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Principal Commissioner of Income Tax-III, Bangalore & Anr. vs. M/s Wipro Limited

Civil Appeal · 2022 INSC 687Decided 11 Jul 2022
Civil Appeal No. 1449 of 2022
M.R. Shah · B.V. Nagarathna

Background

Wipro Limited, a 100% export-oriented unit, filed its original income tax return for Assessment Year 2001-02 claiming a tax exemption under Section 10B of the Income Tax Act and declared that no losses would be carried forward. Over a year later, it filed a declaration seeking to withdraw the Section 10B exemption and then filed a revised return claiming a carry-forward of losses instead. The Assessing Officer rejected this switch because the declaration withdrawing the exemption was not filed by the due date for filing the original return, but the Income Tax Appellate Tribunal and the Karnataka High Court both ruled in Wipro's favour, holding the time limit was only a procedural, not mandatory, requirement.

Decision Breakdown

The Supreme Court held that Section 10B(8) imposes two conditions for opting out of the exemption (filing a written declaration with the Assessing Officer, and doing so before the due date for filing the original return under Section 139(1)) and that both conditions are mandatory, not merely directory, since exemption provisions in tax law must be construed strictly and literally. It held that a revised return filed under Section 139(5) can only correct a genuine omission or error in the original return, and cannot be used to make an entirely new claim or reverse a deliberate choice already made. Since Wipro's declaration to withdraw the Section 10B exemption was filed well after the statutory due date, it could not validly claim the carry-forward of losses, and the Tribunal's and High Court's contrary rulings were set aside. The Revenue's appeal was allowed with no order as to costs.

Lesson Learnt

When a tax statute lays down a strict time limit for exercising an option (such as opting out of an exemption), both the substance and the timing of that compliance are mandatory: a taxpayer cannot use a later revised return to reverse an earlier deliberate choice once the statutory deadline has passed.

Official source (sci.gov.in)View Judgment (PDF)

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