M/S.BODYGEAR INTERNATIONAL P. LTD,ERNAKULAM V. THE DCIT, KOCHI

ITA 274/COCH/2023

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Bodygear International Pvt. Ltd., engaged in the manufacture and export of toys, filed an appeal against the order of the Commissioner of Income-tax (Appeals) which had confirmed the denial of a deduction under section 10B of the Income-tax Act, 1961. The original return for the assessment year 2007-2008 was filed on time, but the claim for deduction under section 10B was only made in a revised return. The Tribunal considered whether the filing of a revised return with a subsequent audit report constituted sufficient compliance with the statutory requirements. The Tribunal referenced several Supreme Court and High Court decisions to conclude that the revised return effectively substituted the original return, thus allowing the deduction if other conditions were met.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315993 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Other Referred Cases: PCIT v. Wipro Limited (2022) 140 taxmann.com 223 (SC), CIT v. G.M.Knitting Industries Pvt. Ltd.(2015) 376 ITR 465, CIT v. Yokogwa India Ltd. (2017) 391 ITR 274 (SC), CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), Tracks & Towers Infratech Pvt. Ltd. (ITA No.1514 & 1515/Hyd/2019), CIT vs. Mahendra Mills /Arun Textile, Glassgow ITA No.274/Coch/2023, CIT vs. Mangalore Chemicals & Fertilizers Ltd., 191 ITR 156 (Kar.), CCIT vs. Machine Tool Corpn. of India Ltd., 201 ITR 101 (Kar.), Beco Engineering Co. Ltd. vs. CIT, 148 ITR 478 (P&H)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OMANAKUTTAN; SENIOR
• Assessee Lawyers: RADHESH BHATT
• Keywords: Revised return
• Section: 139; 10B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member & Shri Soundararajan K, Judicial Member ITA No.274/Coch/2023 :Asst.Year 2007-2008 Bodygear International Pvt.Ltd. V/803, A and B, Edayar Industrial Development Area Muppthadam PO Alangad, Ernakulam – 683 110. PAN : AAACB9545J. v. The Assistant Commissioner of Income-tax, Cir.1(2) Kochi. (Appellant) (Respondent) Appellant by : Sri.Radhesh Bhatt, CA Respondent by : Sri.Omanakuttan, Senior AR Date of Hearing : 20.03.2025 Date of Pronouncement : 14.05.2025 O R D E R Per Inturi Rama Rao, AM : This is an appeal filed by the assessee co-operative society directed against the order of the National Faceless Appeal Centre / Commissioner of Income-tax (Appeals) [“the CIT(A)”] dated 17th February, 2023 for the assessment year 2007-2008. 2. Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of manufacture and export of Toys. The return of income for the assessment year 2007-2008 was originally filed on 23rd October, 2007. The same was revised on 24.11.2007 and again it ITA No.274/Coch/2023. Bodygear International Pvt.Ltd. 2 was revised on 22.02.2008 showing taxable income at Nil, after claiming deduction u/s.10B of the Income-tax Act, 1961 (“the Act”). The audit report as per Rule 16E and Form 56G was submitted by the appellant company on 22nd February, 2018. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income-tax, Circle 1(2), Kochi (“the AO”) vide order dated 23rd December, 2009 passed u/s.143(3) of the Act assessing the total income at Nil after setting off of brought forward losses of Rs.30,75,833. While doing so, the AO denied the claim for deduction u/s.10B of the Act by holding that the appellant had not made a claim for deduction u/s.10B of the Act in the original return of income filed and the prescribed audit report in Form 56G was furnished only on 22nd February, 2008, i.e., after the due date for filing the return of income u/s.139(1) of the Act. The AO was of the opinion that since the claim for deduction u/s.10B of the Act was made only in the revised return and the requisite audit report in Form 56G was filed only on 22.02.2008, it does not conform to the requirement of provisions of section 10B(1) of the Act, and accordingly, denied claim for deduction u/s.10B of the Act. 3. Being aggrieved by the above assessment order, an appeal was filed before the CIT(A) contending that filing of the prescribed audit report before the completion of the assessment constitutes a sufficient compliance, placing reliance on series of judgments of the High Courts, which are extracted by the CIT(A) at page 4 of the impugned order. It is further submitted that since the original return was filed within the due date prescribed u/s.139(1) of the Act, and therefore, there is no violation of provisions of section 10B of the Act. However, the CIT(A) has ITA No.274/Coch/2023. Bodygear International Pvt.Ltd. 3 confirmed the action of the AO in disallowing the claim for deduction u/s.10B of the Act by holding that filing revised return does not amount to substitution of the original return filed u/s.139(1) of the Act, and therefore, does not constitute a sufficient compliance, and accordingly dismissed the appeal placing reliance on the decision of the Hon’ble Supreme Court in the case of PCIT v. Wipro Limited (2022) 140 taxmann.com 223 (SC). 