ARUNA ALLOY STEELS PRIVATES LIMITED,MADURAI vs. ACIT,CORP. CIRCLE-1, MADURAI, MADURAIQ

5. Aggrieved, the assessee is in appeal before this Tribunal.

6. The Ld.AR assailing the action of lower authorities, submitted that since assessee had filed RoI within the due date u/s.139(1) of the Act, the deduction ought to have been allowed, once, assessee produced before the JAO the Form 1CCB, as held by plethora of judicial precedents (infra).

According to him, the settled position of law is that if deduction is claimed by an assessee, it should file the RoI within the time prescribed u/s.139(1), which is mandatory and the filing of Form 10CCB is directory, meaning, it can be filed during the assessment proceedings. According to the Ld. AR, intimation passed by CPC u/s.143(1) can’t be termed as assessment, as held in the case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., reported in [2007] 291 ITR 500 (SC) wherein the Hon’ble Supreme Court has held that an intimation u/s.143(1) of the Act can’t be held to be an assessment by observing as under:

These aspects were highlighted by one of us (D.K. Jain J) in Apogee International Ltd. v. Union of India [1996] 220 ITR 248 (Delhi). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.[emphasis given by us] 6.1 And the Ld.AR brought to our notice the decision of the Hon’ble Madras High Court in the case of CIT v. AKS Alloys (P) Ltd., reported in [2012] 18 taxmann.com 25 (Mad) wherein the Hon’ble High Court had an occasion to deal with identical issue [ i.e, whether filing of Audit Report in Form 10CCB along with return of income is a mandatory requirement for claiming deduction under Section 80IB] and the question of law raised by the Revenue is noted as under:-

"1.Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee was entitled to claim deduction u/s.80IB in respect of the unit at Pondicherrys even though the assessee had not complied with the mandatory provision for filing the Audit Report in Form 10CCB in support of the claim as stipulated in Section 80IB(13) r/w.Sec.80IA(7) of the Act, by observing that it was enough if the Audit Report was filed before the assessment was completed?” 6.2 And the Hon’ble High Court (supra) answered the same by upholding the action of the Tribunal holding that the assessee was entitled to claim deduction u/s.80IB [in respect of the unit at Pondichery] even though the assessee had not complied by filing the Audit Report in Form 10CCB as required under Section 80IB(13) r/w.Sec.80IA(7) of the Act, by observing that it was enough if the Audit Report was filed before the assessment was completed.” and dismissed the Revenue appeal by holding as under:

2.The assessee company is engaged in the business of manufacture of steel ingots. In respect of the assessment year 2005-06, assessment order dated 26.12.2007 was passed under Sec.143(3) of the Act, in which, the assessing officer has disallowed the claim of the assesee made under Section 80IB of the Act and has also made addition of Rs.1,20,00,000/- as unexplained credit, under Section 68 of the Act, on the ground that for the purpose of claiming deduction, the assessee did not file necessary certificate in Form 10CCB of the Act along with the return of income, which was filed on 18.7.2005 declaring the income as Rs.1,02,11,036/-.

3. As against the disallowance of the claim, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The appellate authority has allowed the appeal, thereby granting the claim of the assessee made under Section 80IB of the Act. It was against the said order, the Revenue has preferred appeal before the Appellate Tribunal, which came to be dismissed under the impugned order.

4. Being aggrieved by the said order, the present appeal has been filed on the above substantial questions of law.

7. The Culcutta High Court in the case in THE COMMISSIONER OF INCOME TAX V. BERGER PAINTS (INDIA) LTD (NO.2) has also concurred with the said view which was followed by the Tribunal in this case.

8. Mr.T.Ravikumar, the learned counsel for the appellant is not able to produce any other judgement contrary to the above said views consistently taken.

A) During the course of hearing, the counsel for the appellant submitted that, it is well settled law that filing of the audit report in form-10CCB, for claim of deduction u/s 801A, is mandatory but the date by which it need to be filed is only directory. In support of his submission, the counsel relayed mainly on the Honourable Supreme Court's decision dated 24 July, 2015 in the case of CTT vs. G.M.Knitting Industries (P) Ltd (page-1 & 2 of the case law paper book) and on the jurisdictional High Court decision dated 14th December, 2011 in the case of CIT vs. AKS Alloys (P) Ltd (page-3 to 5 of the case law paper book). Also, relied on various others jurisdictional Tribunals' decisions which were passed following either of the two judgments referred.

