Friday 28 April 2017

Mandatory return-filing before due-date to claim tax-holiday not 'discriminatory'; Upholds Constitutional validity

Delhi HC dismisses assessee’s (100% EOU) writ for AY 2007-08, upholds constitutional validity of Sec. 80A(5) as well as fourth proviso to Sec. 10B(1) (the sections mandate filing of return of income within prescribed due-date u/s 139(1) in order to claim tax holiday u/s. 10A/10B); Assessee submitted that the provisions discriminate between two sets of assessees – one, who file return u/s. 139(1) but claim the deduction subsequently by way of revised return u/s. 139(5), and another set of taxpayers, who could not file return within due date but claim the deduction in the original return filed belatedly u/s. 139(4) and therefore violative of Article 14 of the Constitution; HC observes that the provisions did not curtail any vested rights of taxpayer but it only imposed an obligation to claim deductions in a timely manner and in the return so filed; HC also refers to SC ruling in Nallamilli Ramli Reddi to hold that Article 14 permits reasonable classification if it is based on intelligible differentia and it has reasonable connection with the object sought to be achieved; Noting that the objective behind insertion of the two provisions was to defeat multiple claims of deductions and to ensure better tax compliance, HC rules that “it is open to legislate and prescribe different conditions in respect of those who claim benefits, just as the substantive provisions which stipulate the conditions (kind of accounts to be maintained, eligibility criteria, etc.).”; Also relies on SC rulings in Kedarnath Jute Manufacturing Co. Ltd. and Sanjay Kumar Jain to uphold the validity of fourth proviso, being merely a qualifying proviso, which seeks to limit the general provision in Sec. 10B(1) with a further stipulation or condition:HC 

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HC upholds validity of provisions restricting ITC where supplies are taxed under RCM

  This Tax Alert summarizes a recent judgement of the Delhi High Court (HC) [1] dealing with the issue of denial of input tax credit (ITC) ...