A two-judge bench of the Supreme Court, while considering an appeal by Wipro Ltd., has held that the deduction to Export-oriented Units (EOU) under section 10(8) of the Income Tax Act, 1961 can be denied on the sole ground of delay in filing the mandatory declaration since the twin conditions mentioned in the provision are mandatory.
A bench of Justice M R Shah and Justice Sanjiv Khanna has held that though the filing of declaration is mandatory, the time limit is a directory.
Earlier, the income tax department denied the tax benefit to the assessee by holding that since there was a delay in filing the declaration within the due date, the assessee is not eligible for the benefit.
The two-judge bench, allowing the plea of the assessee, held that “the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is a directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatory to be complied with. Accordingly, the question of law is answered in favor of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on non-compliance of the twin conditions as provided under Section 10B (8) of the IT Act, as observed hereinabove.”
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