2022 (12) TMI 1555 - HC - Income Tax

Utility for filing the return of income electronically in ITR-6 refusing to allow petitioner to upload the return of income for making certain claims which petitioner proposes to make as per the provisions of the Income Tax Act - HELD THAT - If petitioner does not have positive income under the head profits and gains from business but the Gross Total Income is in the positive then petitioner should be permitted to file its return. Also draws the attention of this court to two ad-interim orders in the case of Tata Sons Private Limited 2022 (3) TMI 1627 - BOMBAY HIGH COURT and 2022 (11) TMI 1542 - BOMBAY HIGH COURT where in view of the inability of the software to permit the petitioner therein to make a particular claim this court had granted ad-interim relief to petitioner to file paper return of income subject to final outcome of the petition. Similar appears to be the case here. Issue notice to the respondents. Waives service of notice on behalf of the respondents. The respondents may file reply within a period of six weeks from today with an advance copy to the other side. List on 27th January 2023. Pending the hearing and the final disposal of this petition the petitioner is permitted to file paper return of the income for the assessment year 2022-23 subject to final outcome of the petition. Since there is a constitutional challenge to the vires of Rule 12 of the Income Tax Rules issue notice to the Attorney General for India in so far as prayer clause (a) is concerned.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the petitioner can file a return of income under ITR-6 when the utility programmed for electronic filing does not permit the filing due to the absence of positive income under the head "profits and gains" from business.
• Whether the petitioner is entitled to claim deductions under Chapter VI-A of the Income Tax Act, specifically under section 80-IE, when the Gross Total Income is positive, irrespective of the business income being non-positive.
• Whether the petitioner can be granted ad-interim relief to file a paper return of income due to the limitations of the electronic filing utility.
• Whether there is a constitutional challenge to the vires of Rule 12 of the Income Tax Rules, necessitating notice to the Attorney General for India.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The petitioner relies on the Supreme Court decision in Commissioner of Income Tax -1 Vs. Reliance Energy Limited, which interprets section 80-IA of the Income Tax Act. The Court in that decision held that deductions under section 80-IA are not limited to income under the head "business" only but can be set off against the "gross total income."

Court's interpretation and reasoning:

The Court observed that the decision in the Reliance Energy case pertains to deductions under section 80-IA, which is similar to section 80-IE under which the petitioner seeks to claim deductions. Both sections fall under Chapter VI-A of the Act and involve deductions related to profits and gains derived from eligible businesses.

Key evidence and findings:

The Court noted that the utility for electronic filing of returns does not allow the petitioner to file a return due to the absence of positive business income. However, the petitioner's Gross Total Income is positive, which should allow them to file the return and claim deductions under section 80-IE.

Application of law to facts:

The Court applied the legal principles from the Reliance Energy case to the facts at hand, concluding that the petitioner should be allowed to file the return since the Gross Total Income is positive, even if the business income is not. The Court also considered previous ad-interim orders in similar cases where paper returns were permitted due to software limitations.

Treatment of competing arguments:

The petitioner's argument that the deductions should be allowed against Gross Total Income was supported by the Reliance Energy precedent. The Court did not find any substantial counter-arguments from the respondents at this stage, leading to the granting of ad-interim relief.

Conclusions:

The Court concluded that the petitioner should be permitted to file a paper return for the assessment year 2022-23, pending the final outcome of the petition. The Court also issued notice to the Attorney General for India concerning the constitutional challenge to Rule 12 of the Income Tax Rules.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Court emphasized, "Prima facie therefore we are of the view that even if petitioner does not have positive income under the head 'profits and gains' from business but the Gross Total Income is in the positive, then petitioner should be permitted to file its return."

Core principles established:

• The deductions under Chapter VI-A, including section 80-IE, are not restricted to positive business income but can be claimed against Gross Total Income if it is positive.
• Technical limitations of electronic filing utilities should not impede a taxpayer's ability to file returns and claim legitimate deductions.

Final determinations on each issue:

• The petitioner is allowed to file a paper return for the assessment year 2022-23, subject to the final outcome of the petition.
• The Court recognized the need for a constitutional review of Rule 12 of the Income Tax Rules and issued notice to the Attorney General for India.