2005 (10) TMI 44 - HC - Income Tax

Deduction u/s 80HHD - assessee filed the auditor s report at a belated stage - (i) Whether Tribunal was right in holding that the deduction under section 80HHD is allowable where the assessee had failed to file the relevant audit report along its return? (ii) Whether Tribunal was right in holding that the condition stipulated in section 80HHD regarding the filing of the audit report along with the return is not a mandatory condition for the purpose of claiming deduction under section 80HHD? The issue involved in this appeal is whether the audit report can be filed at a belated stage but before completion of assessment and whether it is mandatory to file the audit report along with the return. - it is not in dispute that the assessee filed the auditor s report at a belated stage but before the completion of assessment. As held by the Tribunal the main purpose behind incorporating section 80HHC is to encourage exports outside India to earn foreign exchange for the country and for that purpose the incentive is given to the exporters from income-tax. Hence we hold that the Tribunal was right in holding that the filing of audit report along with the return is not a mandatory condition for the purpose of claiming deduction under section 80HHD

Summary

Issues:
- Whether the audit report can be filed at a belated stage but before completion of assessment.
- Whether it is mandatory to file the audit report along with the return.

Analysis:
The High Court of Madras heard an appeal against the Income-tax Appellate Tribunal's order regarding the deduction under section 80HHD of the Income-tax Act for the assessment year 1989-90. The original assessment allowed a claim under section 80HHD without the required certificate from a chartered accountant. The Assessing Officer reopened the assessment under section 147, disallowing the claim due to the absence of the audit report with the return. The Commissioner of Income-tax (Appeals) upheld the disallowance, leading to an appeal before the Tribunal by the assessee. The Tribunal ruled in favor of the assessee, stating that the audit report could be filed before the assessment was completed. The Revenue appealed the Tribunal's decision, questioning the mandatory nature of filing the audit report with the return for claiming the deduction under section 80HHD.

The High Court referred to a decision by the Punjab and Haryana High Court in a similar case involving a charitable trust, where it was held that filing the audit report along with the return was not mandatory under certain circumstances. The Madras High Court noted that the purpose of section 80HHC was to incentivize exports and earn foreign exchange, and hence, the filing of the audit report along with the return was not a strict requirement for claiming the deduction under section 80HHD. The Court emphasized that the assessee filed the audit report before the completion of assessment, fulfilling the essence of the provision. Therefore, the Court upheld the Tribunal's decision, answering the questions in favor of the assessee and dismissing the appeal by the Revenue.