory in nature. 10. Even the submission on behalf of the assessee that it was not necessary to exercise the option under section 10B(8) of the IT Act and even without filing the revised return of income, the assessee could have submitted the declaration in writing to the assessing officer during the assessment proceedings has no substance and the same cannot be accepted. Even the submission made on behalf of the assessee that filing of the declaration subsequently and may be during the assessment proceedings would have made no difference also has no substance. The significance of filing a declaration under section 10B(8) can be said to be co-terminus with filing of a return under section 139(1), as a check has been put in place by virtue of section 10B (5) to verify the correctness of claim of deduction at the time of filing the return. If an assessee claims an exemption under the Act by virtue of Section 10B, then the correctness of claim has already been verified under section 10B (5). Therefore, if the claim is withdrawn post the date of filing of return, the accountant's report under section 10B (5) would become falsified and would stand to be nullified.

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The Hon’ble Court thus held that the wording of the Sec.10B(8) was very clear and unambiguous. For claiming the benefit u/s 10B(8), the twin conditions of furnishing the declaration to the assessing officer in writing

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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 Act were required to be fulfilled and/or satisfied. Both the conditions to be satisfied were mandatory in nature. It could not be said that one of the conditions would be mandatory whereas 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 sub-section (1) of section 139 are same/similar. It could not 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. In such a situation, filing a revised return u/s 139(5) claiming carrying forward of losses subsequently would not help the assessee. For claiming the benefit u/s 10B (8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income were mandatory in nature. The Hon’ble Court distinguished the case law of G.M. Knitting Industries (P.) Ltd. (supra) and held that Sec.10B (8) is an exemption provision which could not be compared with claiming an additional depreciation u/s 32(1)(iia) of the Act. As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. The provisions of Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with "incomes which do not form a part of total income", could not be equated with mechanism provided for deductions in Chapter VIA, which deals with "deductions to be made in computing total income". Finally, it was held that Hon’ble High Court erred in observing that the requirement of

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furnishing a declaration u/s 10B(8) was mandatory but the time limit within which the declaration was to be filed was not mandatory but mere directory. The same was erroneous and contrary to the unambiguous language contained in Sec.10B(8) of the Act. It was finally held that to claim the benefit u/s 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 u/s 139(1) were to be satisfied and both were mandatorily to be complied with. Accordingly, the question of law was answered in favour of the Revenue and against the assessee. 12. Upon perusal of facts of this case law, it could be seen that the facts in that case were entirely different. The assessee initially made the claim and did not seek carry forward of losses. However, during assessment proceedings, the assessee altogether took a different stand and sought withdrawal of the initial deduction as claimed by it in the return of income and sought carry forward of losses. The Tribunal also erred in noting the correct facts of the case. In this contextual background, this decision has been rendered and the same, in our opinion, would not apply to the facts of the present case. In the case before us, this claim has been made by the assessee in the original return of income which has been field within prescribed due date. 13. There is no quarrel on the ratio laid down by Hon’ble Supreme Court in the case of Checkmate Services P. Ltd Vs.CIT (2022) 143 Taxmann.com 178 (SC). In this decision, the Hon’ble Court, in para 48, held that one of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain

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conditions, the conditions are to be strictly complied with. This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. Similarly, in the case of Britannia Industries Ltd Vs.CIT (2005) 148 Taxman 468 (SC), the Hon’ble Supreme Court held that when the language of a statute is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. In the present case before us, the assessee has duly fulfilled substantive requirement as well as procedural requirement though there is minor technical breach in fulfillment of procedural requirement. The said breach, in our opinion, would not be fatal to substantive claim of the assessee particularly when in all the earlier years, this claim has been allowed to the assessee and this is the sixth year of claiming impugned deduction. 14. Our aforesaid view is duly supported by the decision of jurisdictional High Court in the case of CIT Vs Jayanthilal Patel (2001) (248 ITR 199) wherein it was held that sub-section (6A) of section 80J requiring filing of report along with return would be directory and not mandatory. Similarly, Hon’ble Delhi High Court in the case of CIT Vs. Web Commerce India Pvt. Ltd (2009) (318 ITR 135) held that the provisions of Section 10B(5) would be directory and not mandatory. It was held by Hon’ble Court that as long as the audit report is filed before framing of the assessment, the provisions of section 80-IA(7) would be complied with inasmuch as the same are directory and not mandatory. 15. The Ld. AR has also referred to the case law of Hon’ble Gujarat High Court in the case of CIT (E) vs. Gujarat Energy Development

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Agency (TCA No.35 of 2024 dated 15-01-2024) which has distinguished the case law in Wipro Ltd. (supra). This case law deal with a case where the assessee was a Trust registered u/s 12A of the Act. The deduction claimed by the assessee u/s 11 was denied by CPC since Audit Report in Form No.10B was not e-filed along with the return of income. The Ld. CIT(A) held the filing of form was procedural in nature. The form was e-filed to AO during regular assessment proceedings and made available before AO when he passed the assessment order. The Tribunal dismissed the appeal of the revenue. Upon further appeal, Hon’ble Court distinguished the case law of Wipro Ltd. (supra) on the ground that the assessee claimed exemption u/s 11 read with Section 12A(1)(b) which require the assessee to file Audit Report in Form No.10B which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% EOU u/s 10B. The provision of Sec.10B(8) require the assessee to file an undertaking before due date of furnishing of return of income u/s 139(1) before AO in writing that the provisions of Sec.10B may not be made available to him, otherwise the provision of this section shall not apply to him for any of the relevant assessment year. Considering the language of Sec.10B(8), Hon’ble Supreme Court held that it was mandatory on the part of the assessee to file declaration before due date of return of income u/s 139(1) whereas the assessee filed such undertaking with the revised return of income u/s 139(5). Proceeding further, Hon’ble High Court, in para 7, held that reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and

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therefore, the said decision was held to be not applicable. This case law also supports our aforesaid conclusion. 16. In our considered opinion, the assessee, in the present case, has fulfilled the substantive requirement as well as procedural requirement to lay claim on the impugned deduction. Accordingly, we do not find any reason to interfere in the impugned order. Therefore, we concur with the adjudication of Ld. CIT(A) in the impugned order. 17. The appeal stand dismissed in terms of our above order.. Order pronounced on 3rd July, 2024

Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा45 / VICE PRESIDENT लेखा सद7 / ACCOUNTANT MEMBER चे9ई Chennai; िदनांक Dated : 03-07-2024 DS आदेशकीCितिलिपअ%ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयुA/CIT Chennai 4. िवभागीय�ितिनिध/DR 5. गाडFफाईल/GF