No deduction under Section 10AA if the assessee did not submit a Tax Audit Report: ITAT
Fact and issue of the case
The brief facts of the case are that the assessee has filed his return of income for the AY 2016-17 on 16.10.2016 declaring total income of Rs.3,69,990/- after claiming deduction of Rs.75,75,621/- u/s.10AA of the Act. The return of income filed by the assessee has been processed u/s.143(1) of the Act, on 24.04.2017 and determined total income of Rs.79,41,610/- and made addition of Rs.75,75,621/- after disallowing deduction claimed u/s.10AA of the Act, for non-filing of Audit Report in Form No.56F by an Accountant as required u/s.10AA(8) of the Act. The assessee carried the matter in appeal before the First Appellate Authority. Before the Ld.CIT(A), the assessee contended that filing of Audit Report as required u/s.10AA(8) of the Act, is procedural and directory in nature and thus, for non-filing of said Audit Report, deduction claimed u/s.10AA of the Act, cannot be denied, when other conditions prescribed thereunder are satisfied.
The Ld.CIT(A) after considering relevant submissions of the assessee and also by following the decision of the Hon’ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., reported in [2022] 140 taxmann.com 223 (SC) held that as per provisions of Sec.10A(5) of the Act, filing of Audit Report in Form No.56F and furnishing said report along with return of income is mandatory in nature, but not directory. Since, the assessee did not file Audit Report in Form No.56F as required u/s.10AA(8) of the Act, the AO has rightly disallowed deduction claimed u/s.10AA of the Act, and thus, rejected arguments of the assessee and sustained additions made towards disallowance of deduction claimed u/s.10AA of the Act.
The facts and issues involved in this appeal are identical to the facts and issues which we had already been considered in ITA No.805/Chny/2022 for the AY 2016-17. The reasons given by us in the preceding paragraphs shall, mutatis mutandis, apply to this appeal, as well. Therefore, for similar reasons, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee for the AY 2019-20 also.
Observation of the court
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The assessee had filed his return of income for the AY 2016-17 on 16.10.2016 and said return was processed u/s.143(1) of the Act, on 24.04.2017. Admittedly, the assessee did not file Audit Report in Form No.56F either along with return of income filed u/s.139(1) of the Act, or before completion of assessment proceedings u/s.143(1) of the Act, which is evident from the fact that as per admission of the assessee, said report in Form No.56F has been filed on 01.03.2022. The provisions of Sec.10AA of the Act, deals with deduction towards total income of newly established units in Special Economic Zones. As per sub-section 8 of 10AA of the Act, the provisions of sub-Sec.(5) of 10A of the Act, shall apply in relation to deduction specified in Sec.10AA(1) of the Act. Sec.10A(5) of the Act, deals with furnishing of Audit Report from an Accountant along with return of income for claiming deduction u/s.10A of the Act, and said section is made applicable to sec.10AA of the Act also. Therefore, from the plain reading of provisions of Sec.10AA(8) of the Act, it is very clear that deduction shall not be admissible unless, the assessee furnishes the report of the Accountant in the prescribed form along with return of income certifying the deduction has been correctly claimed in accordance with the provisions. The Hon’ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., had considered an identical issue in light of deduction claimed u/s.10B of the Act, and after considering relevant provisions including provisions of Sec.10B(8) of the Act, very categorically held that filing of Audit Report as required under the law is mandatory in nature, but not directory for claiming any deduction under the provisions. The relevant findings of the Hon’ble Supreme Court are as under:
We have heard Shri Balbir Singh, learned ASG appearing on behalf of the Revenue and Shri S. Ganesh, learned Senior Advocate appearing on behalf of the assessee at length and perused the material on record.
The short question which is posed for consideration of this Court is, whether, for claiming exemption under Section 10B (8) of the IT Act, the assessee is required to fulfil the twin conditions, namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of Section 10B (8) may not be made applicable to him; and (ii) the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of Section 139 of the IT Act.
The decision rendered by the Hon’ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., which was rendered with reference to sec.10B(8) of the Act, squarely applicable to the facts and circumstances of the case. The plain language used in sec.10A(5) of the Act, is also clear and unambiguous that the condition of filing Audit Report in Form No.56F along with return of income is mandatory for allowing any deduction. In this case, there is no dispute with regard to the fact that the assessee did not satisfy the mandatory condition prescribed u/s.10AA(8) of the Act r.w.s.10A(5) of the Act. Since, the assessee did not file the Audit Report in Form No.56F as required under the law, in our considered view, the AO has rightly disallowed deduction claimed u/s.10AA of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld the additions made by the AO.
As regards the case law relied upon by the assessee in the case of Xavient Software Solutions (India) Pvt. Ltd. v. DCIT, we find that the latest decision of the Hon’ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., prevails overall other decisions rendered prior to the judgment of the Hon’ble Supreme Court and thus, the case law relied upon by the assessee has no application to the facts of the present case and thus, rejected.
In this view of the matter and respectfully following the decision the Hon’ble Supreme Court in the case of Pr.CIT v. Wipro Ltd., we are of the considered view that the assessee is not entitled for deduction u/s.10AA of the Act, for non-filing of Audit Report in Form No.56F as required u/s.10AA(8) of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld the additions made by the AO and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee.
In the result, appeal filed by the assessee for the AY 2016-17 is dismissed.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
You must be logged in to post a comment.