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Facts
The assessee, a NBFC, filed its return for AY 2023-24 declaring income and claiming deduction u/s 80JJAA. The AO disallowed the deduction due to Form 10DA not being filed within the due date. The CIT(A) upheld the disallowance. The assessee appealed to the Tribunal.
Held
The Tribunal held that while filing Form 10DA on or before the due date is mandatory, the filing is a procedural aspect. Since the form was available to the CPC at the time of intimation and the assessee had claimed the deduction in prior years, the disallowance was not justified.
Key Issues
Whether the disallowance of deduction u/s 80JJAA for non-filing of Form 10DA within the due date is justified when the form was filed before intimation and deduction was claimed in prior years?
Sections Cited
80JJAA, 139, 143(1), 19AB, 44AB, 234B, 234C, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. ADDL/JCIT(A)-2, Gurugram dated 27.11.2024 vide DIN & Order No. ITBA/APL/S/250/2024-25/1070676153(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2023-24.
2. The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee is in the business of micro-finance, registered under Reserve Bank of India as NBFC. The assessee company filed its return of income for the assessment year 2023-24 declaring total income of Rs. 53,79,89,240/-. The return of income was filed under section 139(1) of the act on 26.10.2023 i.e. within the due date, whereas the due date for filing the return of income for the assessment year 2023–24 was 31/10/2023. Thereafter, the said return of income was processed and accordingly an intimation under section 143(1) of the act was passed on 29/05/2024 by accepting the gross total income as declared by the assessee company, however the deduction under section 80JJAA of the act amounting to Rs. 35,71,25,441/- as claimed by the assessee company was not granted due to the following incorrect claim as per the provision under section 143(1)(a)(ii) of the act – ‘In schedule VI-A, deduction claimed under section 80JJAA is more than the amount mentioned in Form(s) 10DA filed within the due date. Hence deduction u/s 80JJAA will be restricted in schedule VI-A to the extent of amounts mentioned in the form(s) 10DA filed within the due date.’ 3.1 Due to the above disallowance of the deduction claimed under section 80JJAA of the Act, total income of the assessee company had been computed at Rs.89,51,14,680/-and accordingly total demand of Rs. 8,01,70,530/- was raised on the assessee for the assessment year 2023-24.
Aggrieved by the said intimation passed under section 143(1) of the act dated 29/05/2024, the assessee preferred an appeal before the ld. CIT(A)/ADDL/JCIT(A).
The ld. ADDL/JCIT(A) dismiss the appeal of the assessee with the following observations-
(i) The audit report in form 10DA was uploaded on the portal on 26/10/2023. The due date for submitting the return in the case of the appellant was 30.09.2023. Hence, form 10DA was not filed within the time frame outlined by the act. (ii) As per rule 19AB of the income tax rules, 1962 it was mandatory for the appellant to file the accountant’s reported in form 10DA along with the return of income under section 139(1) of the act, failing which deduction under section 80JJAA will not be admissible. (iii) Further, the ld. ADDL/JCIT(A) also observed that form 10DA can only be accessed and submitted online and must be filed no later than those specified date mentioned in section 44AB of the act, which is one month before the IIFL Samasta Finance Limited, Bangalore Page 5 of 13 due date for submitting the return of income under section 139 (1) of the act. (iv) Lastly, the ld. ADDL/JCIT(A) also suggested that the appellant has the option to approach the jurisdictionalCommissioner of income tax, Chief Commissioner of income tax, or Principal Chief Commissioner of income tax for the condonation of delay in filing form 10DA.
Aggrieved by the order of the ld. ADDL/JCIT(A) dated 27/11/2024, the assessee has filed the present appeal before this Tribunal. The assessee has also filed a detailed synopsis along with the case laws relied upon by the assessee.
Before us, the ld. AR of the assessee vehemently submitted that the assessee company could not file Form 10DA along with the Tax Audit Report due to certain technical reasons although the same was ready & duly signed by the Chartered Accountant on or before the due date. It is also submitted that the tax auditor in clause-33 of the Form 3CD has also disclosed the amount of deduction u/s 80JJAA amounting to Rs. 35,71,25,441/-. Further, the ld. AR of the assessee submitted that the deduction u/s 80JJAA was also claimed in earlier years which is also indicated in the Tax Audit report. Lastly the ld. AR of the assessee submitted that as form no. 10DA along with the tax audit report in form 3CA & 3CD was available at the time of passing the intimation u/s 143(1) of the Act, the deduction claimed u/s 80JJAA should not be disallowed by the CPC.
The ld. DR on the other hand relied on the order of the ld. ADDL/JCIT(A) & vehemently submitted that the delay in filing Form 10DA can only be condoned by the ld. CIT/PCIT u/s IIFL Samasta Finance Limited, Bangalore Page 6 of 13 119(2)(b) of the Act. Further the ld. DR submitted that as the quantification of deduction claimed u/s 80JJAA has not been examined by the AO, the same may be remitted back to the AO.
We have heard the rival submissions & perused the material available on record. We have also gone through the case laws relied upon by the assessee as well as the report submitted by the ld. DR on the contention of the assessee that it has claimed the deduction u/s 80JJAA even in earlier years also. It is an undisputed fact that the Tax Audit report in Form 3CA & 3CD was filed on 28/09/2023 i.e.before the due date of furnishing the tax audit report which was 30/09/2023. Further, it is also an undisputed fact that the Return of Income was also filed on 26/10/2023 i.e. before the due date of filing the return u/s 139(1) of the Act which was 31/10/2023. On going through the Form No. 10DA submitted before us, we take note of the fact that although the form no.10DA is dated 25/09/2023 but it is actually uploaded on 26/10/2023 vide e-filing Acknowledgement No. 445132350261023 along with the return of income. Therefore, we find force in the contention of the AR of the assessee that the assessee company could not file Form 10DA along with the Tax Audit Report due to certain technical reasons although Form No. 10DA was ready & duly signed by the Chartered Accountant on or before the due date of furnishing the same. We also take note of the fact that as the Tax audit report was furnished on or before the due date of furnishing the audit report, the Chartered Accountant had also disclosed the claim of deduction amounting to Rs.35,71,25,441/- u/s 80JJAA in clause-33 of Form No. 3CD of the Tax Audit Report. It is also an undisputed fact that the assessee company is claiming the deduction u/s 80JJAA from the Asst. year 2019-20 onwards as verified from the report IIFL Samasta Finance Limited, Bangalore Page 7 of 13 submitted by the ld. DR. Therefore, this is not the first year of claim of deduction under section 80JJA and similar claim was also made by the assessee in the previous assessment years as can be verified from the report submitted by the ld. DR which is as under: -
9.1 Surprisingly, while going through the Pg-16 of the Intimation u/s 143(1) dated 29/05/2024, we find that the alleged discrepancy for the incorrect claim u/s 80JJAA was only Rs.19,66,94,811/- ( 35,71,25,441/- (-) 16,04,30,630/-), however the CPC had preferred to disallow the entire claim of deduction u/s 80JJAA amounting to Rs.35,71,25,441/- without assigning any reason. On the other hand, while going through the order of the ld. ADDL/JCIT(A), we find that his/her observations are self- contradictory. On the one hand he/she holds that the audit report in form 10DA was uploaded on the portal on 26/10/2023. The due date for submitting the return in the case of the appellant was 30.09.2023. Hence, form 10DA was not filed within the time frame outlined by the act. We take a note that the due date of filing the return of income was actually on 31/10/2023. Further, the ld. ADDL/JCIT(A) had also observed that as per rule 19AB of the income tax rules, 1962 it was mandatory for the appellant to file the accountant’s reported in form 10DA along with the return of income under section 139(1)
9.2 Before proceeding further, it is apposite here to mention the relevant provisions of the Act for ease of reference & record: -
Deduction in respect of employment of new employees.
80JJAA (1) Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed,— (a) if the business is formed by splitting up, or the reconstruction, of an existing business: Provided that nothing contained in this clause shall apply in respect of a business which is formed as a result of re-establishment, reconstruction or revival by the assessee of the business in the circumstances and within the period specified in section 33B; (b) if the business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation; (c) unless the assessee furnishes 27[ the report of the accountant, as defined in the Explanation below sub-section (2) of section 288, before the specified date referred to in section 44AB ] giving such particulars in the report as may be prescribed. ********** It is worth while here to note that Section 80JJAA(2)(c) of the Act was substituted for “along with the return of income the report of the accountant, as defined in the Explanation below sub- IIFL Samasta Finance Limited, Bangalore Page 9 of 13 section (2) of section 288” by the Finance Act, 2020, w.e.f. 01- 04-2020. Thus, as per Section 80JJAA(2)(c) of the Act, the assessee company must furnish the report of the Accountant in Form No. 10AD before the specified date referred to in Section 44AB of the Act. Now the Specified date referred to in Section 44AB of the Act is as follows: -
“Specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means date one month prior to the date for furnishing the return of income under sub-section (1) of section 139.”
Therefore, in the present case the due date of furnishing the report of the chartered accountant in Form No. 10DA was 30/09/2023 as per the provisions of the Act.
9.3 Now coming to Rule 19AB of the Income Tax Rules, 1962 which are reproduced as below for ease of reference & convenience-
“70[Form of report for claiming deduction under section 80JJAA. 19AB. Report of an accountant which is required to be furnished by the assessee along with the return of income under clause (c) of sub- section (2) of section 80JJAA shall be in Form No. 10DA.]”
On going through the above rule, we take a note of the fact that the Rule 12AB still stipulates that the report of an accountant is required to be furnished along with the return of Income. There is a discrepancy/inconsistency between the provision of the Income tax act and the Provision of the Income Tax Rules. Perhaps the legislature overlooked amending rule 19AB in consequent to the substitution of Section 80JJAA(2)(c) of the Act by the Finance Act, 2020, w.e.f. 01-04-2020. If we consider the Rules then as per the IIFL Samasta Finance Limited, Bangalore Page 10 of 13 Rule 12AB, the assessee company had rightly furnished the Report of the accountant in form 10AD along with the return of income.
