The Gauhati High Court has ruled that “Turnover” and “Income Tax Return (ITR)” are fundamentally different concepts, and an exemption from submitting turnover documents in a tender process does not extend to waiving the requirement to furnish ITRs for the prescribed years.
Justice Michael Zothankhuma observed that while Annual Turnover demonstrates a company’s revenue-generating capacity and is used to assess financial strength in tender evaluations, an Income Tax Return fulfills statutory tax obligations and provides the government with comprehensive financial information for accurate taxation.
Case Overview
The petitioner, a Micro, Small, and Medium Enterprise (MSME), contested its disqualification from a tender process for failing to submit ITRs for the past three years as required under Clause 13(h) of the e-Tender Notice (NIT). Clause 13(h) mandated the submission of ITRs and annual audited reports for the preceding three financial years.
The petitioner argued that, as an MSME, it was exempt under Clause 3(e) of the NIT from meeting the eligibility criterion of having an average annual financial turnover of at least ₹50 lakh over the last three years. It further claimed that ITRs served as proof of turnover and should, therefore, also be exempted under Clause 3(e).
Court’s Findings
The Court dismissed the petitioner’s plea, stating that Annual Turnover and Income Tax Returns are distinct. It clarified that the exemption granted to MSMEs under Clause 3(e) applied only to the turnover requirement and not to the submission of ITRs.
The Court noted that Clause 3(b) of the NIT specifically required bidders to submit ITRs alongside the audited or certified balance sheet, regardless of turnover exemption.
Key Distinctions Between Turnover and ITR
In its judgment, the Court elaborated on the differences:
- Annual Turnover:
- Represents the total revenue generated from goods or services during a financial year before expenses or taxes.
- Focuses solely on sales and operational revenue.
- Does not include deductions, taxes, or financial liabilities.
- Reflects business activity and operational performance.
- Income Tax Return:
- A formal document submitted to tax authorities detailing income, deductions, and taxes owed.
- Includes all income sources, such as investments and non-operational revenues.
- Adheres to tax regulations and prescribed formats.
- Provides a comprehensive financial snapshot beyond just revenue.
Verdict
The High Court concluded that the petitioner’s interpretation conflating turnover with ITR was incorrect. It ruled that MSME exemptions under Clause 3(e) did not extend to the submission of ITRs. Accordingly, the petition was dismissed, affirming that the two financial documents serve different purposes and are not interchangeable in tender processes.
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