4. Being aggrieved, the appellant is in appeal before us in the present appeal. It is submitted that the appellant had filed original return of income within the due date prescribed u/s.139(1) of the Act. Once an assessee files a revised return of income, it amounts to substitution of the original return of income. The time limit prescribed for filing of the requisite audit report is directory in nature and can be file at any time before the completion of the assessment proceedings, placing reliance on the following judgments :- (i) CIT v. G.M.Knitting Industries Pvt. Ltd.(2015) 376 ITR 465 (ii) CIT v. Yokogwa India Ltd. (2017) 391 ITR 274 (SC) (iii) CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) (iv) Tracks & Towers Infratech Pvt. Ltd. (ITA No.1514 & 1515/Hyd/2019), Hyderabad Bench. 5. On the other hand, the learned Sr.DR placing reliance on the orders of the authorities below submits that no interference is called for, as the appellant had not made the claim in the original return of income ITA No.274/Coch/2023. Bodygear International Pvt.Ltd. 4 and the requisite audit report was not filed within the due date prescribed. 6. We heard the rival submissions and perused the material available on record. The issue in the present appeal relates to the claim for deduction u/s.10B of the Act. The AO had denied the claim of deduction u/s.10B of the Act solely on the ground that no claim for deduction u/s.10B was made in the original return of income filed u/s.139(1) of the Act, but made the claim in the revised return of income, and also on the ground that the requisite audit report in Form 56G was filed belatedly, i.e. on 22,08.2008. There is no dispute that the original return of income was filed within the due date prescribed u/s.139(1) of the Act. The AO also accepted the revised return of income filed by the assessee. Therefore, the validity of the revised return of income is not under challenge before us, as the same was filed within the time allowed under the provision of sub-section (5) of section 139 of the Act. Once a revised return of income is filed, the natural consequence is that the original return of income is effaced for all the purposes, and it is not open to the AO to advert to the original return of income as filed by the assessee company. It is a settled position of law that an assessee is entitled to revise return of income within the time allowed under the provisions of sub-section (5) of section 139 of the Act, once a revised return of income is filed, the natural consequence is that the original return of income is effaced or obliterated for all the purposes, it is not open to the Assessing Officer to advert to the original return of income. This position of law was approved by Hon'ble Supreme Court in CIT vs. Mahendra Mills /Arun Textile, Glassgow ITA No.274/Coch/2023. Bodygear International Pvt.Ltd. 5 Consultants, 243 ITR 56 (SC), wherein, the Hon'ble Supreme Court had inter alia approved the decision of the Hon'ble Karnataka High Court in the case of (i) CIT vs. Mangalore Chemicals & Fertilizers Ltd., 191 ITR 156 (Kar.), (ii) CCIT vs. Machine Tool Corpn. of India Ltd., 201 ITR 101 (Kar.) and the decision of the Hon'ble Punjab & Haryana High Court in the case of Beco Engineering Co. Ltd. vs. CIT, 148 ITR 478 (P&H). 7. Therefore, in the light of the above legal position, it can be safely concluded that the claim made in the revised return of income, although not made in the original return of income, amounts to claim made in the original return of income. It is nowhere prescribed that the claim should be made only in the original return of income filed u/s.139(1) of the Act. The only requirement under the provisions of section 10B of the Act is that only the return of income should be filed within the due date prescribed u/s.139(1) of the Act, and similarly, filing of the prescribed audit report before the date of completion of the assessment proceedings constitutes a sufficient compliance in view of the judgment of the Hon’ble Supreme Court in the case of CIT v. G.M.Knitting Industries Pvt. Ltd.(2015) 376 ITR 465, and therefore, in the light of above legal position, reasoning of the lower authorities cannot be sustained in the eyes of law. However, since the AO had no occasion to examine the satisfaction or otherwise of the other conditions prescribed u/s.10B of the Act, we remit the matter back to the file of the AO with a direction to allow the deduction u/s.10B of the Act, on being satisfied that the other conditions prescribed for allowing of deduction u/s.10B were satisfied. ITA No.274/Coch/2023. Bodygear International Pvt.Ltd. 6 8. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 14th day of May, 2025. Sd/- (Soundararajan K) Sd/- (Inturi Rama Rao) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin; Dated : 14th May, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "