Case Law Details
1. The Petitioner challenges the validity of Section 80(5) of the Income Tax Act, 1961 (hereafter “the Act”) inserted by Finance Act, 2009 with effect from 01.04.2003 (hereafter “the 2009 amendment”) and also, the fourth proviso to S.10B (1) of the Act inserted by the Finance Act, 2006 w.e.f. 01.04.2006, (“the 2006 amendment) as arbitrary, discriminatory, unreasonable, and violative of Article 14 of the Constitution of India.
2. The brief facts of the case are that the petitioner (also hereafter “the assessee”), is an unlisted, deemed, family-owned public limited company engaged in business of manufacture and export of readymade garments, garment made ups and silk fabric. The Petitioner had, during the assessment year 2002-03, set up Export Oriented Unit (EOU) as an independent unit. The profits derived therefrom were eligible for deduction under Section 10B of the Act. No deduction however, was claimed by the petitioner up to AY 2007-08. In the relevant assessment year (AY), the said entity earned profits of `2,43,53,757/- which were eligible to tax exemption. The petitioner failed to claim deduction in the belated income tax returns filed by it on 31.12.2008, (which was due on 30.09.2008) and only made claim for deduction under Section 10B in the subsequent revised return filed by him on 26.03.2010. The Petitioner claimed that it was precluded from filing his return of income within the time prescribed under Section 139(1) because: (a) there were some disputes among family members of the directors of the Petitioner company; and (b) due date of filing return by the assessee company was for the first time reduced by Finance Act, 2009 from 31st October following the close of the previous year to 30th September following. Accordingly, for AY 2008-09, the return was due on 30.09.2009 instead of the earlier due date of 31.10.2009, a fact the Petitioner claims it was unaware of.
3. The second respondent, (the Assistant Commissioner of Income Tax “ACIT”), considered the petitioner‟s claim of deduction under Section 10B and by order dated 29.12.2010 passed under Section 143(3) of the Act, denied the said deduction. The assessee felt aggrieved by the said order, challenged it before CIT (Appeals), who by order dated 17.08.2012 upheld the order of the ACIT. An appeal was preferred against that order of the CIT (Appeals) and is presently pending before the ITAT Delhi. Bound by the plain language of Section 80A (5) and fourth proviso to Section 10B (1) of the Act, the Petitioner has preferred the present petition.
Arguments of the Petitioner
4. That Section 80A(5) precludes any deductions made by assessees who have failed to do so under the provisions of S.10A, S.10AA, S.10B, S.10BA or any other provision of Chapter VI-A (of the Act) under the heading – Deductions in respect of certain incomes. The fourth proviso to Section 10B(1) stipulates that no deductions under the section are permitted if not so claimed before the due date specified under sub-section (1) of Section 139. Simply put, claim for deduction under Section 10B of the Act is allowed only when the claim is preferred in the return of income and also, the return is furnished within the time limit under Section 139(1) of the Act. That the Petitioner argues that under Article 265 of the Constitution of India, the State is authorised to collect only legitimate taxes due by an assessee. Any tax recovered in excess of what is legitimately payable by the assessee, would be without authority of law [CIT v. Shelly Products, 261 ITR 367].
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