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Facts
The assessee, engaged in manufacturing mosquito repellents and generating electricity, filed its return of income. The CPC disallowed a deduction of Rs.14,81,308/- claimed under Section 80IA for the windmill division, stating the audit report (Form 10CCB) was filed belatedly. The CIT(A) upheld this disallowance.
Held
The Tribunal noted that the assessee had claimed this deduction for several prior years and had e-filed the audit report before the processing of the return under Section 143(1). Citing Supreme Court precedents regarding the timely filing of audit reports before the culmination of assessment proceedings, the Tribunal held that the disallowance was incorrect.
Key Issues
Whether the disallowance of deduction under Section 80IA due to the belated filing of the audit report (Form 10CCB) is justified when the report was filed before the processing of the return under Section 143(1) and in line with previous years' practice?
Sections Cited
80IA, 143(1), 44AB, 10B, 32(1)(ii-a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL
आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT (A), Aurangabad, (hereinafter in short "the Ld.CIT(A)”), dated 20.03.2024 for the Assessment Year (hereinafter in short "AY”) 2017-18.
The main grievance of the assessee is against the action of the Ld.CIT(A) in disallowing the claim of deduction u/s.80IA to the tune of Rs.14,81,308/-.
The brief facts are that the assessee is engaged in the business of manufacture and sale of mosquito repellents (coils) and generation of electricity through windmill division, besides income from salary and house property. The assessee had filed his return of income (RoI)
admitting an income of Rs.1,40,82,913/- on 07.11.2017. Later, RoI was processed by the CPC u/s.143(1) dated 23.01.2019 disallowing the deduction of Rs.14,81,308/- claimed u/s.80IA of the Act in relation to the windmill division. According to the assessee, this is the 8th year of the claim u/s.80IA of the Act which amounts to Rs.14,81,308/-. According to the assessee, it had filed Audit Report in Form 10CCB electronically on 27.02.2019 is well before processing the RoI u/s.143(1) dated 23.03.2019. Therefore, according to the assessee, the CPC ought not to have disallowed the claim on belated filing of Audit Report; and preferred an appeal before the Ld.CIT(A) which was dismissed by the Ld.CIT(A) on the ground that the report of Audit in Form 10CCB had not been filed before the specified date referred to sec.44AB of the Act which was on 07.11.2017 and the assessee has filed the same only on 27.02.2019, therefore, he was pleased to dismiss the appeal of the assessee.
Aggrieved, the assessee is in appeal before us.
We have heard both the parties and perused the material available on record. We find that this was the 8th year of claiming deduction u/s.80IA of the Act and in earlier years, it is noted that assessee was granted such deduction; and in the relevant AY, the CPC denied the deduction only on the ground that Audit Report/ Form No.10CCB was belatedly e-filed i.e, not along with the return of income. On appeal, the Ld.CIT(A) has confirmed the action of the CPC by holding that the assessee ought to have filed Form No.10CCB on the due date, which requirement of law, we note came w.e.f. 01.04.2020 and is not applicable for AY 2017-18. Having said so, we also note that the assessee had e- filed Form No.10CCB and the CPC while processing the return of income u/s 143(1) of the Act, the Audit Report was before it as noted (supra) and therefore, the deduction claimed ought to have been allowed as held by the Hon’ble Supreme Court in the case of GM Knitting Industries (P.) Ltd., (supra), wherein the Hon’ble Apex Court had an occasion to examine the action of the Hon’ble Bombay High Court holding that if Form 3AA is filed before the assessment proceedings culminated, then additional depreciation shall be allowed and such a claim shouldn’t be denied only because assessee didn’t furnish Form 3AA along with return of income.
And the Hon’ble Apex Court, affirmed the action of the Hon’ble High Court of Bombay as well as tagged along matter wherein Revenue challenged the action of the Hon’ble Madras High Court in AKS Alloys Pvt. Ltd (supra) and the Civil Appeal of department was dismissed, which means the decision of the Hon’ble Madras High Court has been affirmed by Hon’ble Supreme Court, and is binding precedent that if assessee had filed the Form 10CCB before the culmination of assessment proceedings , then the deduction claimed u/s.80IB ought not to be denied on the reason that assessee didn’t file Form 10CCB along with Return of Income. We also note the Hon’ble Supreme Court’s decision in M/s.Wipro Ltd. (supra) was in the context of that assessee’s [Wipro] claim of exemption under Chapter III, in contra-distinction to the claim raised by the present assessee under Chapter VI-A. And it would be gainful to reproduce the Hon’ble Supreme Court’s observation in M/s.Wipro Ltd., wherein in the distinction in the claim made for exemption under Chapter-III and deduction claimed under Chapter VI was noted as under:
“11. 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) (ii-a) 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 VIA 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 VIA, which deals with "deductions to made in computing total income". Therefore, none of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim under Section 10B (8) of the IT Act.[emphasis given by us]”
In the light of the discussion, and taking note that assessee had e- filed the audit report in Form 10CCB on 27.02.2019 and processing by CPC u/s.143(1) took place only on 21.03.2019, which is an event after the assessee had e-filed the Form 10CCB, therefore, the claim of deduction ought to have been granted especially when assessee was (AY 2017-18) Mylswamy Ranga Ramanujam :: 5 :: granted such a deduction for the earlier ‘7’ years. Therefore, we set-aside the impugned order of Ld CIT(A)/JCIT(A) and direct the AO to allow the claim of deduction u/s.80IA of the Act.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 09th day of October, 2024, in Chennai.