The court emphasized 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 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.

JUDGMENT :

M.R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 30.11.2020 passed by the High Court of Karnataka at Bengaluru in Income Tax Appeal No. 462/2017, by which the High Court has dismissed the said appeal preferred by the Revenue and has confirmed the judgment and order dated 25.11.2016 passed by the Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore (for short, ‘ITAT’), allowing the assessee’s claim for carry forward of losses under Section 72 of the Income Tax Act, 1961 (for short, ‘IT Act’), the Revenue has preferred the present appeal.

2. The respondent-assessee is a 100% export-oriented unit and engaged in the business of running a call centre and IT Enabled and Remote Processing Services. Assessee filed its return of income on 31.10.2001 for Assessment Year 2001-2002, declaring loss of Rs.15,47,76,990/- and claimed exemption under Section 10B of the IT Act. Along with the original return filed on 31.10.2001, the assessee annexed a note to the computation of income in which the assessee clearly stated that the company 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. That thereafter, the assessee filed a declaration dated 24.10.2002 before the Assessing Officer (AO) stating that the assessee does not want to avail the benefit under Section 10B of the IT Act for A.Y. 2001-02 as per Section 10B (8) of the IT Act. The assessee filed the revised return of income on 23.12.2002 wherein exemption under Section 10B of the IT Act was not claimed and the assessee claimed carry forward of losses.

2.1 Assessing Officer passed an order dated 31.03.2004 rejecting the withdrawal of exemption under Section 10B of the IT Act 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. Thereby, the AO made the addition in respect of denial of claim of carrying forward of losses under Section 72 of the IT Act.

2.2 Assessee filed an appeal before the Commissioner of Income Tax (Appeals), New Delhi (for short, ‘CIT(A)’). By order dated 19.01.2009, the CIT(A) upheld the order passed by the Assessing Officer making addition in respect of denial of claim of carrying forward of losses under Section 72 of the IT Act.

2.3 Aggrieved by the order passed by the CIT(A), the assessee filed an appeal before the ITAT. Vide order dated 25.11.2016, the ITAT decided the issue in favour of the assessee stating that the declaration requirement under Section 10B (8) of the IT Act was filed by the assessee before the AO before the due date of filing of return of income as per Section 139(1) of the IT Act. ITAT allowed the assessee’s claim for carrying forward of losses under Section 72 of the IT Act.

2.4 Feeling aggrieved and dissatisfied with the order passed by the ITAT, allowing the assessee’s claim for carrying forward of losses under Section 72 of the IT Act, the Revenue preferred an appeal before the High Court. By the impugned judgment and order, the High Court has dismissed the said appeal. Hence, the Revenue is before this Court by way of present appeal.

3. Shri Balbir Singh, learned Additional Solicitor General of India appearing for the Revenue has vehemently contended that in the present case, as the conditions mentioned in Section 10B (8) of the IT Act are not complied with, inasmuch as the declaration was not filed before the due date of filing of return, both, the ITAT and the High Court have committed a grave error in allowing the assessee’s claim for carrying forward of losses under Section 72 of the IT Act.

3.1 It is submitted that in the present case, the original return of income was filed on 31.10.2001, which was the due date for filing return of income. The assessee filed a declaration on 24.10.2002 before the AO stating that the assessee does not want to avail the benefit under Section 10B of the IT Act for A.Y. 200