2022 (11) TMI 1557 - AT - Income Tax

Deduction u/s. 80IB(10) - no claim for deduction was made in the return of Income neither assessee had not made the claim in the Audit Report also - HELD THAT - As per section 80A(5) of the Act no deduction under Chapter VIA shall be allowed if not claimed in the Return of Income. As per section 80AC No deduction shall be allowed unless the return is filed on or before the due date mentioned in the section 139(1) of the Act for the Assessment year. Thus conjoint reading of section 80A and Section 80AC lays down the primary conditions as under (1) no deduction under Section 80IB shall be allowed if the deduction is not claimed in the return of Income. (2) the return of Income shall be filed on or before the due date mentioned in the Section 139(1) of the Act. Both these conditions need to be satisfied as these are primary conditions. If an assessee satisfies these primary conditions then the AO shall verify eligibility of the assessee from the perspective of conditions mentioned in the respective subsections of Section 80IB. It is an admitted fact that the Assessee had not claimed any deduction u/s. 80IB(10) of the Act in the Return of Income. The said return has been digitally signed by Shankar Pandurang Jagtap Partner of the assessee firm on 30/11/2014. It is also observed that the Auditor in the audit report in form 3CD has not claimed any deduction u/s. 80IB(10) of the Act. The Auditor has merely mentioned Nil in the relevant column. As per section 80A(5) no deduction under Chapter VIA shall be allowed if not claimed in the Return of Income. The filling of form 10CCB is as per Income Tax Rule 18BBB. The provisions of the Income Tax rules cannot override provisions of the Income tax Act. Therefore compliance of Income tax Rules 18BBB cannot be interpreted as compliance of Section 80A(5) of the Income Tax Act. The assessee claimed that it filed another corrected return of Income during the assessment proceedings claiming deduction u/s. 80IB in physical format however the said return is not a valid return. The return should have been filed on or before the due date mentioned in the section 139(1). The said corrected return was filed many years after the due date. Also it was not filed electronically. In the case under consideration it is an admitted fact that no deduction u/s. 80IB(10) was claimed in the return of Income. It is also observed that the Auditor in the Audit report has mentioned deduction claimed under chapter VIA as NIL. Therefore CIT (A) has erred in allowing deduction u/s. 80IB(10) of the act. Therefore we hold that the assessee is not eligible for deduction u/s. 80IB(10) - Revenue s appeal is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the assessee was justified in claiming deduction under section 80IB(10) of the Income Tax Act when no such claim was made in the original return of income filed electronically on time, and whether the claim made during assessment proceedings or in a revised return filed after the due date could be entertained.

(b) Whether the assessee's explanation that the filing of a nil return without claiming deduction was a clerical error holds ground in law.

(c) Whether the Assessing Officer and the Commissioner of Income Tax (Appeals) correctly applied the legal principles and precedents, including the Supreme Court ruling in CIT vs. Goetze India Ltd., which disallows deduction claims not made in the original or revised return filed within time.

(d) Whether the reliance on judicial precedents by the CIT(A) was justified given the factual differences in those cases.

(e) Whether the principle laid down by the Calcutta High Court in Shelcon Properties Pvt. Ltd., that benefits under section 80AC can only be claimed if the return is filed on time, applies analogously to this case under section 80IB(10).

(f) Whether the project was completed within the prescribed time limit to qualify for deduction under section 80IB(10).

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Claim of deduction under section 80IB(10) not made in original return and alleged clerical error

The relevant legal framework includes section 80IB(10) which grants deduction to eligible housing projects, subject to fulfillment of conditions. Sections 80A(5) and 80AC impose mandatory conditions that no deduction under Chapter VI-A shall be allowed unless claimed in the return of income filed on or before the due date under section 139(1).

The Tribunal noted that the assessee filed a nil return electronically on 30/11/2014 for AY 2014-15, showing nil income and no claim for deduction under section 80IB(10). The audit report also recorded "Nil" in the relevant column for deductions under Chapter VI-A. The Form 10CCB, which certifies the claim, was uploaded but the date column was blank, and the form alone does not constitute a valid claim in the return.

The Assessing Officer denied the deduction on the ground that the claim was not made in the return or audit report, and the revised return filed during assessment proceedings was not valid as it was filed after the due date and not electronically.

The CIT(A) allowed the claim relying on the fact that the Form 10CCB was uploaded on time, the deduction had been allowed in earlier years for the same project, and the assessee paid the minimum alternate tax (MAT) with interest subsequently. The CIT(A) treated the nil return as a clerical error and held that no prejudice was caused to the Revenue since taxes were paid eventually.

