2023 (2) TMI 386 - AT - Income Tax

Denial of deduction u/s 10AA - non-filing of Audit Report in Form No.56F by an Accountant as required u/s.10AA(8) - assessee contended that filing of Audit Report as required u/s.10AA(8) of the Act, is procedural and directory in nature and thus, for non-filing of said Audit Report, deduction claimed u/s.10AA of the Act, cannot be denied, when other conditions prescribed thereundere are satisfied - HELD THAT - From the plain reading of provisions of Sec.10AA(8) of the Act, it is very clear that deduction shall not be admissible unless, the assessee furnishes the report of the Accountant in the prescribed form along with return of income certifying the deduction has been correctly claimed in accordance with the provisions. Hon ble Supreme Court in the case of Pr.CIT v. Wipro Ltd 2022 (7) TMI 560 - SUPREME COURT had considered an identical issue in light of deduction claimed u/s.10B of the Act, and after considering relevant provisions including provisions of Sec.10B(8) of the Act, very categorically held that filing of Audit Report as required under the law is mandatory in nature, but not directory for claiming any deduction under the provisions. The decision rendered by the Hon ble Supreme Court in the case of Pr.CIT v. Wipro Ltd. 2022 (7) TMI 560 - SUPREME COURT which was rendered with reference to sec.10B(8) of the Act, squarely applicable to the facts and circumstances of the case. The plain language used in sec.10A(5) of the Act, is also clear and unambiguous that the condition of filing Audit Report in Form No.56F along with return of income is mandatory for allowing any deduction. In this case, there is no dispute with regard to the fact that the assessee did not satisfy the mandatory condition prescribed u/s.10AA(8) of the Act r.w.s.10A(5) of the Act. Since, the assessee did not file the Audit Report in Form No.56F as required under the law, in our considered view, the AO has rightly disallowed deduction claimed u/s.10AA of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld the additions made by the AO. Thus the assessee is not entitled for deduction u/s.10AA of the Act, for non-filing of Audit Report in Form No.56F as required u/s.10AA(8) - CIT(A) after considering relevant facts has rightly upheld the additions made by the AO and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee.

Summary

Issues Involved:
1. Denial of deduction under Section 10AA of the Income Tax Act.
2. Procedural vs. mandatory requirement of filing Form 56F along with the return of income.
3. Applicability of the Supreme Court decision in Pr.CIT v. Wipro Ltd. to Section 10AA claims.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 10AA of the Income Tax Act:
The primary issue in both appeals is the denial of deduction under Section 10AA of the Income Tax Act, amounting to Rs.75,71,621 for the assessment year 2016-17. The appellant contended that the National Faceless Appeal Centre (NFAC) erred in confirming the denial of this deduction. The appellant argued that the deduction was previously allowed for other assessment years despite a similar procedural lapse and that the denial in the current year was unsustainable.

2. Procedural vs. Mandatory Requirement of Filing Form 56F:
The appellant argued that filing Form 56F along with the return of income is procedural and not mandatory, except for the first year of the claim. The appellant cited previous years where the deduction was allowed despite the delayed filing of Form 56F. The NFAC, however, held that the filing of the audit report in Form 56F along with the return of income is a mandatory requirement as per Section 10AA(8) of the Act, referencing Section 10A(5), which mandates the submission of the audit report with the return of income. The NFAC relied on the Supreme Court's decision in Pr.CIT v. Wipro Ltd., which emphasized the mandatory nature of such procedural requirements.

3. Applicability of the Supreme Court Decision in Pr.CIT v. Wipro Ltd.:
The appellant contended that the Supreme Court's decision in Pr.CIT v. Wipro Ltd., which dealt with Section 10B(8), should not apply to Section 10AA claims. However, the NFAC and the Tribunal found that the principles laid down in the Wipro case were applicable. The Supreme Court had held that the conditions for filing declarations and reports within specified timelines are mandatory in nature for claiming deductions. The Tribunal upheld this view, stating that the plain language of Section 10A(5), applicable to Section 10AA, clearly mandates the filing of the audit report along with the return of income for the deduction to be admissible.

Conclusion:
The Tribunal concluded that the appellant did not fulfill the mandatory requirement of filing the audit report in Form 56F along with the return of income. Consequently, the deduction under Section 10AA was not admissible. The Tribunal dismissed the appeals for both assessment years 2016-17 and 2019-20, upholding the NFAC's decision and the disallowance made by the Assessing Officer. The Tribunal emphasized the binding nature of the Supreme Court's decision in Pr.CIT v. Wipro Ltd., which mandates strict compliance with procedural requirements for claiming deductions under the Income Tax Act.

Order Pronounced:
The appeals filed by the assessee for the assessment years 2016-17 and 2019-20 were dismissed, and the order was pronounced on the 08th day of February, 2023, in Chennai.