9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (6) TMI 417 - HC - Income TaxDenial of deduction u/s 10AA - assessee had failed to file the statutory Form 56F within the time limit prescribed by the statute - appeal was allowed by the CIT(A) who observed that the delay in filing Form 56F was only a procedural lapse and that cannot be a ground for not granting the deduction claimed under Section 10AA which was affirmed by the ITAT - HELD THAT - The prescribed date for filing Form 56F was 31.10.2018 and admittedly assessee had filed it on 20.12.2018. Counsel was unable to show any provision which provides that after the due date an assessee is barred from filing Form 56F. Admittedly Form 56F was filed and in effect the delay in filing has been condoned. We agree with the ITAT that the facts in the case of Principal Commissioner of Income Tax v. Wipro Ltd 2022 (7) TMI 560 - SUPREME COURT were different. In that case assessee initially made the claim and did not seek to carry forward losses but during the assessment proceedings the assessee had taken an altogether different stand and sought withdrawal of the initial deduction claimed in the return of income and sought to carry forward losses. In the case at hand the deduction under Section 10AA has been claimed in the original return of income which was filed within the prescribed time but Form 56F was filed about 50 days later. Assessee having duly fulfilled the substantial requirement as well as the procedural requirement though there is a minor technical breach in fulfillment of the procedural requirement CIT(A) as well as the ITAT have opined that the delay in filing Form 56F would not be fatal to the substantive claim of the assessee. In fact what has also weighed in the mind of the ITAT is that the same claim had been allowed to assessee and this was the sixth assessment year of claiming the amount of deduction. No substantial question of law arises.
1. ISSUES PRESENTED and CONSIDERED
The Court considered two core legal questions arising from the appeal under Section 260A of the Income Tax Act, 1961: (a) Whether the Income Tax Appellate Tribunal (ITAT) was justified in allowing the assessee's claim for deduction under Section 10AA of the Act despite the assessee's failure to file the statutory audit report in Form 56F within the prescribed time limit? (b) Whether the ITAT was correct in holding that the filing of Form 56F is directory (i.e., not mandatory) in nature, relying on a recent decision (CIT (E) v. Gujarat Energy Development Agency), contrary to the Supreme Court's directions in Principal Commissioner of Income Tax v. Wipro Limited and its review petition, which emphasized that the twin conditions of furnishing the declaration in writing and before the due date for filing the return under Section 139(1) must be strictly complied with? 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification of Allowing Deduction under Section 10AA Despite Delay in Filing Form 56F Relevant Legal Framework and Precedents: Section 10AA of the Income Tax Act provides for deduction of profits and gains derived from units established in Special Economic Zones (SEZs). A procedural requirement under this section mandates filing of Form 56F (audit report) along with the return of income. The prescribed due date for filing Form 56F is statutory and is generally coupled with the due date for filing the return under Section 139(1). Precedents such as Principal Commissioner of Income Tax v. Wipro Limited have emphasized the importance of strict compliance with procedural requirements, including timely filing of declarations to claim deductions. However, the facts in Wipro involved a change in the assessee's stand during assessment proceedings, which is distinguishable. Court's Interpretation and Reasoning: The Court noted that the assessee had filed the return of income within the prescribed time, claiming the deduction under Section 10AA. The delay pertained only to the filing of Form 56F, which was submitted approximately 50 days after the due date. The Court observed that the assessee had fulfilled the substantive requirements for claiming the deduction and had only committed a procedural lapse by filing Form 56F late. The Court found no statutory provision explicitly barring the filing of Form 56F after the due date. The delay was condoned by the lower authorities, and the CIT(Appeals) and ITAT had held that the delay was a minor technical breach and not fatal to the claim. The Court agreed with this view, emphasizing that the substantial right of the assessee to claim deduction should not be defeated by a procedural lapse, especially when the audit report was eventually filed. Key Evidence and Findings: The assessee's return was filed on 16.10.2018, within the due date, with the deduction claimed. Form 56F was filed on 20.12.2018, after the prescribed date of 31.10.2018. The CIT(A) and ITAT allowed the claim, noting that this was the sixth assessment year for which the deduction was claimed and allowed, indicating consistency in the assessee's position. Application of Law to Facts: The Court applied the principle that procedural requirements should not override substantive rights unless the statute expressly provides otherwise. The late filing of Form 56F was treated as a procedural lapse that did not invalidate the deduction claim, especially since the audit report was ultimately furnished. Treatment of Competing Arguments: The Revenue's argument that the deduction should be disallowed due to non-compliance with the prescribed time limit for filing Form 56F was rejected. The Court distinguished the facts from Wipro Limited, where the assessee had altered its claim during assessment proceedings, unlike the present case where the claim was made timely and consistently. Conclusions: The Court concluded that the Tribunal was justified in allowing the deduction under Section 10AA despite the delayed filing of Form 56F, as the delay was a procedural lapse and did not defeat the substantial claim. Issue 2: Nature of Filing Form 56F - Directory or Mandatory Relevant Legal Framework and Precedents: The question revolved around whether filing Form 56F is mandatory (mandatory compliance is required for claiming deduction) or directory (non-filing or delayed filing does not invalidate the claim). The Supreme Court in Wipro Limited had held that the twin conditions of furnishing the declaration in writing and before the due date for filing the return under Section 139(1) must be satisfied to claim deduction under Section 10B(8), which is analogous to Section 10AA. However, the ITAT relied on a recent decision in CIT (E) v. Gujarat Energy Development Agency, which held that filing of Form 56F is directory in nature. Court's Interpretation and Reasoning: The Court observed that the facts in Wipro Limited were different and involved a change in the assessee's claim during assessment, whereas in the present case, the assessee claimed the deduction in the original return and only delayed filing Form 56F. The Court noted that no provision explicitly bars acceptance of Form 56F after the due date, and the delay was condoned. The Court agreed with the ITAT's approach that the filing of Form 56F is directory, meaning that a procedural lapse in filing does not automatically disentitle the assessee from claiming the deduction, provided the substantive conditions are met. Key Evidence and Findings: The assessee filed Form 56F after the due date but before the assessment was finalized. The CIT(A) and ITAT had condoned the delay and allowed the deduction claim. The Court found no material to hold that the delay was fatal. Application of Law to Facts: The Court applied the principle that procedural requirements which are not expressly made mandatory by statute should be treated as directory. Since the assessee fulfilled the substantive conditions and eventually furnished Form 56F, the delay was not fatal. Treatment of Competing Arguments: The Revenue's reliance on Wipro Limited to argue mandatory compliance was rejected on the ground of factual distinction. The Court upheld the ITAT's reliance on the Gujarat Energy Development Agency decision, which treated the filing as directory. Conclusions: The Court held that the ITAT was justified in treating the filing of Form 56F as directory and allowing the deduction despite the delay. 3. SIGNIFICANT HOLDINGS The Court held: "Assessee having duly fulfilled the substantial requirement as well as the procedural requirement, though
|
