When Missing Form 10CCB Doesn’t Kill Your 80IAC Tax Break – ITAT Delhi Rules Technical Lapse Curable
Facts and Issue in the Case
In Eradicatus Infectus Pvt. Ltd vs. DCIT, the issue at the heart of the dispute was whether a start-up company could lose its deduction under Section 80IAC of the Income-tax Act simply because it did not upload Form 10CCB (the audit report) with its income-tax return on time.
Section 80IAC is a special deduction available to DPIIT-recognized start-ups, allowing them to claim 100 % deduction of profits and gains for eligible years. This is a lucrative tax benefit intended to support new businesses.
The appellant in this dispute, a biomedical devices company recognized as a start-up, filed its income-tax return for Assessment Year 2023-24 on time and claimed a deduction of ₹3.56 crore under Section 80IAC. All statutory conditions, including audit of accounts, were satisfied. However, the Central Processing Centre (CPC) disallowed the deduction in the intimation under Section 143(1), on the ground that Form 10CCB – the audit certificate required under the rules – was not uploaded with the original return before the due date.
The key legal issue was this:
🔹 Is the failure to file Form 10CCB with the return a mandatory disqualification for claiming the deduction under Section 80IAC? Or is it simply a technical lapse that can be cured so long as the form is filed before a final assessment order?
The Department of Income-tax argued that since the audit report in Form 10CCB was not filed by the due date, the deduction was not properly claimed and must therefore be denied. The taxpayer countered that it was technically impossible to attach the prescribed form for Section 80IAC claims, that the audit and certification were completed, and that this procedural defect should not prevent a valid claim on substantive grounds.
Observations by the Tribunal
The Income Tax Appellate Tribunal (ITAT), Delhi took a nuanced view of the matter. It emphasized that the core purpose of requiring an audited report is to ensure that the taxpayer genuinely meets all eligibility conditions for claiming the deduction. Where these conditions are satisfied and the audit report exists, the mere failure to attach Form 10CCB with the return on time should not automatically forfeit the benefit.
The Tribunal made several important observations:
Nature of the Requirement:
While the law prescribes furnishing an audit report in Form 10CCB, the Tribunal noted this requirement is procedural and thus “directory” in nature unless explicitly stated as mandatory in the statute. In simpler terms, this means that a failure to comply with the procedure does not automatically negate the taxpayer’s substantive right to the deduction, especially where the requisite audit and supporting records clearly demonstrate eligibility.
No Dispute on Eligibility Conditions:
It was not disputed that the company met all statutory conditions — it was DPIIT-recognized, its accounts were audited by a qualified auditor, and the audit report did certify compliance with relevant conditions. The only lapse was the timing of the file upload for Form 10CCB.
Technical vs. Substantial Compliance:
The Tribunal acknowledged similar judicial pronouncements on related provisions like Section 80IC and Section 80IA, where courts and tax tribunals have held that procedural lapses should not deny substantive benefits if compliance occurs before completion of assessment or the defect can be cured.
Recognising this principle, the ITAT held that the non-furnishing of Form 10CCB at the time of original filing was a mere technical lapse. It remanded the matter to the Assessing Officer with a direction to obtain the Form 10CCB and allow the deduction if conditions are otherwise satisfied.
Applicable Law
To understand the legal backbone of this judgment, it’s important to know how Section 80IAC operates:
What Section 80IAC Says
This provision allows certain start-ups to claim a deduction of profits from their business for specified years if specific conditions are satisfied. These include holding a valid DPIIT recognition and carrying out eligible business activities.
Role of Audit and Form 10CCB
The Act, read with rules framed under it, requires entities claiming this deduction to furnish an audit report from an accountant, certifying compliance with conditions, in Form 10CCB. Traditionally, such forms are expected to accompany the return filed under Section 139(1). Failing this, many CPC systems and Assessing Officers treat the claim as defective.
However, a growing body of jurisprudence has evolved around the idea that procedural requirements like filing of specific forms in a certain manner should not defeat genuine claims — provided the substance of eligibility is present and the taxpayer makes efforts to cure any lapses. Similar reasoning has been adopted in cases under Sections such as 80IA and 80IC.
This trend recognizes that denying a deduction purely on procedural grounds — especially when audit and eligibility are undisputed — goes against the broader objective of tax law, which is to implement parliamentary intent rather than trap taxpayers on technicalities.
Conclusion by the Tribunal
The ITAT Delhi’s decision in Eradicatus Infectus Pvt. Ltd. represents an important shift towards substance over form in tax litigation. The Tribunal concluded that:
- The mere non-attachment of Form 10CCB with the original return of income should not defeat the taxpayer’s claim to a legitimate deduction under Section 80IAC.
- This defect is curable, meaning that if the audit report is produced and filed at an appropriate stage (before assessment or upon remand), the deduction should be granted.
- The Assessing Officer is directed to consider the audit report and allow the deduction on merits, provided all statutory conditions are satisfied.
Key Takeaway:
For taxpayers, especially start-ups claiming Section 80IAC deductions, this case provides assurance that procedural lapses — like delayed uploading of required audit forms — need not result in an automatic denial of tax benefits if the substantive conditions are fulfilled and the lapse can be cured before assessment closure.
Practical Tip:
Tax professionals and assessees should continue to aim for timely compliance, but this judgment reinforces that the law does not intend to penalize on purely technical grounds where the taxpayer genuinely qualifies for the benefit.
