Deduction under s.80IAC allowed despite delayed Form 10CCB, timeline held procedural; eligibility remanded to AO

ITAT Delhi held that deduction under s.80IAC cannot be denied solely for not filing Form 10CCB within the due date, treating the timeline as procedural, provided the audit report is furnished before completion of assessment. Relying on SC precedent interpreting s.80IA(7) and considering the Finance Act 2020 amendment, the Tribunal ruled that the assessee met the substantive compliance for claiming deduction. However, as this was the first year of claim and the AO had not examined eligibility or quantum, the matter was remanded to the AO for fresh determination in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether deduction under section 80IAC can be denied solely on the ground that the audit report in Form 10CCB was furnished after the "specified date" under section 44AB but before completion of assessment.

1.2 Whether, after the amendment to section 80IA(7) by the Finance Act, 2020, the requirement of furnishing the audit report by the specified date is a substantive condition affecting eligibility or a procedural requirement as to time of compliance.

1.3 Whether, in the first year of claim under section 80IAC, the matter requires remand to the Assessing Officer for examination of eligibility and quantification of deduction, even if delay in filing Form 10CCB is condoned.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Effect of delayed filing of Form 10CCB and nature of requirement post Finance Act, 2020

Legal framework (as discussed):

2.1 The Court noted that for claiming deduction under section 80IAC, the assessee must comply, inter alia, with section 80IA(7). Section 80IA(7) provides that deduction shall not be admissible unless the accounts of the undertaking are audited by an accountant before the "specified date" referred to in section 44AB and the audit report in the prescribed form is furnished by that date.

2.2 The "specified date" in section 44AB is defined as one month prior to the due date for filing the return under section 139(1). For the relevant assessment year, the specified date was 31.10.2023 and the due date for return filing was 30.11.2023.

2.3 Prior to the amendment by the Finance Act, 2020, the audit report was required to be furnished along with the return of income. Post amendment, the audit report is required to be furnished before the specified date under section 44AB. The Court considered the scope and effect of this change in timing.

2.4 The Court referred to the decision of the Supreme Court in CIT v. GM Knitting Industries (P) Ltd., holding that though it is necessary to file the audit report in Form 10CCB, filing the report before completion of assessment (even if not along with the return) is sufficient compliance for deduction under section 80IB. The Court also relied on the jurisdictional High Court decision in CIT v. Contimeters Electrical (P) Ltd. and coordinate bench decisions including Sanjay Kukreja v. ACIT and Kumaon Exports (P) Ltd. v. DCIT, which took the same view on the procedural nature of the timing of filing the report.

Interpretation and reasoning:

2.5 The Court recorded that the assessee's accounts were duly audited, and Form 10CCB was prepared and signed by the auditor by the specified date (31.10.2023). The defect found was only that the assessee did not upload/furnish the audit report on the portal by that specified date; it was uploaded on 13.12.2023, i.e., after the specified date but before completion of processing/assessment.

2.6 The Court held that the requirement to have the accounts audited and to furnish the audit report in the prescribed form is a mandatory condition for availing deduction under section 80IAC. However, the timing as to when such report is furnished (whether exactly by the specified date or later but before completion of assessment) is procedural in nature.

2.7 The Court reasoned that the amendment by the Finance Act, 2020 only shifts the time-line for furnishing the audit report-from furnishing it "along with the return" to furnishing it "before the specified date" under section 44AB. This alteration of the time of compliance does not convert the timing into a substantive eligibility condition so as to disentitle an otherwise compliant assessee solely for a marginal delay, where the report exists and is furnished before assessment is completed.

2.8 The Court rejected the Department's contention that post-amendment there is no scope to accept audit reports filed after the specified date, holding that the Supreme Court's principle-that filing of the audit report before completion of assessment is sufficient compliance-continues to govern, as the essential requirement is the existence and furnishing of the audit report, while the exact date of filing is procedural.

2.9 The Court emphasized that if an assessee satisfies all substantive conditions under section 80IAC and section 80IA(7), and the audit report in prescribed form, duly signed by the accountant, is in existence by the specified date and is furnished before completion of assessment, deduction cannot be denied at the threshold on the sole ground of delayed electronic filing of Form 10CCB.

Conclusions on Issue 1 & 2:

2.10 Furnishing of the audit report in Form 10CCB is a mandatory requirement for deduction under section 80IAC, but the stipulation that it be filed by the specified date under section 44AB is a procedural requirement.

2.11 Where the audit report is duly signed by the specified date and is furnished electronically after the specified date but before completion of assessment, the conditions of section 80IA(7) are sufficiently complied with.

2.12 Deduction under section 80IAC cannot be denied solely on the ground of delayed filing of Form 10CCB in these circumstances; the question of law is answered in favour of the assessee.

Issue 3: Necessity of remand to examine eligibility and quantum of deduction under section 80IAC

Interpretation and reasoning:

2.13 The Court noted that the relevant assessment year is the first year in which the assessee has claimed deduction under section 80IAC.

2.14 It was observed that the Assessing Officer had not examined either (i) the assessee's substantive eligibility under section 80IAC(1), (3) and (4), or (ii) the correctness and quantum of the deduction claimed, because the claim was rejected at the threshold on the ground of late filing of Form 10CCB.

2.15 Given that the legal impediment relating to delay in furnishing the audit report stood removed by the Court's decision, the factual aspects of eligibility and quantification remained unexamined and required determination by the Assessing Officer.

Conclusions on Issue 3:

2.16 The disallowance of deduction under section 80IAC at the threshold on account of late filing of Form 10CCB is unsustainable.

2.17 The issue of the assessee's eligibility for deduction under section 80IAC and the correct quantum of deduction is remitted to the Assessing Officer for fresh examination.

2.18 The Assessing Officer shall allow the deduction under section 80IAC if, upon such examination, the assessee is found eligible in terms of the statutory provisions, after affording reasonable opportunity of hearing and passing an order in accordance with law.

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