Cosmo Films Limited Vs Central Board of Direct Taxes (Delhi High Court)
Delhi High Court has issued a directive to the Central Board of Direct Taxes (CBDT) concerning a petition filed by Cosmo Films Limited. The company sought permission to manually file its income tax return for Assessment Year (AY) 2017-18, or for the tax department to rectify a software issue preventing it from carrying forward business losses. The Court’s ruling emphasizes that the electronic filing system must align with established legal precedents, rather than dictating tax claims.
Cosmo Films Limited, a manufacturer and exporter of Bi-axially Oriented Polypropylene (BOPP) Films, operates manufacturing units in both Domestic Tariff Area (DTA) and a Special Economic Zone (SEZ). As an ‘entrepreneur’ under the Special Economic Zones Act, 2005, the company has been eligible for deductions under Section 10AA of the Income Tax Act, 1961, since AY 2014-15.
For AY 2017-18, Cosmo Films reported an income of Rs. 52,55,59,560/- from its SEZ unit under ‘Profit and Gains of Business and Profession’ (PGBP). In line with the Supreme Court’s decision in CIT v. Yokogawa India Ltd. (2017) 391 ITR 274 (SC), the company calculated the PGBP of its SEZ unit (the eligible unit) separately, claiming the Section 10AA deduction in Form ITR-6. This approach meant that losses from its DTA unit (the ineligible unit), amounting to Rs. 33,80,37,785/-, were not offset against the eligible unit’s PGBP. An Audit Report, as required under Section 10A(5) of the Act read with Rule 16D of the Income Tax Rules, 1962, was also submitted.
