2022 (10) TMI 117 - AT - Income Tax

Deduction u/s 10AA - Disallowance for the reason that the assessee had filed return of income belatedly and not within the time limit prescribed u/s 139(1) - AO has disallowed the claim of deduction u/s 10AA for the solitary reason that the return of income was not filed within the specified due date u/s 139(1) - HELD THAT - Hon ble High Court of Delhi has applied this doctrine of interpretation of Scott R.Bayman v. Commissioner of Income-tax, Delhi 2012 (8) TMI 646 - DELHI HIGH COURT and referred to the above mentioned judgment of the Hon ble Apex Court. When the Legislature has omitted such a restriction in section 10AA in its wisdom, it is not for the A.O. nor the CIT(A) to prescribe such a conditionality and impose it on an assessee. Therefore, the denial of the exemption on the ground of not filing the return of income within the specified due date u/s 139(1) of the I.T.Act is not legally correct. Since the A.O. had disallowed the claim of deduction u/s 10AA of the I.T.Act, at threshold for reason that the assessee has not filed the return of income u/s 139(1) we are of the view that the matter needs to be examined whether the assessee has complied with any other conditions mandated u/s 10AA - A.O. shall also examine whether the assessee has correctly computed the claim CIT(A) in the impugned order has stated that the assessee has claimed excess deduction u/s 10AA. Deduction u/s 35(1)(i) - expenditure on scientific research - HELD THAT - The details with regard to expenditure claimed u/s 35(1)(i) was disallowed by the A.O. for the reason that the assessee has failed to furnish the details of the claim. The assessee had debited to Profit and Loss account under the 'other expenses . The details of the 'other expenses are placed on record filed by the assessee. However, the bifurcation/schedule of the 'product development expenses has not been provided. The assessee is now claiming the benefit of deduction u/s 37 of the I.T.Act and the details of the said claim is not before the Tribunal. Therefore, in the interest of justice and equity, we are of the view that the matter needs to be examined afresh by the A.O. The assessee shall provide the necessary details of bifurcation and explain the nature of expenditure - It is ordered accordingly. Hence, 2 is allowed for statistical purposes.

Summary

Issues Involved:
1. Deduction under Section 10AA of the Income Tax Act.
2. Deduction under Section 35(1)(i) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deduction under Section 10AA of the Income Tax Act:

The assessee, a company engaged in manufacturing and trading medical equipment, claimed a deduction under Section 10AA amounting to Rs.109,55,99,171 for the assessment year 2013-2014. The return of income was filed belatedly on 22.03.2014, beyond the due date prescribed under Section 139(1). Consequently, the Assessing Officer (AO) disallowed the deduction, a decision upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) reasoned that certain subsections of Sections 10A and 10B, which require timely filing of returns, also apply to Section 10AA.

Upon appeal to the Tribunal, the assessee argued that Section 10AA does not mandate filing the return within the specified due date under Section 139(1) as a condition for claiming the deduction. The Tribunal noted that the restrictive clauses in Sections 10A and 10B were introduced via amendments, but no such clause exists in Section 10AA. The Tribunal concluded that the CIT(A) misinterpreted the provisions and that Section 10AA does not require filing the return within the specified due date under Section 139(1). The Tribunal directed the AO to re-examine the compliance with other conditions under Section 10AA and the correctness of the claimed deduction.

2. Deduction under Section 35(1)(i) of the Income Tax Act:

The assessee claimed a deduction of Rs.6,29,81,289 under Section 35(1)(i) for scientific research expenditure. The AO disallowed the deduction due to the assessee's failure to furnish details of the claim. The CIT(A) upheld the disallowance, stating that the expenditure did not qualify under Section 35(1)(i). The CIT(A) did not address whether the expenditure could be allowed under Section 37 as business expenditure.

The Tribunal observed that the details of the expenditure were not provided and that the assessee now sought deduction under Section 37. The Tribunal remanded the matter to the AO for a fresh examination, directing the assessee to provide necessary details and explain the nature of the expenditure.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, directing a re-examination of the deduction claims under Sections 10AA and 35(1)(i) by the AO. The Tribunal emphasized the need for proper interpretation of statutory provisions and adherence to legislative intent.