2022 (6) TMI 189 - HC - Income Tax

High Court rules audit report filing under Section 80IA(7) pre-2020 not mandatory, supports assessee's deduction claim

The High Court of Madras ruled in favor of the assessee in a tax case appeal regarding the interpretation of Section 80IA(7). The Court held that prior to ... Deduction u/s 80IA - audit report is filed at the appellate stage - Whether provisions of section 80-IA(7) requiring filing of audit report along with return are not mandatory, but directory and if the audit report is filed at any time before framing of assessment, then requirement of section 80IA(7) would be met? - HELD THAT:- As assessee should furnish the audit report along with his return of income, only pursuant to the amendment by the Finance Act, 2020 with effect from 01.04.2020. Prior to that, the requirement of filing the audit report along with the return of income is not mandatory, but directory and the audit report can be filed at any time before framing of assessment, so as to meet out the requirement of section 80IA(7). As also settled law that the taxing statute should be read prospectively and not retrospectively. Applying the said legal proposition to the facts of the present case, wherein it is an admitted fact that the respondent / assessee furnished the audit report during the course of assessment relating to the assessment year 2009-10 and they very well complied with the requirement of section 80IA(7) for claiming deduction under section 80IA - CIT(A) allowed the claim of the respondent / assessee, which was also rightly affirmed by the ITAT and the same do not call for any interference at the hands of this Court. - Decided against revenue. Issues:1. Interpretation of Section 80IA(7) - Mandatory or Directory RequirementAnalysis:The High Court of Madras heard an appeal by the Revenue against the order of the Income Tax Appellate Tribunal regarding the disallowance of a claim under Section 80IA by the assessee for the assessment year 2009-2010. The Tribunal had dismissed the Revenue's appeal, leading to this tax case appeal. The main contention was whether the requirement of filing an audit report under Section 80IA(7) along with the return of income is mandatory or directory.The Revenue argued that the audit report is a mandatory requirement under Section 80IA(7) and should be filed along with the return of income. They contended that the CIT(A) and the Tribunal erred in holding that the audit report can be filed before the framing of assessment. The Revenue stressed that the Tribunal's decision contradicted the clear mandate of Section 80IA(7) and should be set aside.On the other hand, the assessee argued that filing the audit report along with the return of income is not mandatory for claiming deduction under Section 80IA. They cited a decision of the Karnataka High Court to support their position, stating that the audit report can even be filed at the appellate stage. The assessee maintained that the Tribunal's decision did not require intervention by the High Court.The High Court analyzed the provisions of Section 80IA(7) and noted that, as per the Finance Act, 2020 amendment effective from 01.04.2020, the audit report must be furnished along with the return of income. However, prior to this amendment, the requirement was not mandatory but directory, allowing the audit report to be filed before the assessment. In this case, the assessee had submitted the audit report during the assessment for the relevant year, fulfilling the Section 80IA(7) requirement. The Court upheld the decisions of the CIT(A) and the Tribunal, stating that the assessee had complied with the law.Referring to a decision of the Karnataka High Court, the High Court of Madras emphasized that the assessee's entitlement to claim deduction under Section 80IA could be supported even if the audit report was filed at a later stage. Consequently, the High Court ruled in favor of the assessee, dismissing the Tax case Appeal filed by the Revenue.