2025 (7) TMI 960 - AT - Income Tax

Denial of deduction u/s 80JJAA - form 10DA has been filed belatedly by a delay of 29 days - CIT(A) confirmed the denial of deduction holding that the requirement of filing Form 10DA before the stipulated time as per law was a mandatory requirement and failure to comply with the same would result in denial of deduction. HELD THAT - Disallowance of deduction claimed by the assessee u/s.80JJAA is highly unjustified and not in accordance with law which has been interpreted by various judicial authorities holding that filing of Form 10DA is not a mandatory requirement affecting the assessee s substantive right of claiming deduction under the said Section. We therefore direct the CPC/AO to allow assessee s claim of deduction u/s.80JJAA - Appeal filed by the assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

- Whether the delay of 29 days in filing Form 10DA, required under Section 80JJAA of the Income Tax Act, 1961, results in denial of the deduction claimed under that section.

- Whether the requirement of filing Form 10DA is mandatory or directory in nature for claiming deduction under Section 80JJAA.

- Whether interest under Sections 234B and 234C of the Income Tax Act can be charged if the deduction under Section 80JJAA is denied due to procedural delay.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of denial of deduction under Section 80JJAA due to belated filing of Form 10DA

Relevant legal framework and precedents: Section 80JJAA of the Income Tax Act provides deduction to assessees for employment generation. The proviso mandates filing of Form 10DA, an audit report, to claim this deduction. The due date for filing Form 10DA was amended to be 30 days prior to filing the income tax return, which in this case was 31st October 2023. The assessee filed Form 10DA on 29th November 2023, 29 days late.

Judicial precedents referred to by the assessee include:

• Co-ordinate Bench of ITAT, Delhi in Sai Computers Ltd. v. ACIT (2023), which held that filing of Form 10DA is directory and delay does not affect substantive right to deduction.
• Hon'ble Madras High Court in Craftsman Automation P. Ltd. v. CIT (2021), which held non-filing of audit report along with return is not mandatory and can be furnished subsequently without loss of deduction.
• Hon'ble Allahabad High Court in PCIT v. Surya Merchants Ltd. (2016), upheld by the Supreme Court, which held that filing of audit report is a directory requirement and not mandatory, and the requirement is satisfied if the audit report is filed before assessment.

Court's interpretation and reasoning: The Tribunal noted that the Commissioner of Income Tax (Appeals) (CIT(A)) dismissed the appeal relying on the mandatory nature of filing Form 10DA before the due date, thereby denying the deduction. The CIT(A) did not distinguish or consider the above judicial precedents submitted by the assessee.

The Tribunal emphasized that the judicial view is consistent in holding the filing of Form 10DA as a procedural/directory requirement rather than a substantive condition for claiming deduction. The delay of 29 days was not intentional or wilful and did not prejudice the revenue's ability to verify the claim.

Key evidence and findings: The assessee had filed Form 10DA before filing the return of income and before processing of intimation under Section 143(1). The deduction was also reflected in the return and audit report (Form 3CA/3CD). The delay was only in filing Form 10DA by 29 days beyond the stipulated deadline.

Application of law to facts: Applying the judicial precedents, the Tribunal held that the substantive right to claim deduction under Section 80JJAA was not lost due to procedural delay in filing Form 10DA. The delay was excusable and did not justify denial of deduction.

Treatment of competing arguments: The revenue representative failed to distinguish the binding precedents or provide contrary authority. The CIT(A)'s strict view was contrary to settled law. The Tribunal rejected the argument that the requirement was mandatory.

Conclusion: The denial of deduction under Section 80JJAA on account of belated filing of Form 10DA was held to be unjustified and contrary to law. The deduction amounting to Rs. 92,60,717/- was to be allowed.

Issue 2: Charging of interest under Sections 234B and 234C due to denial of deduction

Relevant legal framework: Sections 234B and 234C of the Income Tax Act provide for interest on shortfall of advance tax and deferment of advance tax installments respectively.

Court's interpretation and reasoning: The Tribunal observed that since the substantive deduction under Section 80JJAA was allowable, the tax was not payable on that amount. Consequently, no interest under Sections 234B or 234C was payable on account of denial of deduction.

Application of law to facts: The denial of deduction was due to procedural lapse, which the Tribunal found excusable. Therefore, the interest charges premised on denial of deduction were also not justified.

Conclusion: Interest under Sections 234B and 234C was held not payable since the deduction was allowable and the tax was not payable.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The order passed by the Ld. CIT(A) confirming the disallowance of deduction claimed by the assessee u/s.80JJAA of the Act amounting to Rs.92,60,717/- is highly unjustified and not in accordance with law which has been interpreted by various judicial authorities, holding that filing of Form 10DA is not a mandatory requirement affecting the assessee's substantive right of claiming deduction under the said Section."

Core principles established include:

• Filing of Form 10DA under Section 80JJAA is a directory procedural requirement and not a mandatory condition for claiming deduction.
• Delay in filing Form 10DA, if not intentional or prejudicial, does not disentitle the assessee from claiming deduction.
• Substantive rights under the Income Tax Act cannot be denied on account of procedural lapses where the law and judicial precedents hold such requirements as directory.
• Interest under Sections 234B and 234C cannot be charged if the underlying deduction is allowable and tax is not payable.

Final determinations on each issue were:

• The deduction under Section 80JJAA amounting to Rs. 92,60,717/- was allowed despite delay in filing Form 10DA.
• Interest under Sections 234B and 234C was not payable.
• The appeal was allowed in favour of the assessee.