SC says taxpayer needs to satisfy twin conditions to claim set-off losses

The Supreme Court has held that a taxpayer must fulfil the twin conditions of furnishing a declaration to avail the benefit of carrying forward or set off of any loss and doing this before the due date of filing the original return of income.

Setting aside the Karnataka High Court’s contrary view that the requirement of furnishing a declaration is mandatory, but the time limit within which the declaration is to be filed is an only directory, a Bench led by Justice MB Shah held that the HC had committed a grave error and its view “is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act.”

“We hold 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 that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatory to be complied with,” it said, adding that the wording of Section 10B (8) is “very clear and unambiguous.”

It held that Wipro, which is in the business of running a call centre and IT Enabled and Remote Processing Services, cannot claim a tax benefit of Rs 15.48 crore as it had failed to fulfil the twin conditions for carrying forwarding of losses under Section 72.

Rejecting Wipro’s argument that it had a substantive statutory right to opt-out of Section 10B (8) which cannot be nullified by construing the purely procedural time requirement as being mandatory, the judges said that the exemption provisions are to be strictly and complied with and the same cannot be construed as a procedural requirement.