TMI Blog2005 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... GH. JUDGMENT The judgment of the court was delivered by G.S. Singhvi J.- On an application filed by the Commissioner of Income-tax (Appeals), Rohtak, the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi (for short, "the Tribunal"), has referred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified to direct the Assessing Officer to allow deduction under section 80HHC of the Income-tax Act, 1961, to the assessee when the mandatory condition of filing of audit report along with the return of income, for the purpose of deduction under section 80HHC was not satisfied, and when the jurisdictional High Court decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80HHC are not in dispute. It is difficult for us to agree with the contentions of the Department. The Department desires that the assessee should have done a thing which it bona fidely believed was not required to be done. It cannot be disputed that whether cash incentives were taxable or not was indeed a debatable issue and many judicial pronouncements were in favour of the assessee. In view of this judicial scenario regarding the taxability of cash incentives, the assessee was justified in claiming such receipts as exempt. As a result of such claim, the assessee's income was reduced to nil which disentitled it to claim deduction under section 80HHC and hence for bona fide reasons the audit report was not filed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Full Bench interpreted section 32AB(1) and (5) of the Act and held that while sub-section (1) of section 32AB was mandatory, sub-section (5) thereof was not mandatory and the assessee's claim for deduction cannot be rejected only on the ground of non-filing of audit report along with the return. The relevant extracts of that judgment are reproduced below (headnote): "The conditions embodied in sub-section (1) of section 32AB of the Income-tax Act, 1961, the fulfilment of which entitles the assessee to claim deduction on the basis of Investment Deposit Account are mandatory, because the substratum of the claim of deduction is the deposit of the amount in the account maintained by the assessee with the Development Bank or utilisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the phraseology of the provision but also by considering its nature, its design, and the consequences which would follow from construing it one way or the other. The use of the word 'shall' in a statutory provision, though generally taken in a mandatory sense, does not necessarily mean that in every case it shall have that effect, that is to say, unless the words of the statute are punctiliously followed, the proceeding or the outcome of the proceeding would be invalid. On the other hand, it is not always correct to say that where the word "may" has been used, the statute is only permissive or directory in the sense that non-compliance with those provisions will not render the proceedings invalid." Since the provisions of section 80HHC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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