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TMI Blog2002 (9) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... above remarks, the CIT was of the view that the receipts in convertible foreign exchange had not been verified by the auditors and accordingly, condition envisaged by sub-section (6) of section 80HHD was not fulfilled and consequently, the claim of the assessee was not admissible. He, therefore, formed the view that order of Assessing Officer was erroneous and pre-judicial to the interest of revenue. Hence, notice under section 263 was issued to the assessee. 3. In the course of hearing before the CIT also, the auditors' stated that receipts in convertible foreign exchange had not been verified by them and they had relied on the figures certified by the management. However, the auditor's furnished a fresh report dated 27-10-1995, according to which, the claim allowable was Rs. 34,25,995 as against Rs. 35,12,869 claimed by the assessee in the return on the basis of the original audit report dated 30th December, 1991. 4. After hearing the assessee, the CIT was of the view that in order to claim deduction under section 80HHD, the report should contain a certificate to the effect, "that the deduction has been correctly claimed by the assessee". He referred to the concise Oxford Dic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar v. CIT [1981] 132 ITR 619 for the proposition that the claim of the deduction could be allowed for the first time before the CIT under section 264. He relied on the decision of J K High Court in the case of CIT v. Trehan Enterprises [2001] 248 ITR 333 and the decision of the Madras High Court in the case of CIT v. Jayant Patel [2001] 248 ITR 199 for the proposition that such audit report could be filed even before the appellate authorities. 5.1 Proceeding further, it was submitted by him that incentive provisions of the statute should be construed liberally so as to achieve the object of the statute. In support of this proposition, he relied on Supreme Court judgment in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188. It was submitted that principle of strict construction of the statute is applicable only to those taxing provisions which are charging provisions and such interpretation is not applicable to the machinery provisions. Reliance was placed on the Supreme Court judgment in the case of CIT v. National Taj Traders [1980] 121 ITR 535 and in the case of Mangalore Chemicals Fertilisers Ltd. v. Dy. Commissioner of Commercial Taxes AIR 1992 SC 152. It was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmissible". This shows the intention of the legislature to the effect that no deduction can be allowed unless the conditions specified therein are fulfilled. He referred to the decision of the Supreme Court in the case of CIT v. Nagpur Hotel Owners Association [2001] 247 ITR 201 for the proposition that such provisions are to be construed strictly and the exemption/ deduction cannot be allowed if the condition precedent is not fulfilled. He also referred to the decision of jurisdictional High Court in the case of CIT v. Prem Nath Motors (P.) Ltd. [2002] 253 ITR 705 and the decision of Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 for the proposition that the provisions are to be construed strictly where the legislature has used the word "shall". Alternatively, it was contended by her that even presuming that filing of the report was directory, still the first requirement of obtaining auditors' report certifying the correctness of the claim of the assessee is mandatory even according to the decisions cited by the learned counsel for the assessee. Further, all the decisions cited by assessee's counsel suggest that if the assessee fails to file the report al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions of the parties, the material placed before us and the case laws referred to have been considered carefully. The question for consideration is whether the CIT, in exercise of its powers under section 263, was justified in holding the report of the auditor furnished by the assessee along with return was not the report as contemplated by the mandatory provisions of sub-section (6) of section 80HHD and consequently, the assessee was not entitled to deduction under the aforesaid section. The answer to this question centers around the interpretation of such section. 8. It is well settled principle of law that where the provisions of statute are unambiguous then its natural and plain meaning should be adopted and nothing can be added to or subtracted from such provisions. Reference can be made to the judgment of Hon'ble Supreme Court in the case of Smt. Tarulata Shyam. It is also well-settled principle of interpretation that the incentive provisions should be interpreted liberally in the manner so as to achieve the object of the legislation and not in the manner which may defeat such objects. Reference can be made to the judgment of Hon'ble Supreme Court in the case of Bajaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it." In view of the above discussion, we are of the view that the provisions of sub-section (6), though compliance is mandatory, should be liberally construed. If, so construed, then we are of the view that if such report is found to be defective then, considering the principle of natural justice, an opportunity should be afforded to the assessee to remove such defect. 10. It is not the case of the revenue that the report of the auditor was not filed along with the return. Therefore, the provisions of sub-section (6) were substantially complied with. However, the report of the auditors appears to be defective in the sense that auditors had issued the report without properly verifying the record of the assessee but on that account, the claim of the assessee cannot be rejected, which is otherwise allowable, without affording an opportunity to the assessee to rectify the defect. However, in the present case, the report of the auditor furnished by the assessee along with the return was accepted by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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