Saffire Garments v. ITO - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 0290 (Rkt-Trib) : (2013) 050 (II) ITCL 0081 : (2013) 140 ITD 0006 : (2013) 151 TTJ 0114 : (2013) 081 DTR 0131 : (2012) 020 ITR (Trib) 0623 INCOME TAX ACT, 1961 --Deduction under section 10A--Undertaking in a free trade zone `Failure to file return of income within due date under section 139(1)--Assessee derived profit from export of articles produced in SEZ and claimed deduction 10A. Assessing officer observed that as assessee failed to file its return of income on or before due date under section 139(1), therefore, no deduction should be allowed to it assessee argued that the proviso to section 10A(1A) is not mandatory and merely directory assessing officer held that when one of the consequences for not filing return of income within due date under section 139(1), viz., charging of interest under section 234A, is mandatory then, other consequences of the same failure of the assessee cannot be directory and same is also mandatory. *Held:* When consequences of not filing the return of income within the due date prescribed under section 139(1) are so grave, then it cannot be said that provision of proviso to section 10A(1A) resulting in denying of deduction under section 10A as a consequence of filing of return of income within the due date prescribed under section 139(1)is directory and not mandatory. Income Tax Act, 1961 Section 10A(1A) In The ITAT, Rajkot Special Bench G. C. Gupta, D. K. Tyagi, J.M. & A. K. Garodia, A.M. Saffire Garments v. ITO I.T.A. No. 397/ RJT/2009 A.Y. 2006-07 30 November, 2012 Appellant by : Sanjay P. Shah & Vimal Desai Respondent by : Ankur Garg ORDER *A. K. Garodia, A.M.* This special bench has been constituted by Honble President, ITAT under section 255(3) of the Income Tax Act, 1961 to consider and decide the following questions, which relate to the solitary issue arising out of the appeal filed by the assessee for the assessment year 2006-07 being I.T.A. No. 397/RJT/2009 : '(a) Whether the proviso to section 10A(lA) of the Income Tax Act, which says that no deduction under section 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under section 139(1), is mandatory or merely directory? (b) Whether, on a proper interpretation of the said proviso, it is permissible for the Tribunal to hold it to be merely directory and on that basis to hold that even if the return of income is not filed within the time-limit set by section 139(1) the assessee cannot be denied the deduction under section l0A? c) If the answer to question (b) is in the affirmative, would it not amount to conferring a power on the Tribunal to extend the time-limit for filing the return under section 139(1) or to condone the delay in filing the same, when no such power is expressly conferred upon it by the Act?' 2. The assessee is a partnership firm. The assessee filed return of income declaring total income of Rs. 2,72,730 on 31-1-2007 which was processed under section 143(1) of the Income Tax Act, 1961. Thereafter, the case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 was issued and served on 23-1-2008. The assessee had claimed deduction under section 10A of the Income Tax Act, 1961. When asked to explain this claim, the assessee submitted before the assessing officer that it derived profit from export of articles produced in SEZ and the sale proceeds were brought in India in convertible foreign exchange and, therefore, deduction under section 10A of the Income Tax Act, 1961 is allowable to it. Thereafter, it is noted by the assessing officer in the assessment order that the assessee had filed its return of income on 31-1-2007 and the extended due date for filing return of income for the assessees, being a firm, as per the provisions of section 139(1) of the Act was 31-12-2006. The assessing officer also observed that the assessee failed to file its return of income on or before the due date specified under sub-section (1) of section 139 of the Income Tax Act, 1961. He further noted that as per the newly inserted proviso appended to section 10A of the Income Tax Act, 1961, no deduction should be allowed to an assessee who does not furnish return of income on or before the due date specified under sub 'section (1) of section 139 of the Income Tax Act, 1961. He also noted that the proviso was introduced by the Finance Act 2005 which came into effect from 1-4-2006. The assessing officer held that this proviso is applicable to the case of the assessee and hence, the assessees claim for deduction under section 10A of the Income Tax Act, 1961 is to be disallowed. In this manner, the assessing officer disallowed the claim of the assessee for deduction under section 10A of the Income Tax Act, 1961. Being aggrieved, the assessee carried the matter in appeal before learned Commissioner (Appeals) but without success and hence, the assessee is in further appeal before the Tribunal. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0290 (Rkt-Trib) : (2013) 050 (II) ITCL 0081 : (2013) 140 ITD 0006 : (2013) 151 TTJ 0114 : (2013) 081 DTR 0131 : (2012) 020 ITR (Trib) 0623

