[Opinion] Supreme Court decision in Wipro – Whether per incuriam?

Manuj Sabharwal – [2022] 141 taxmann.com 338 (Article)

The decision of the Hon’ble Supreme Court in Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223, is a new subject-matter of talks in the corridors of the Courts, for setting a new jurisprudence in tax matters. The controversy, in brief, before the Hon’ble Supreme Court was as under:

Controversy in brief

1. The assessee, Wipro Limited, a 100% EOU, filed its return of income on 31.10.2001 after having availed exemption under s. 10B of the Income-tax Act, 1961 (“Act”). A note was appended to the computation / return of income in which it was clearly stated that the company is a 100% EOU, and thus entitled to claim exemption under s. 10B. Thereafter, on 24.10.2002, the assessee filed declaration dated 24.10.2002 before the assessing officer, in terms of s. 10B(8) of the Act, stating that it does not wish to avail the benefit of exemption under s. 10B. In accordance with the said intention, later, on 22.12.2002, a revised return was filed by Wipro withdrawing the said exemption under s. 10B, and claiming the carry forward of loss arising in the eligible undertaking. Such carry forward of loss was denied by the Revenue on the ground that the declaration under s. 10B(8) was not filed within the due date of filing of return of income. The controversy, in short, before the Supreme Court was whether filing of such a declaration under s. 10B(8) after the due date prescribed for filing of return of income is merely procedural or fatal to claim under s.10B.

Incorrect appreciation of decision of G.M. Knitting Industries Pvt. Ltd.

2. In the above context, the Hon’ble Supreme Court held that the condition that the declaration under s. 10B(8) is to be filed within the prescribed timelines of filing of return under s. 139(1) is mandatory and not directory. While holding so, the Hon’ble Supreme Court has distinguished its earlier decision rendered in the case of CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015] 376 ITR 456 by observing that it involved a claim of additional depreciation on plant and machinery under s. 32(1)(iia) of the Act and that it does not deal with s. 10B. It is submitted that the Hon’ble Supreme Court, in the case of Wipro Ltd. (supra), seems to have overlooked the fact that the observations in G.M. Knitting Industries (P.) Ltd.’s case (supra) were also given in the context of s. 80-IB in Civil Appeal No. 4048 of 2014 which was also clubbed with the appeal of G.M. Knitting Industries (P.) Ltd.’s case (supra) before the Supreme Court. The said civil appeal dealt with the condition of furnishing the Form 10CCB provided under s. 80-IB(13) before the due date of return under s. 139(1).

3. It is submitted that the provisions of s. 80-IA(7) and s. 10B(5) are in pari-materia to the extent they require furnishing of forms prescribed therein before the due date of filing of return of income. For the sake of reference, the relevant portions are reproduced, in juxtaposition, hereunder:

7. Therefore, the principle enunciated by the Hon’ble Supreme Court in G.M. Knitting Industries (P.) Ltd.’s case (supra) that filing of necessary forms (in the context of s. 80-IA) during the assessment proceedings and before the final assessment would amount to sufficient compliance. The said decision is thus applicable to similar kind of provisions contained s. 10B(5) of the Act. Hence, in the entire scheme of s. 10B [including that of sub-s. (8)] where it prescribes procedure for furnishing of forms, reports, etc. before the due date of filing of return, the ratio/logic of G.M. Knitting Industries (P.) Ltd.’s case (supra) is applicable, and therefore it can be said to be a direct precedent on this issue. It is humbly submitted that, distinguishing G.M. Knitting Industries (P.) Ltd.’s case (supra) from the facts of the present case is thus a clear infirmity in the reasoning of the decision.

8. Moving a step further, it is also respectfully submitted that the observation of the Hon’ble Supreme Court in para 11 that

“…Even otherwise, Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with “incomes which do not form a part of total income”, cannot be equated with mechanism provided for deductions in Chapter VIA, which deals with “deductions to be made in computing total income”

is not correct to the extent of procedure prescribed for claiming of deductions under the respective Chapters, where a similar requirement of furnishing certificates, reports, declarations have been prescribed No difference can be attributed with regard to the procedures prescribed in view of the decision of G.M. Knitting Industries (P.) Ltd.’s case (supra).

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