2022 (10) TMI 117

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....diture deductible under section 37 of the Act as business expenses of the R&D, Product Development Division. 3. The appellant prays leave to add, alter, amend or delete any of the grounds taken at the time of hearing." We shall adjudicate the above grounds as under: Deduction u/s 10AA of the I.T.Act. 3. The assessee is a company engaged in the business of manufacturing and trading of medical equipments. For the assessment year 2013-2014, the return of income was filed by declaring income of Rs.118,39,63,780 after claiming deduction u/s 10AA of the I.T.Act amounting to Rs.109,55,99,171. The assessment was selected for scrutiny and assessment u/s 143(3) of the I.T.Act was completed vide order dated 31.03.2016. In the said assessment order, the assessee's claim of deduction u/s 10AA of the I.T.Act was disallowed for the reason that the assessee had filed return of income belatedly on 22.03.2014 and not within the time limit prescribed u/s 139(1) of the I.T.Act. 4. Aggrieved, the assessee filed an appeal before the first appellate authority. The CIT(A) confirmed the view taken by the A.O. The relevant finding of the CIT(A) in this regard reads as follows:- ....

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....Act.) that the return ought to be filed within the time limited prescribed u/s 139(1) of the I.T.Act. 6. The learned Departmental Representative supported the orders of the AO and the CIT(A). 7. We have heard rival submissions and perused the material on record. The A.O. has disallowed the claim of deduction u/s 10AA of the I.T.Act for the solitary reason that the return of income was not filed within the specified due date u/s 139(1) of the I.T.Act. The disallowance of exemption u/s 10AA of the I.T.Act was sustained by the CIT(A) as per the discussion in paras 6 & 6.1 of the impugned order. The CIT(A) merely affirmed the view of the AO. Under Chapter III of the Income-tax Act, 1961, special provision have been enacted to provide profit linked deductions, viz., sections 10A, 10AA, 10B, 10BA and 10C of the I.T.Act. Such special provisions have also been provided under Chapter VIA of the Income-tax Act, viz., sections 80IA, 80IAB, 80IB, 80IC of the I.T.Act. The Legislature, wherever it deemed necessary, has expressly laid down the pre-condition of filing the return of income within the specified due date u/s 139(1) of the I.T.Act either in the original enactment, or by amending....

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.... (5)62 and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if- (a) for the figures, letters and word "1st April, 2001", the figures, letters and word "1st April, 2006" had been substituted; (b) for the word "undertaking", the words "undertaking, being the Unit" had been substituted." 9. Sub-sections (5) & (6) of section10A of the I.T.Act applicable to the exemption u/s 10AA of the I.T.Act reads as follows:- "(5) The deduction under this section shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, ^59[***] the report of an accountant, as defined in the Explanation below sub-section (2) of section 288 ^60[before the specified date referred to in section 44AB], certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment....

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....ecified due date u/s 139(1) of the I.T.Act as one of the conditions precedent for claiming the deduction. The conditions to be fulfilled in order to claim the exemption are stipulated in sub-section (2) of section 10AA of the I.T.Act. Further, sub-section (4) has stipulated the conditions which ought not to be violated in order that an undertaking is not disentitled from claiming the exemption under the section. It is not the case of the Revenue for disallowing the claim u/s 10AA of the I.T.Act that the assessee has not fulfilled or violated any of the conditions mentioned in sub-sections (2) and (4) of section 10AA of the I.T.Act. 12. The precondition of filing the return before the specified due date u/s 139(1) of the I.T.Act was introduced in the following sections, namely, 10A, 10B, 80IA, 80IAB, 80IB, 80IC, etc., by amending the Law and making / inserting appropriate restrictive clauses in the relevant sections. These amendments are made effective from particular date and in some cases, retrospective effect has been given. That is to say that a conditionality of filing a return within the specified due date u/s 139(1) of the I.T.Act in order to be entitled to a particular de....

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....s deduction u/s 10AA of the I.T.Act]. 15. In the result, ground 1 is allowed for statistical purposes. Deduction u/s 35(1)(i) of the i.T.Act amounting to Rs.6,29,81,289 16. In the assessment completed u/s 143(3) of the I.T.Act, the A.O. had disallowed the claim of deduction u/s 35(1)(i) of the I.T.Act amounting to Rs.6,29,81,289 by observing as under:- "The assessee has claimed deduction u/s 35(1)(i) amounting to Rs.6,29,81,289/-. The assessee was asked to furnish the details of the claim. As the details have not been submitted till date, the deduction claimed u/s 35(1)(i) is hereby disallowed and added back to the income of the assessee company." 17. Aggrieved, the assessee raised this issue before the first appellate authority. Before the CIT(A) it was contended that the A.O. is not justified in presuming that the assessee had not incurred expenditure on scientific research u/s 35(1)(i) of the I.T.Act. It was contended that the nature of business carried on by the assessee being manufacturing and trading of medical equipments, the assessee was continuously required to develop low cost medical equipments, hence, the expenditure was incurred on scientific resea....