Appellate Tribunal Grants Deduction Under Income Tax Act Section 80-IA

The Appellate Tribunal allowed the appellant's claim for deduction under section 80-IA of the Income Tax Act, holding that filing the audit report before the completion of assessment fulfilled statutory requirements. The Tribunal overturned the lower authorities' decision, emphasizing the distinction between exemption provisions and deduction clauses as clarified by the Supreme Court. The appellant's timely filing of the audit report entitled them to the deduction, in line with judicial precedents supporting the view that audit reports can be filed before assessment completion without affecting eligibility for deductions.

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Issues involved:
The only issue in this appeal is regarding the disallowance of the claim of deduction under section 80-IA of the Income Tax Act amounting to Rs. 35,58,840, made by the Deputy Commissioner of Income Tax, Centralized Processing Center, Bengaluru, while adjudicating the return of income under section 143(1) of the Act and without jurisdiction.

Analysis:

Issue 1: Disallowance of deduction under section 80-IA
The appellant, engaged in the business of manufacturing and exporting hosiery garments, filed its return of income for the Assessment Year 2017-18 on 31.10.2017. The claim of deduction under section 80-IA amounting to Rs. 35,58,840 was disallowed by the Deputy Commissioner of Income Tax, Centralized Processing Center, Bengaluru, in an intimation dated 23.03.2019, as the mandatory audit report in Form No.10CCB was not filed along with the return of income. The Commissioner of Income Tax (Appeals) upheld this disallowance, citing the absence of the audit report at the time of claiming the deduction. The CIT(A) relied on the judgment of the Hon'ble Rajasthan High Court in CIT vs. Jyoti Jain (2009) 17 DTR (Raj) 286 to support the decision. However, the appellant argued that the audit report was filed later, on 13.11.2017, albeit after the return filing date. The appellant cited the decision of the Hon'ble Supreme Court in CIT v. G.M. Knitting Industries (P.) Ltd. [2015] 376 ITR 456 (SC) to support their claim that filing the necessary certificate before the final assessment entitles them to the deduction. The appellant also referred to the decision of the Hon'ble Madras High Court in CIT v. AKS Alloys (P.) Ltd. [2012] 18 taxmann.com 25 (Mad.) which allowed the deduction even if the audit report was filed before the assessment was completed.

Issue 2: Interpretation of the law regarding filing of audit reports
The appellant argued that the filing of the audit report in Form No.10CCB is not mandatory at the time of filing the return of income but can be done before the assessment is completed. They cited various judicial precedents, including decisions by the Karnataka High Court, Delhi High Court, Bombay High Court, and others, to support their stance that filing the audit report before the assessment is finalized fulfills the statutory requirements. The appellant's counsel emphasized that the law does not mandate filing the audit report along with the return of income, as it is a directory requirement and not mandatory. The appellant's reliance on these precedents highlighted the consistent view across various High Courts that the audit report can be filed before the assessment without affecting the eligibility for deductions.

Conclusion:
The Appellate Tribunal, after considering the arguments and precedents cited by both parties, held that the appellant, having filed the audit report in Form No.10CCB on 13.11.2017 before the completion of the assessment on 23.03.2019, was entitled to claim the deduction under section 80-IA of the Act. The Tribunal set aside the orders of the lower authorities and allowed the appellant's claim for deduction. The decision was based on the distinction between exemption provisions and deduction clauses of the Act, as clarified by the Hon'ble Supreme Court in the case of PCIT v. M/s. Wipro Ltd., highlighting that the claim for deduction under section 80-IA was justified in this case.

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