9.4 However, we are of the considered opinion that when there is inconsistency between the provisions of the income tax Act & Income tax Rules, the provision of the income Tax Act will prevail. In holding so, we rely on the decision of the Hon’ble Delhi High Court in the case of National Stock Exchange Member vs Union Of India (Uoi) And Ors. reported in125(2005)DLT165, 005(85)DRJ298. The relevant paragraph is reproduced below for ease of reference &convenience: - “14. It may be mentioned here that according to the theory of the eminent jurist Kelsen (The Pure Theory of Law) in every legal system there is a hierarchy of laws, and the general principle is that if there is a conflict between a norm in a higher layer of the hierarchy and a norm in a lower level of the hierarchy, then the norm in the higher layer prevails, and the norm in the lower layer becomes ultra vires (see Kelsen's 'The General Theory of Law and State').
In our country this hierarchy is as follows: - (1) The Constitution of India. (2) Statutory Law, which may be either Parliamentary Law or law made by the State Legislature. (3) Delegated legislation which may be in the form of rules, regulations etc. made under the Act. (4) Administrative instructions which may be in the form of GOs, Circulars etc.
The SEBI Act is in the second layer of this hierarchy and the rules and regulations are in the third layer, whereas the circular dated 16.3.1998 is in the fourth and the lowest layer in the hierarchy. Hence, if there is a conflict between the Act and the Rules & Regulations the Act will prevail, and if there is a conflict between the Act, Rules and Regulations on the one hand, and the circular on the other, the former will prevail and the latter IIFL Samasta Finance Limited, Bangalore Page 11 of 13 becomes ultra vires vide Union of India v. Arun Kumar Roy, AIR 1986 SC 737 (para 15), Page 1997 Shish Ram v. State of H.P , Union of India v. Madras Telephone S.C & S.T Social Welfare Association , etc.”
Thus, the Income Tax Act, 1961 is in the second layer of the above hierarchy and the Income Tax Rules, 1961 is in the third layer. Hence, if there is a conflict between the Act and the Rules & Regulations, the Act will prevail, and if there is a conflict between the Act, Rules and Regulations on the one hand, and the circular on the other, the former will prevail, and the latter becomes ultra vires. In view of the above, we are of the opinion thatin order to claim deduction u/s 80JJAA of the Act, the report of an Accountant is required to be furnish one month prior to the date for furnishing the return of income under sub-section (1) of section 139 i.e. on or before 30/09/2023.
9.5 Now coming to the issue whether requirement of furnishing the report of an Accountant in form 10DA on or before the due date is mandatory to claim the deduction u/s 80JJA of the Act? We are of the considered opinion that obviously the requirement of furnishing the report of an accountant is mandatory; however the filing thereof is a procedural aspect. Once the report of the Accountant in Form 10DA was available before the CPC at the time of passing intimation u/s 143(1) of the act, even though the same may not be filed on or before the due date of furnishing the same, the assessee is entitled to claim the deduction u/s 80JJAA of the Act. Thus, when the report of an accountant was part of the record of the AO during the processing of the return of income, the AO could not have denied the deduction claimed by the assessee u/s 80JJAA of the Act. In holding so, we get the guidance & support from the decision of Hon’ble Apex Court in the case of Commissioner of Income -tax, Maharashtra v. G. M. Knitting “1. It would be suffice to reproduce para 2 of the impugned order whereby action of Income Tax Appellate Tribunal was held to be justified in allowing additional depreciation as claimed by the respondent-assessee herein: — "Additional depreciation is denied to the assessee on the ground that the assessee has failed to furnish form 3AA along with the return of income. Admittedly, Form 3AA was submitted during the course of assessment proceedings and it is not in dispute that the assessee is entitled to the additional depreciation. In these circumstances, in the light of the judgment of this Court in the case of Commissioner of Income Tax v. Shivanand Electronics [1994] 209 ITR 63 (Bom.), we see no merit in this appeal. The appeal is accordingly dismissed with no order as to costs."
We concur with the aforesaid view of the High Court and hold that even if Form 3AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. These appeals are, accordingly, dismissed.”
9.6 Respectfully, following the decision of the Apex court and considering the facts that the assessee is claiming the deduction from the Asst. year 2019-20 onwards & the Form 10DA for the Asst. year 2023-24 was filed even before the due date of filing the return and the same was also part of the record of the AO during the processing of the return of income, the AO could not have denied the deduction claimed by the assessee u/s 80JJAA of the Act.
9.7 However, we are also conscious of the fact that as the AO has not verified, the quantification of deduction claimed u/s 80JJAA by the assessee company, we deem it fit & proper to remit this issue to the file of AO with the above observations for the limited verification of quantification of the allowable deduction u/s 80JJAA of the Act.
IIFL Samasta Finance Limited, Bangalore Page 13 of 13 The assessee company is also directed to produce relevant information/details/documents/record/report to substantiate its claim. Needless to say a reasonable opportunity must be granted to the assessee. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.