GANPATI GEMS & JEWELLERS,JAIPUR vs. ASSTT./DY. CIT, CIRCLE 6, JAIPUR, JAIPUR

ITA 36/JPR/2025Status: DisposedITAT Jaipur13 May 2025AY 2017-201813 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal. Regarding the first issue, the Tribunal held that the disallowance of exemption under Section 10AA was incorrect. It noted that numerous judicial pronouncements hold that the requirement of filing a certificate like Form 56F along with the return is directory, not mandatory, and can be filed at any time before the completion of assessment, provided there is a sufficient cause for the delay. The Tribunal cited decisions from the Gujarat High Court (CIT v. Gujarat Oil and Allied Industries Ltd.), Supreme Court (CIT vs. G.M. Knitting Industries Pvt. Ltd.), and Rajasthan High Court (CIT vs. Godha Chemicals Pvt, Ltd.) to support this view. The CIT(A) was found to have failed to discuss these case laws. For the second issue, the Tribunal held that the interest paid on late deposit of TDS is compensatory in nature and not penal. It distinguished the case of Bharat Commerce & Industries Ltd. vs. CIT, which dealt with interest on delayed income tax payment. The Tribunal relied on the principles from the Supreme Court decision in Lachmandas Mathura Das vs. CIT, holding that interest on delayed payment of TDS is deductible under Section 37(1) as it is incurred wholly and exclusively for the purpose of business. The appellate order confirming the disallowance of interest on TDS was set aside.

What were the facts?

The assessee, Ganpati Gems & Jewellers, filed an appeal before the ITAT Jaipur against the order of the CIT(A), NFAC, Delhi, for Assessment Year 2017-18. The appeal arose from an order passed by the AO under Section 143(3) of the Income Tax Act. The assessee, a partnership firm engaged in manufacturing and export of handmade jewelry from an SEZ, claimed a deduction of Rs. 42,38,478/- under Section 10AA of the Act. This deduction was for 50% of profits, as it was the sixth year of operation. The AO disallowed this exemption because the assessee failed to file the mandatory audit report in Form 56F along with the return of income. The AO also disallowed Rs. 3,622/- paid as interest on late TDS deposit, treating it as penal in nature.

What were the issues?

1. Whether the Ld. CIT(A) erred in sustaining the disallowance of exemption of Rs. 42,38,477/- allowable under Section 10AA of the Income Tax Act, 1961, due to the non-filing of Form 56F with the e-filed return, despite it being submitted during assessment proceedings? - Assessee's contention: The non-filing of Form 56F was a procedural lapse by the previous Chartered Accountant, and it was subsequently submitted to the AO during assessment. The CIT(A) erred in not considering this. - Revenue's contention: As per Section 10AA(5) of the Act, Form 56F must be furnished along with the return of income, and failure to do so warrants disallowance of the exemption. 2. Whether the Ld. CIT(A) was justified in sustaining the disallowance of interest of Rs. 3,622/- on late payment of TDS, treating it as penal in nature under Section 37(1) of the Income Tax Act? - Assessee's contention: The interest paid on late TDS is compensatory in nature and should be allowed as a business expenditure. - Revenue's contention: The interest paid on late TDS is penal in nature and not deductible under Section 37(1).

Which sections of the Income-tax Act were involved?

Section 10AA,Section 139(1),Section 37(1),Section 201(1A),Section 40(a)(ii),Section 2(43),Section 36(1)(iii)

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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM

For Appellant: Shri G. M. Mehta, C.A
For Respondent: Ms. Swapnil Parihar, JCIT-DR
Hearing: 19/02/2025Pronounced: 13/05/2025

PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the assessee aggrieved from the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi dated 25.11.2024 [hereinafter referred as “CIT(A)/NFAC"] for the assessment year 2017-18, which in turn arise from the order dated 26.12.2019 passed under section 143(3) of the Income Tax Act, [hereinafter referred as “Act”] by the AO.

2.

The assessee has raised th

The order continues below.

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