2011 (1) TMI 1113 - HC - Income Tax

Carry forward of business loss u/s 10B(6) - 100% EOU - In the absence of prior intimation in terms of Section 10B(8) the assessing officer declined the benefit of carry forward of loss claimed by the assessee - Held that - As respondent had forfeited the claim under Section 10B because they were debonded by the Development Commissioner initially on provisional basis and thereafter through final order passed on 21.10.1999 - assessee in fact was well aware of the withdrawal of the benefit by the Development Commissioner, and so much so in the income tax return filed for 1999-2000 they had not claimed the benefit of deduction under Section 10B - Appeal is dismissed

Summary

Issues:
1. Claiming benefit of carry forward of business loss under Section 10B(6) without furnishing declaration under Section 10B(8).
2. Forfeiture of claim under Section 10B due to debonding by the Development Commissioner.

Analysis:
1. The main issue in this case is whether an assessee, who did not furnish a declaration under Section 10B(8) opting out of exemption before filing the return, can claim the benefit of carry forward of business loss for the next year under Section 10B(6) of the Income Tax Act. The assessee, a 100% Export Oriented Unit (EOU), did not claim deduction under Section 10B for the assessment year 1999-2000, resulting in the assessing officer denying the benefit of carry forward of loss. The Tribunal, on second appeal, held that the non-filing of the declaration under Section 10B(8) was a rectifiable mistake and allowed the assessee to furnish the declaration. Consequently, the Tribunal permitted the assessee's claim for computation of the current year's loss and its carry forward to the subsequent year. The High Court upheld the Tribunal's decision, emphasizing that the technicality of non-compliance with Section 10B(8) should not prevent the assessee from claiming the benefit of carry forward of business loss.

2. The second issue pertains to the forfeiture of the claim under Section 10B due to debonding by the Development Commissioner. The High Court noted that the respondent had forfeited the claim under Section 10B as they were debonded by the Development Commissioner, first on a provisional basis and then through a final order. The assessee was aware of the withdrawal of the benefit by the Development Commissioner, as evidenced by their failure to claim the deduction under Section 10B in the income tax return for 1999-2000. Despite the technical non-compliance with Section 10B(8), the High Court held that the assessee should not be deprived of the benefit of carrying forward the business loss computed for that year. Consequently, the High Court dismissed the appeal filed by the revenue against the Tribunal's order, affirming the allowance of the carry forward of business loss for the assessee.

In conclusion, the High Court's judgment in this case clarifies the application of Sections 10B(6) and 10B(8) of the Income Tax Act concerning the carry forward of business loss for an assessee who did not opt out of exemption under Section 10B(8) before filing the return. The judgment emphasizes the importance of substance over technicalities in allowing legitimate claims for business loss carry forwards, even in cases where there was a forfeiture of benefits under Section 10B due to debonding by the Development Commissioner.