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May 4, 2021

Fresh claims made by assesse which was not claimed in Original Return to be allowed

Fresh claims made by assesse which was not claimed in Original Return to be allowed

What is section 80JJAA of the Income tax act?

In order to promote employment generation in India the government has introduced section 80JJAA under chapter VIA of the Income tax act, 1961, which allows for deduction in respect of employment of new employees. It is applicable to any assessee having income from business and who care liable for audit under section 44AB of the Income tax act, 1961. The provision is beneficial to newly incorporated startups and businesses. The assessee will not get the deduction if the business is set up by restructuring the existing business or the business is acquired from other person. The assessee will get deduction whether he is opting for new tax regime or old tax regime u/s 115BAC from Previous year 2020-21.

The assessee will get deduction of 30% of the additional employee cost for 3 consecutive years from the year in which the assessee starts incurring the additional employee cost. In order to claim the deduction, the assessee is required to file Form 10DA. Form 10DA is to be filed by a Practicing Chartered Accountant on behalf of the assessee on the Income tax e filing portal before or at the time of filing return of income.

Additional employee cost means total emolument/ salary/ wages paid or payable to additional employees during the previous year. In case of new business additional employee cost shall be emolument paid or payable to employees employed during that period.

Fact and issue of the case

Assessee claims that he is engaged in the business of manufacturing and assembling tractors and tractor components. On 30.10.2007, the assessee filed the return qua AY 2007-2008 wherein it declared its taxable income as Rs.147,83,25,740/-. Concededly, the assessee while filing its return of income had failed to claim the deduction both under Section 80JJAA of the Act and qua prior period expenses. Insofar as the deduction under Section 80JJAA of the Act was concerned, the amount was pegged at Rs.1,07,33,164/- whereas insofar as deduction qua prior period expenses was involved, the amount was quantified at Rs.51,21,024. These deductions were claimed by the assessee before the AO by way of a statement/communication dated 14.12.2009 filed with him. This statement, admittedly, was accompanied by a Chartered Accountant’s report in the prescribed form [i.e., Form 10DA]. Furthermore, the details concerning prior period expenses were also provided by the assessee.

Observation of the Court

A perusal of the aforementioned extract would show that the CIT(A) insofar as the deduction claimed under Section 80JJAA was concerned, not only had before him the chartered accountant’s report in the prescribed form, i.e., Form 10DA but also examined the details concerning the new regular workmen, numbering 543, produced before him. In this context, the CIT(A) examined the details concerning the dates when the said workmen had joined the services, the period, during which they had worked, relatable to the AY in issue, as also the details concerning the bank accounts in which remuneration was remitted.

Based on the aforesaid material, the CIT(A) concluded that the deduction under Section 80JJAA was correctly claimed by the assessee. Likewise, insofar as prior period expenses were concerned, as noticed above, out of a total amount of Rs.51,21,024/- claimed by the assessee, a sum of Rs.24,78,391/- was not allowed, for the reason, that withholding tax had not been deducted by the assessee. It is pertinent to note that the assessee had disclosed the same in its statement/communication dated 14.12.2009 placed before the AO. The other amounts, which did not concern the period in issue, amounting to a cumulative value of Rs.1,02,328/- was also disallowed.

Therefore,  once the Tribunal accepted the view taken by the CIT(A) that it could entertain fresh claims; a view which the CIT(A) has expressed in paragraph 6.6.2 of its order, all that the Tribunal was required to examine was: as to whether the CIT(A) had, scrupulously, verified the material placed before it before allowing deductions claimed by the assessee. The Tribunal, however, instead of examining this aspect of the matter, observed, and in our view, incorrectly, that because an opportunity was not given to the AO to examine the material, therefore, the matter needed to be remanded to the AO for a fresh verification.

Unless the Tribunal would have reached to a conclusion and expressed its clear view, in that respect, as to what was wrong or missing in the examination made by the CIT(A), a remand was not called for. We agree with Mr. Seth’s contention that the CIT(A) in the exercise of its powers under Section 250(4) of the Act was entitled to seek production of documents and/or material to satisfy himself as to whether or not the deductions claimed were sustainable/viable in law. This was, however, a case where the details were placed before the AO, who declined to entertain the claims only on the ground that they did not form part of assessee’s original return and that the assessee had not made a course correction by filing a revised return.

In any event, we are of the view that, if a claim is otherwise sustainable in law, then the appellate authorities are empowered to entertain the same. This view finds reflection in a judgment of the coordinate bench of this Court dated 28.11.2011, passed in ITA No.1233/2011, titled CIT vs. Aspentech India Pvt. Ltd.


The judgment of the Tribunal deserves to be set aside. The questions of law are answered in the favour of the assessee and against the revenue.

Read the full order of High Court from below


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