The Revenue challenged this, relying on the Supreme Court decision in CIT vs. Goetze India Ltd., which held that deduction claims not made in the original or revised return filed within time cannot be entertained by the Assessing Officer. The Revenue also relied on the Hon'ble Jurisdictional High Court decision in EBR Enterprises v. Union of India, which upheld the strict application of sections 80A(5) and 80AC, disallowing deductions not claimed in the return filed on or before the due date.

The Tribunal analyzed the statutory provisions and judicial precedents and held that sections 80A(5) and 80AC impose mandatory conditions that cannot be bypassed by subsequent filing or claims during assessment. The Tribunal emphasized that the Form 10CCB and audit report cannot substitute the statutory requirement of claiming deduction in the return of income filed on or before the due date.

The Tribunal rejected the assessee's plea of clerical error as unsubstantiated, noting the absence of affidavit or evidence from the clerk and the auditor's certification of "Nil" deduction. The Tribunal also held that the CIT(A) erred in allowing the deduction on these grounds, as the law requires strict compliance with the claim requirements.

Issue (c) and (d): Application of Supreme Court and other judicial precedents

The Tribunal referred to the Supreme Court decision in CIT vs. Goetze India Ltd., which prohibits allowance of deductions not claimed in the return or revised return filed within time. The Tribunal also considered the Hon'ble High Court of Bombay's ruling in EBR Enterprises, which reiterated that section 80A(5) is a statutory interdict preventing allowance of deductions not claimed in the return.

The Tribunal distinguished the CIT(A)'s reliance on other judicial pronouncements where facts differed, emphasizing that the statutory provisions under Chapter VI-A require strict adherence to the claim in the return. The Tribunal rejected the argument that the CIT(A) could rely on discretionary powers or revisional powers to allow the deduction, as section 80A(5) expressly bars such claims if not made in the return.

Issue (e): Applicability of Shelcon Properties Pvt. Ltd. principle regarding timely filing of return

The Tribunal noted the Calcutta High Court's ruling in Shelcon Properties Pvt. Ltd. that benefits under section 80AC can only be claimed if the return is filed on time. The Tribunal found this principle applicable by analogy to section 80IB(10), as both sections are part of Chapter VI-A and subject to the claim conditions under section 80A(5) and 80AC.

The Tribunal held that since the assessee's return was filed on time but did not claim deduction, and the revised return was filed late, the deduction claim cannot be entertained.

Issue (f): Completion of the project within prescribed time

The Assessing Officer, without prejudice, disallowed the deduction on the ground that the project was not completed within the stipulated period as certified by a Government Registered Valuer. The Tribunal, having held that the deduction claim is not allowable due to non-compliance with claim requirements, declined to examine the issue of project completion.

3. SIGNIFICANT HOLDINGS

"As per section 80A(5) of the Act, no deduction under Chapter VIA shall be allowed if not claimed in the Return of Income. As per section 80AC no deduction shall be allowed unless the return is filed on or before the due date mentioned in section 139(1) of the Act. Thus conjoint reading of section 80A and Section 80AC lays down the primary conditions as under: (1) no deduction under Section 80IB shall be allowed if the deduction is not claimed in the return of Income; (2) the return of Income shall be filed on or before the due date mentioned in section 139(1) of the Act."

"The filling of form 10CCB is as per Income Tax Rule 18BBB. The provisions of the Income Tax rules cannot override provisions of the Income Tax Act. Therefore, compliance of Income Tax Rules 18BBB cannot be interpreted as compliance of Section 80A(5) of the Income Tax Act."

"The Hon'ble Supreme Court has held that in case of exemption provisions the rule of strict interpretation shall be applied and in case of any ambiguity the benefit must go to Revenue."

"It is an admitted fact that no deduction u/s. 80IB(10) was claimed in the return of Income. It is also observed that the Auditor in the Audit report has mentioned deduction claimed under chapter VIA as NIL. Therefore, we are of the opinion that the Ld.CIT (A) has erred in allowing deduction u/s. 80IB(10) of the act. Therefore, we hold that the assessee is not eligible for deduction u/s. 80IB(10) of the Act as assessee has not claimed it in the return of Income."

"Since, we have already held that the assessee is not eligible for deduction u/s. 80IB(10) of the Act, we do not wish to examine the issue of date of completion of the project."

In conclusion, the Tribunal allowed the Revenue's appeal and held that the assessee is not eligible for deduction under section 80IB(10) of the Income Tax Act as the claim was not made in the return of income filed on or before the due date, and subsequent claims or corrections cannot cure this defect. The Tribunal emphasized the mandatory nature of sections 80A(5) and 80AC and the principle of strict interpretation of exemption provisions in favor of the Revenue.