Windmill power business s.80-IA deduction claim despite late Form 10CCB filing, denial barred at s.143(1) processing

The dominant issue was whether a deduction under s.80-IA could be denied at the stage of processing under s.143(1) on the ground that the return/Form 10CCB was not filed within the due date under s.139(1), where the assessee generated power through a windmill. The ITAT held that such a denial is beyond the permissible scope of adjustments under s.143(1) and cannot be made merely due to belated filing, relying on prior ITAT authority. Consequently, the denial of s.80-IA deduction in intimation under s.143(1) was set aside and the assessee's grounds were allowed.

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Issues: (i) Whether deduction under section 80IA can be denied by processing u/s 143(1) on the ground that Form 10CCB/audit report was not filed with the return within the original due date; (ii) Whether filing of the audit report in Form 10CCB is mandatory to claim deduction under section 80IA or merely directory for AY 2019-20.

Issue (i): Whether denial of deduction under section 80IA while processing the return under section 143(1) is permissible for AY 2019-20.

Analysis: The issue concerns scope of adjustments permissible under section 143(1) for AY 2019-20 and applicability of amendments introduced later. The assessment year in question predates the Finance Act, 2021 amendment that enables disallowance of Chapter VI-A deductions by summary adjustment for late filing. Coordinate-bench decisions considered the Explanation to section 143(1) and held that denial of Chapter VI-A deductions on grounds of late filing of return did not fall within prima facie adjustments available under section 143(1) for the year under consideration.

Conclusion: Denial of deduction under section 80IA by processing u/s 143(1) is not justified for AY 2019-20 and the deduction cannot be disallowed by such summary processing.

Issue (ii): Whether the requirement to furnish audit report in Form 10CCB along with the return is mandatory or directory for claiming deduction under section 80IA for AY 2019-20.

Analysis: Relevant statutory text (section 80IA(7) and Explanation 2 to section 139(1)) and CBDT extension orders were considered. Judicial precedents from various High Courts and Tribunals were applied, which uniformly interpret filing of the audit report along with the return as directory; substantial compliance is satisfied if the audit report is filed before framing of assessment. For AY 2019-20, CBDT had extended the due date to 31.10.2019 for assessees requiring audit under Explanation 2 to section 139(1), and the return and Form 10CCB were filed on 05.10.2019.

Conclusion: Filing of the audit report in Form 10CCB along with the return is directory and not mandatory; the assessee satisfied the requirement for AY 2019-20 and is entitled to the deduction under section 80IA.

Final Conclusion: The assessee's grounds challenging denial of deduction under section 80IA and related interest/late fee are allowed; the deduction is to be permitted and consequential interest/fees reversed as applicable.

Ratio Decidendi: For AY 2019-20, denial of Chapter VI-A deduction by adjustments under section 143(1) is not permissible and the requirement to file the audit report in Form 10CCB with the return under section 80IA(7) is directory so long as the report is furnished before completion of assessment; CBDT's extension of due date under Explanation 2 to section 139(1) governs the applicable due date.

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