SC Follows Strict Interpretation Of Exemption Provision To Mandatorily Require Filing Of Declaration To Withdraw Benefit Within Due Date: EY Analysis


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2022 wherein issue raised was whether a claim for exemption under section 10B made in original return of income can be withdrawn by filing a declaration to opt out of the claim beyond the time specified in the provision.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

The instant SC ruling is significant in terms of diverse principles emanating from it. One of the propositions endorsed by the SC is that revised tax return cannot be filed to modify the claim made in the original return except in cases involving mistake or wrong statement in the original return.

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