Deduction u/s 80IA cannot be denied merely for non-filing of Form 10CCB along with ITR

The brief facts of the case are that, the appellant is a partnership firm engaged in the business of manufacture and sale of cotton yarn. The appellant had filed its return of income for the assessment year 2017-18 on 24.10.2017, admitting a total income of Rs. 61,23,360/-, after making a claim of deduction u/s. 80IA of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) amounting to Rs. 58,15,804/-. The appellant had also filed tax audit report as required u/s. 44AB of the Act in Form no. 3CB & 3CD on 24.10.2017. However, the report of an Accountant as required u/s. 80IA of the Act, in form no. 10CCB has been electronically filed on 18.05.2018. The return of income filed by the assessee has been processed by the AO, CPC, Bengaluru and issued intimation u/s. 143(1) of the Act on 09.03.2019 and determined total income of Rs. 1,22,86,520/-, by disallowing deduction claimed u/s. 80IA of the Act, for the reason that the assessee did not file Form No. 10CCB along with return of income filed for the relevant assessment year.

The assessee carried the matter in appeal before the first appellant authority and argued that when the return of income has been filed on or before due date prescribed u/s. 139(1) of the Act, then merely for non-filing of Form no. 10CCB along with return of income, deduction claimed u/s. 80IA of the Act cannot be denied. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of certain judicial precedents, including the decision of Hon’ble Supreme Court in the case of Prakash Nath Khanna vs CIT 266 ITR 1 (SC), held that the assessee is not entitled for deduction u/s. 80IA of the Act, for non-filing of audit report in Form no. 10CCB along with return of income filed for the relevant assessment year. Therefore, rejected arguments of the assessee and sustained additions made by the AO towards disallowance of deduction claimed u/s. 80IA of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before the Income Tax Appellant Tribunal.

Counsel for the assessee

The Ld. Counsel for the assessee, referring to the decision of ITAT, Chennai Benches in the case of Aquasub Engineering vs DCIT reported in 2022 (10) TMI 80, ITAT Chennai, submitted that the issue is squarely covered in favour of the assessee, where it has been clearly held that filing of Form no. 10CCB is not mandatory but directory and further, when such audit report has been filed before completion of assessment, then deduction claimed u/s. 80IA of the Act, cannot be denied. He had also relied upon the decision of Hon’ble Madras High Court in the case of CIT vs Ramani Realtors (P) Ltd 2015 (1) TMI 395 – Madras High Court.

Counsel for the Tax Department

The Ld. DR, on the other hand referring to provisions of section 80IA of the Act, and provisions of section 80AC of the Act, submitted that unless the assessee filed return of income on or before due date prescribed u/s. 139(1) of the Act, deduction claimed under Chapter VI A cannot be allowed. Further, return of income filed by the assessee is considered as valid return, if said return is accompanied by audit report as prescribed under the law. Since, the assessee did not file audit report in Form no. 10CCB along with return of income before the due date prescribed under the law, the AO has rightly disallowed deduction claimed u/s. 80IA of the Act and their order should be upheld.

Income Tax Appellant Tribunal

The Tribunal was of the considered view that the AO ought to have considered audit report filed by the assessee in Form no. 10CCB and allow deduction claimed u/s. 80IA of the Act. This legal proposition is supported by the decision of Hon’ble Supreme Court in the case of CIT vs GM Knitting Industries Pvt Ltd., [2015] 376 ITR 456 (SC), where it has been clearly held that even though necessary certificate in Form no. 10CCB along with return of income had not been filed, but same was filed before the final order of assessment was made, the assessee was entitled to claim deduction u/s. 80IA of the Act.

A similar issue had been considered by the Hon’ble Madras High Court in the case of CIT vs Ramani Realtors P Ltd (Supra), where it has been held that filing of audit report is directory in nature, but not mandatory and thus, when such audit report was made available to the Assessing Officer before completion of assessment, the AO ought to have allowed deduction claimed by the assessee.

The ITAT, Chennai Benches in the case of Aquasub Engineering vs DCIT (Supra) had considered an identical issue.

Thus, ITAT directed the AO to allow deduction claimed u/s. 80IA of the Act.

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