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2013 (9) TMI 400 - AT - Income TaxAllowability of deduction u/s 80IB, if the return is not filed u/s 139(1) but u/s 153A The provisions of section 80AC is directory or mandatory - Assessee engaged in the business of developing and building of housing projects approved by local authorities. The assessees have not filed their returns of income for the impugned assessment years within the due dates prescribed under section 139(1) of the Income-tax Act, 1961. Meanwhile, there was a search action under section 132 conducted on the business premises of the assessees on 6-8-2009 and 17-8-2009. In pursuance of the said search carried out under section 132, the Assessing Officer issued notices under section 153A, requiring the assessees to file their returns of income for the period relevant to six assessment years. The notices under section 153A were issued on 26-7-2011 Held that - Returns filed by the assessees under section 153A are to be treated as returns filed under section 139(1) by virtue of the law stated in section 153A(1)(a). As such, the assessees are entitled for the deduction available under section 80IB(1). The rider provided in section 80AC does not apply to the present cases, as the returns filed by the assesees under section 153A have been considered as returns filed under section 139(1) within time. Levy of interest under section 234A Held that - Return filed under section 153A would be deemed to be a return of income under section 139 as per the express language of the provisions of section 153A(1)(a) and therefore the return of income filed under section 153A also is to be processed under section 143(1) and the income determined thereof. These are all consequences of search conducted under section 132 and the issuance of notice under section 153A. Once a recomputation in the assessment order under section 153A is done, the interest chargeable under section 234A would have to be reckoned from the date of determination of income under section 143(1), read with section 153A to the date of the recomputation of income under section 153A, read with section 143(3). This position is in tune with the law stated in section 234A(3). Levy of interest u/s 234B of the Income Tax Act Held that - Interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 153A, read with section 143 and therefore the period of charge should be from the date of determination of the income under section 143(1), read with section 153A to the determination of increased total income under section 153A, read with section 143(3).
Issues Involved:
1. Deduction under section 80IB(10) of the Income-tax Act. 2. Compliance with section 80AC of the Income-tax Act. 3. Validity of returns filed under section 153A as returns filed under section 139(1). 4. Levy of interest under section 234A. 5. Levy of interest under section 234B. 6. Allocation of administrative expenses. Detailed Analysis: 1. Deduction under section 80IB(10): The assessees claimed deductions under section 80IB(10) for profits derived from developing and building housing projects. The Assessing Officer denied these claims based on non-compliance with section 80AC, which mandates filing returns on or before the due date specified under section 139(1). The Commissioner of Income-tax(Appeals) (CIT(A)) found that the assessees met all mandatory conditions of section 80IB(10) except for timely filing under section 139(1). The CIT(A) ruled that section 80AC is directory, not mandatory, citing the doctrine of substantial compliance and similar provisions in other sections. The CIT(A) relied on various judicial decisions, including those of the Income-tax Appellate Tribunal (ITAT) and the Delhi High Court, to support this view. 2. Compliance with section 80AC: The CIT(A) determined that section 80AC, which requires timely filing of returns to claim deductions under sections like 80IB, is directory. However, the ITAT Rajkot Special Bench in Saffire Garments vs. ITO held that the requirement is mandatory. The ITAT Chennai, bound by this decision, ruled that timely filing under section 139(1) is essential for claiming deductions under section 80IB(10). 3. Validity of returns filed under section 153A: The CIT(A) held that returns filed under section 153A should be treated as returns filed under section 139(1). The ITAT upheld this view, stating that section 153A(1)(a) treats returns filed in response to a notice under section 153A as returns required under section 139. The ITAT cited decisions from the Mumbai Benches in Mr. Faisal Abbas vs. DCIT and DCIT vs. M/s. Eversmile Construction Co. Pvt. Ltd., which supported treating section 153A returns as equivalent to section 139(1) returns. Consequently, the assessees were entitled to claim deductions under section 80IB(10). 4. Levy of interest under section 234A: The Revenue contended that interest under section 234A should be charged from the due date specified under section 139(1). The CIT(A) directed that interest should be charged from the expiry of the notice period under section 153A. The ITAT upheld the CIT(A)'s decision, aligning with the jurisdictional Tribunal's ruling in Dr. V. Jayakumar vs. ACIT, which stated that interest under section 234A is chargeable from the notice period expiry to the assessment completion date. 5. Levy of interest under section 234B: The Revenue argued that interest under section 234B should be levied from the date of determination under section 143(1) to the assessment under section 153A. The CIT(A) directed that interest should be charged from the determination under section 143(1), read with section 153A, to the assessment under section 153A, read with section 143(3). The ITAT upheld this view, reasoning that interest should be levied on additional tax from the enhanced income determined under section 153A. 6. Allocation of administrative expenses: The Revenue contended that the allocation of administrative expenses between 80IB and non-80IB units was without basis. The CIT(A) found that the assessees had already accounted for direct and indirect expenses, including administrative expenses, in computing profits under section 80IB(10). The ITAT upheld the CIT(A)'s decision, noting that the assessees had appropriately allocated expenses. Conclusion: The ITAT partly allowed the Revenue's appeals, ruling that timely filing under section 139(1) is mandatory for claiming deductions under section 80IB(10). However, it upheld the CIT(A)'s decision that returns filed under section 153A are equivalent to those filed under section 139(1), thus allowing the assessees to claim deductions. The ITAT also upheld the CIT(A)'s decisions on the levy of interest under sections 234A and 234B and the allocation of administrative expenses.
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