The cases laws relied on by the counsel are no more applicable to the appellant's case on account of two folds. (i) On Interpretation of statues:

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B) The Honourable Supreme Court in its detailed speaking order dated 11 July, 2022, while deciding a claim of deduction u/s.10B of the Act, in the case of Wipro Ltd, after detailed consideration of various rulings including CIT vs. G.M.Knitting Industries (P) Ltd, and held at Para 14 of its order as follows:

14. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under section 10B(8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in section 10B(8) of the IT Act. We hold that for claiming the benefit under section 108(8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under section 10B(8) of the IT Act on non- compliance of the twin conditions as provided under section 108(8) of the IT Act, as observed hereinabove. The present Appeal is accordingly Allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.

C) In another latest decision, while passing a detailed order dated 12th October, 2022, the Honourable Supreme Court in the case of Checkmate Services (P.) Ltd vs. CIT (as reported in 143 taxmann.com 178) held at Para 48 as follows:

"48. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with Eagle Flask Industries Ltd. v. CCE 2004 taxmann.com 350 (SC)/2004 Supp. (4) SCR 35, This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations."

D) Similarly, while passing a detailed order dated 5th October, 2005, the Honourable Supreme Court in the case of Britannia Industries Ltd. vs. Commissioner of Income-tax held at Para 17 as follows:

"When the language of a statute is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute".

(ii) Change in Law:

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E) Both the case laws relied upon by the appellant counsel pertains to a case where assessment was for AY-2005-06 that is before introduction of a specific provision 80AC in the Income Tax Act. With effect from 01/04/2006, section 80 AC was introduced into the Act with a specific purpose of timely enforcement of procedural various requirements as contemplated under various other provisions of the Act. The section reads as under:

"[Deduction not to be allowed unless return furnished.

80AC. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-LAB or section 80- IB or section 80-IC, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]

F) This additional condition introduced is over and above the already existing conditions by way of 801A(7). As per this section, deduction shall be allowed only if i. separate books of accounts of the eligible undertaking are maintained ii. Such books are got audited iii. The audit report in the prescribed form obtained and iv. Such audit report in the prescribed form is furnished along with the return of Income.

Rule 12(2) of the Income tax Rules 1962 governs furnishing of return of income and the proviso to this rule mandates furnishing of audit reports along with the return of income.

G) In the present case, the return of income in Form-6 was filed on 28/11/2017 but the audit report in Form-10CCB had been only on 04/09/2018 filed on 04/09/2018 i.e. after a delay of more than 10 months. Thus, not meeting the critical conditions of claim as laid out under section 801A(7) of the Act.

H) It may be submitted that law is continuously evolving. The government is in the process of giving sun-set to various deductions and exemptions sections of the Act and even encouraging existing taxpayers to migrate to simplified tax payment structure, by giving-up its various otherwise entitled claims under the Act. This is the intent behind incorporating various stringent conditions, if a taxpayer intent to claim any deduction or exemption under the Act. Keeping this change in intent, the Honourable Supreme Court has been directing through its various case decisions, as mentioned above, to interpret the language of the law as it is in a literal sense, without attributing any additional meaning or liberty, which the law never indented to extend.

Section 80A(5) of the Income Tax Act, 1961: (5) Where the assessee fails to make a claim in his return of income for any deduction under section 10-A or section 10-AA or section 10-B or section 10-BA or under any provision of this Chapter under the heading "C.-Deductions in respect of certain incomes", no deduction shall be allowed to him there under.] Section 80AC in the Income Tax Act, 1961: 80AC. [ Deduction not to be allowed unless return furnished

- Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after –

(i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE;

(ii) …. no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]

Section 80IA(7) in the Income Tax Act, 1961:

(7) [The deduction] [ Substituted by Act 20 of 2002, Section 33, for " Where the assessee is a person other than a company or a cooperative society, the deduction" (w.e.f. 1.4.2003).] under sub-section (1) from profits and gains derived from an [undertaking] [ Substituted by Act 14 of 2001, Section 44, for certain words (w.e.f. 1.4.2002).] shall not be admissible unless the accounts of the [undertaking] [Substituted by Act 14 of 2001, Section 44, for certain words (w.e.f. 1.4.2002).] for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.

