2024 (7) TMI 1578 - AT - Income Tax

Denial of Deduction u/s. 10AA - Assessee has not filed the requisite Statutory Form 56F within the time limits as prescribed - HELD THAT - The above condition, in our considered opinion, is directory and not mandatory in nature since filing of requisite form could be said to be procedural requirement and therefore, technical default in filing of the same would not jeopardize the claim of the assessee. It could be seen that the assessee has fulfilled all the other requirements to lay claim on this deduction in this year. In fact, it is the sixth year of claiming of impugned deduction. The objective of requirement of Filing of Form 56F, in our considered opinion, is to enable the revenue to ascertain that the deduction has correctly been claimed by the assessee in accordance with law. The mere technical failure to comply with this condition would not, therefore, result into denial of deduction to the assessee. The assessee has already filed this form on 20-12-2018 as against prescribed date of 31-10-2018. In our considered opinion, the assessee, in the present case, has fulfilled the substantive requirement as well as procedural requirement to lay claim on the impugned deduction. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question in this judgment revolves around whether the assessee's claim for deduction under Section 10AA of the Income Tax Act can be denied due to the late filing of the requisite Form No. 56F, despite the claim being made within the extended due date for filing the return of income.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework involves Section 10AA of the Income Tax Act, which provides for deductions for certain undertakings. The requirement under this section is linked to the filing of Form No. 56F. Precedents considered include the Supreme Court's decisions in Pr. CIT Vs Wipro Ltd., Checkmate Services P. Ltd Vs. CIT, and Britannia Industries Ltd Vs. CIT, which emphasize strict compliance with statutory requirements for claiming deductions.

Court's interpretation and reasoning:

The court interpreted that while the filing of Form No. 56F is a statutory requirement, the failure to file it along with the return of income is a procedural lapse rather than a substantive one. The court emphasized that the assessee had consistently claimed the deduction in previous years and fulfilled all substantive requirements.

Key evidence and findings:

The key evidence was the timing of the filing of Form No. 56F, which was submitted after the return of income but before the issue was raised by the CPC. The court found that the assessee had filed the return within the extended due date and had made the deduction claim in the original return.

Application of law to facts:

The court applied the principle that procedural requirements, such as the timing of filing a form, should not override substantive rights, especially when the procedural lapse does not affect the correctness of the claim.

Treatment of competing arguments:

The court considered the revenue's argument that the late filing of Form No. 56F should result in the denial of the deduction. However, it distinguished the facts of the present case from those in the Wipro decision, where the circumstances were materially different.

Conclusions:

The court concluded that the procedural lapse of late filing of Form No. 56F did not warrant the denial of the deduction under Section 10AA, as the substantive requirements were met and the procedural requirement was not central to the claim.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The objective of requirement of Filing of Form 56F, in our considered opinion, is to enable the revenue to ascertain that the deduction has correctly been claimed by the assessee in accordance with law. The mere technical failure to comply with this condition would not, therefore, result into denial of deduction to the assessee."

Core principles established:

The judgment establishes that procedural requirements should not override substantive rights when the procedural lapse does not affect the correctness of the claim. It emphasizes the need to distinguish between procedural and substantive requirements in tax law.

Final determinations on each issue:

The court upheld the decision of the CIT(A) to allow the deduction under Section 10AA, dismissing the revenue's appeal. It emphasized that the procedural lapse in filing Form No. 56F did not justify the denial of the deduction, given the fulfillment of all substantive requirements.

The appeal was dismissed, and the order was pronounced on 3rd July, 2024.