INCOME TAX ACT, 1961

--Deduction under section 10A--Undertaking in a free trade zone `Failure to file return of income within due date under section 139(1)--Assessee derived profit from export of articles produced in SEZ and claimed deduction 10A. Assessing officer observed that as assessee failed to file its return of income on or before due date under section 139(1), therefore, no deduction should be allowed to it assessee argued that the proviso to section 10A(1A) is not mandatory and merely directory assessing officer held that when one of the consequences for not filing return of income within due date under section 139(1), viz., charging of interest under section 234A, is mandatory then, other consequences of the same failure of the assessee cannot be directory and same is also mandatory. Held: When consequences of not filing the return of income within the due date prescribed under section 139(1) are so grave, then it cannot be said that provision of proviso to section 10A(1A) resulting in denying of deduction under section 10A as a consequence of filing of return of income within the due date prescribed under section 139(1)is directory and not mandatory.

Income Tax Act, 1961 Section 10A(1A)

In The ITAT, Rajkot Special Bench

G. C. Gupta, D. K. Tyagi, J.M. & A. K. Garodia, A.M.

Saffire Garments v. ITO

I.T.A. No. 397/ RJT/2009

A.Y. 2006-07

30 November, 2012

Appellant by : Sanjay P. Shah & Vimal Desai

Respondent by : Ankur Garg

ORDER

A. K. Garodia, A.M.

This special bench has been constituted by Honble President, ITAT under section 255(3) of the Income Tax Act, 1961 to consider and decide the following questions, which relate to the solitary issue arising out of the appeal filed by the assessee for the assessment year 2006-07 being I.T.A. No. 397/RJT/2009 :

'(a) Whether the proviso to section 10A(lA) of the Income Tax Act, which says that no deduction under section 10A shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under section 139(1), is mandatory or merely directory?

(b) Whether, on a proper interpretation of the said proviso, it is permissible for the Tribunal to hold it to be merely directory and on that basis to hold that even if the return of income is not filed within the time-limit set by section 139(1) the assessee cannot be denied the deduction under section l0A?

c) If the answer to question (b) is in the affirmative, would it not amount to conferring a power on the Tribunal to extend the time-limit for filing the return under section 139(1) or to condone the delay in filing the same, when no such power is expressly conferred upon it by the Act?'

2. The assessee is a partnership firm. The assessee filed return of income declaring total income of Rs. 2,72,730 on 31-1-2007 which was processed under section 143(1) of the Income Tax Act, 1961. Thereafter, the case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 was issued and served on 23-1-2008. The assessee had claimed deduction under section 10A of the Income Tax Act, 1961. When asked to explain this claim, the assessee submitted before the assessing officer that it derived profit from export of articles produced in SEZ and the sale proceeds were brought in India in convertible foreign exchange and, therefore, deduction under section 10A of the Income Tax Act, 1961 is allowable to it. Thereafter, it is noted by the assessing officer in the assessment order that the assessee had filed its return of income on 31-1-2007 and the extended due date for filing return of income for the assessees, being a firm, as per the provisions of section 139(1) of the Act was 31-12-2006. The assessing officer also observed that the assessee failed to file its return of income on or before the due date specified under sub-section (1) of section 139 of the Income Tax Act, 1961. He further noted that as per the newly inserted proviso appended to section 10A of the Income Tax Act, 1961, no deduction should be allowed to an assessee who does not furnish return of income on or before the due date specified under sub 'section (1) of section 139 of the Income Tax Act, 1961. He also noted that the proviso was introduced by the Finance Act 2005 which came into effect from 1-4-2006. The assessing officer held that this proviso is applicable to the case of the assessee and hence, the assessees claim for deduction under section 10A of the Income Tax Act, 1961 is to be disallowed. In this manner, the assessing officer disallowed the claim of the assessee for deduction under section 10A of the Income Tax Act, 1961. Being aggrieved, the assessee carried the matter in appeal before learned Commissioner (Appeals) but without success and hence, the assessee is in further appeal before the Tribunal.