Supreme Court follows strict interpretation of exemption provision to mandatorily require filing of declaration to withdraw section 10B benefit within due date

This Tax Alert summarizes a Supreme Court (SC) ruling in the case of Wipro Ltd. (Taxpayer), dated 11 July 2022 wherein issue raised was whether a claim for exemption under section (S.) 10B made in original return of income (ROI) can be withdrawn by filing a declaration to opt out of the claim beyond the time specified in the provision.

The Taxpayer filed its original ROI within the due date by declaring loss but reserved its claim for exemption under S. 10B by furnishing a certificate from an accountant verifying such a claim. Subsequently, the Taxpayer withdrew such claim under revised ROI, filed a belated declaration for opting out of S.10B and made a claim for carry forward of losses. However, tax authority denied the claim for belated withdrawal and thereby denied the benefit of carrying forward of loss.

In this backdrop, the SC negatived the contention of the Taxpayer and held that exemption provisions are to be strictly construed and the time limit provided under S.10B(8) to file a declaration to opt out of the claim is mandatory. Accordingly, since in the present case, the withdrawal of such claim is made beyond the time limit, the tax authority was right in not accepting it. The SC also held that the revised ROI can be filed only in cases where there is omission or wrong statement in the original ROI. The revised ROI cannot be validly filed to withdraw a claim made in original ROI.