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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI ABRAHAM P. GEORGE
Per N.V. Vasudevan, Judicial Member
This appeal by the Revenue is against the order dated 2.1.2015 of the CIT(Appeals), Mangalore relating to assessment year 2011-12.
The effective grounds of appeal raised by the Revenue reads as follows:-
“2.1 The Ld. C.I.T (Appeals) erred in allowing the deduction u/s 80IB ignoring the provisions of Sec.8OAC. 2.2 The ld. C.I.T (Appeals) failed to appreciate the fact that the assessee has failed to prove any genuine hardship preventing him from filing the return within the time provided u/s 139(1).”
The assessee is a company engaged in the business of fruit processing industry. It was entitled to claim deduction u/s. 80IB(11A) of the Act. As far as AY 2011-12 is concerned, the assessee filed a return of income on 16.10.2011 claiming deduction u/s. u/s. 80IB(11A). The due date for filing the return of income for AY 2011-12 was, admittedly, 30.9.2011. In view of the provisions of section 80AC of the Act, the return which was processed by the CPC denied the claim of assessee for deduction u/s. 80IB(11A). The Assessee filed application u/s. 154 praying for rectification of the error in processing the assessee’s return of income whereby claim for deduction u/s. 80IB(11A) was denied. The said rectification application was dismissed by an order dated 30.9.13.
Against the order of the AO, the assessee filed appeal before the CIT(Appeals), who by the impugned order, allowed the claim of assessee for deduction u/s. 80IB(11A) observing as follows:-
“6. I have considered the rival contentions carefully. The solitary issue involved in this appeal is denial of rectification u/s 154 of the order u/s 143(1). The issue involved is denial of deduction u/s 80IB which was sought to be rectified u/s 154. Admitted facts are that the appellant was to file return u/s 139(1) on 30.09.2011 which was filed on 16.10.2011 and there was almost a fortnight delay in filing of return. However, the return was field within the due date u/s 139(4). The only reason for which the appellant was denied deduction u/s 80IB (11A) was this delay in filing of return u/s 139(1) which is however filed within the time u/s.139(4) for the A.Y.2011-12. This is the only reason for which the deduction was denied and admittedly, the appellant satisfied all other conditions. In the earlier years and subsequent years, the filing was within time and claims were allowed. In view of various judicial pronouncements cited by the appellant, I am of the view that the appellant is eligible for the deduction. Hence the AO is directed to allow the same.”
Aggrieved by the order of CIT(Appeals), the Revenue has preferred the present appeal before the Tribunal.
We have heard the rival submissions. As per the provisions of Sec.80AC of the Act, deduction u/s.80-IB(11A) of the Act cannot be allowed if the Assessee does not file the return of income on or before the due date specified in Sec.139(1) of the Act. The said provisions reads as follows:
"80AC. Deduction not to be allowed unless return furnished-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-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, 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.".
Since the Assessee admittedly filed the return of income only on 16.10.2011 which was admitted beyond the due date specified u/s.139(1) of the Act, the AO denied the deduction u/s.80-IB(11A) of the Act claimed by the Assessee.
At the time of hearing the learned DR brought to our notice that a Special Bench of the ITAT, Rajkot Bench, in the case of Saffire Garments Vs. ITO (2013) 140 ITD 6 (Rajkot)(SB) had an occasion to examine identical provisions such as Sec.80AC viz., proviso to Sec.10A(1A) of the Act, as to whether the same were directory or mandatory. The provisions of Sec.10A(1A) of the Act are as follows:
"[(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,—
(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;
(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re- investment Allowance Reserve Account") to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :
Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139."
(underlining for emphasis)
The Special Bench examined the whole scheme of the Act. The Special Bench found that One consequence of failure to file return of income on or before the due date u/s.139(1) of the Act was levy of interest u/s.234A of the Act as per which, the assessee is liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS if any paid by him apart from some other reductions and such interest is payable from the date immediately following the due date for filing return of income and is payable up to the date on which such return of income was furnished by the assessee. Payment of interest u/s.234A of the Act was a consequence for failure to file return of income on or before the due date u/.139(1) and the same is mandatory. The Special Bench held that the provisions of the proviso to Section 10A(1A) is nothing but a consequence of failure of the assessee to file the return of income within the due date prescribed u/s 139(1) of the Income tax Act, 1961. For such a failure of the assessee to file his return of income within the due date prescribed u/s 139(1) of the Income tax Act, 1961, this is also only of the mandatory consequence.
The Special Bench accordingly held that provisions of the proviso to section 10A(1A) are mandatory and not directory, thus deduction u/s 10A(1A) could not be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1).
The decisions rendered by the division bench of Tribunal on which the CIT(A) placed reliance are no longer good law in view of the later decision of the Special Bench referred to above.
The learned DR also brought to our notice the decision rendered by the ITAT Bangalore Bench in the case of Avasarala Technologies Ltd. Vs. DCIT to 954/Bng/2011 order dated 8.3.2013, wherein in the context of deduction u/s.80-IB(10) of the Act, the decision of the Special Bench in the case of Saffire Garment (supra) was followed and it was held that the provisions of Sec.80AC of the Act were mandatory and not directory, thus deduction u/s 80-IB(10) of the Act could not be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1).
The learned counsel for the Assessee however reiterated his submission that provisions of Sec.80AC of the Act have to be construed as directory and that the provisions of Sec.80IB(10) of the Act are beneficial provisions and need to be interpreted liberally to further the object of the section.
We are of the view that in the light of the aforesaid decision of the Special Bench in the case of Saffire Garments (supra) and Avasarala Technologies Ltd.(supra), the plea raised on behalf of the Assessee cannot be accepted. Accordingly, we hold that provisions of Sec.80AC of the Act were mandatory and not directory, thus deduction u/s 80-IB(10) of the Act could not be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1) of the Act. We therefore reverse the order of CIT(A) and restore the order of the AO. The appeal of the Revenue is accordingly allowed.
In the result the appeal is allowed.
Pronounced in the open court on this 7th day of August, 2015.