9. The requirement to file Form 10 CCB under Section 80IA(7) came w.e.f. 01.04.2020 and not in AY 2016-17. Therefore, the reliance by Ld.DR in her written submissions (supra) will not be of any aid to the Revenue, to deny the claim of deduction under Chapter VI of the Act.

Next argument is that sec.80A(5) & 80AC creates fetter for assessee’s claim of deduction u/s 80IA of the Act. A conjoint reading of both sec.80A(5) & 80AC supra it is clear that in order to claim deduction u/s.80IA of the Act, the assessee had to file RoI before due date u/s.139(1) of the Act and make its claim of deduction under Chapter-VIA.

Then, the deduction claimed u/s.80IA can’t be denied to the assessee. In the present case, the assessee has undisputedly filed RoI before the due date u/s.139(1) of the Act by filing the return for AY 2016-17 on 17.10.2016 after claiming deduction u/s.80IA of the Act to the tune of Rs.2,88,10,028/-. Thus, the assessee has fulfilled the condition stipulated u/s.80A(5) as well as 80AC of the Act. It is pertinent to note here that the aforesaid provisions doesn’t specifies that unless the assessee makes claim for deduction in the return filed u/s.139(1) of the Act along with Form 10CCB the deduction would be denied. Therefore, the assertion made by the Ld.AR of the assessee that filing of Form 10CCB is directory in nature and not mandatory needs to be accepted. In this regard, the Ld.AR also brought to our notice that the decision of the Hon’ble Supreme Court in the case of State Of U. P v. Manbodhan Lal Srivastava reported in AIR 1957 912 wherein the Hon’ble Supreme Court has held that while interpreting a fiscal statute strict interpretation is required only to taxing provision such as charging provisions or provisions imposing penalty; and not to those parts of the statutes, which contained machinery provisions and in this respect observed as under:

'All the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that construction put to be on a particular provision makes consistent enactment of the whole statute. This would be more so if a literal construction of a particular clause leads to manifestly absurd and anomalous results which could not have been intended by the Legislature.

The principle that a fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty, and not to those parts of the statute which contain machinery provisions. (Emphasis Supplied)

3. An identical issue was considered by this Court in CIT v. AKS Alloys (P) Ltd. [2012] 205 Taxman 11/18 taxmann.com 25 (Mad.), wherein this Court after referring to a number of judicial precedents held that filing of audit report along with the return was not mandatory, but directory, and that if the audit report was filed at any time before the framing of assessment, the requirement of the provisions of the Act should be held to have been met.

Ltd., reported in [2015] 54 taxmann.com 321 (Madras) wherein the Hon’ble Madras High Court held as under:

In view of the well-settled principles uniformly held in the decisions cited supra, we have no hesitation to hold that the filing of the audit report along with the return, as contemplated under section 32AB(5) of the Act, is only directory and not mandatory. Hence, finding no substantial question of law arising for consideration, the appeal is dismissed.

Now so far as the reliance placed upon the decision of this court in the case of G. M. Knitting Industries Pvt. Ltd. (supra), relied upon by the learned counsel appearing on behalf of the assessee is concerned, section 10B(8) is an exemption provision which cannot be compared with claiming an additional depreciation under section 32(1)(iia) of the Act. As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. Therefore, the said decision shall not be applicable to the facts of the case on hand, while considering the exemption provisions. Even otherwise, Chapter III and Chapter VI-A of the Act operate in different realms and principles of Chapter III, which deals with "incomes which do not form a part of total income", cannot be equated with mechanism provided for deductions in Chapter VI-A, which deals with "deductions to be made in computing total income". Therefore, none of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VI-A shall be applicable while considering the claim under section 10B(8) of the Income-tax Act.

Order pronounced on the 26th day of February, 2025, in Chennai.