Case Law Details
CIT Vs Ramco Cements Limited (Madras High Court)
The Madras High Court dismissed the Revenue’s appeal and upheld the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT), holding that, for the assessment year 2009-10, the requirement under Section 80IA(7) of the Income Tax Act to furnish an audit report along with the return of income was directory and not mandatory. The Court concluded that the statutory requirement stood satisfied if the audit report was furnished before the completion of the assessment proceedings.
The respondent-assessee, engaged in the business of manufacture and sale of cement, filed its return of income for the assessment year 2009-10 on September 28, 2009, declaring a total income of ₹1,58,55,60,958. After processing the return under Section 143(1), the Assessing Officer issued a notice under Section 143(2). During the assessment proceedings, the Assessing Officer sought the audit report of the Chartered Accountant required under Section 80IA in support of the assessee’s claim for deduction relating to its windmill undertaking, including details regarding the purchase of windmills, income derived therefrom, and expenditure incurred. The Assessing Officer ultimately disallowed the deduction claimed under Section 80IA on the ground that the audit report had not been furnished along with the return of income.
Aggrieved by the assessment order dated December 29, 2011, the assessee preferred an appeal before the CIT(A). The CIT(A), by order dated September 3, 2012, held that the requirement under Section 80IA(7) regarding the filing of the audit report along with the return of income was not mandatory but merely directory. It was observed that if the audit report was submitted at any time before the completion of the assessment, the statutory requirement would stand complied with. Consequently, the assessee’s appeal was allowed.
The Revenue challenged this order before the ITAT. However, by order dated June 11, 2013, the Tribunal dismissed the Revenue’s appeal and affirmed the view taken by the CIT(A). The Revenue thereafter approached the Madras High Court, contending that Section 80IA(7) expressly required the assessee to furnish the prescribed audit report along with the return of income and that non-compliance with this requirement disentitled the assessee from claiming the deduction.
The substantial question of law framed by the High Court was whether the Tribunal was correct in holding that Section 80IA(7) was directory and not mandatory when the provision stipulated that the audit report should be filed along with the return of income.
The High Court examined Section 80IA(7) and noted that the provision had been amended by the Finance Act, 2020, with effect from April 1, 2020. Following the amendment, the requirement was that the audit report should be furnished by the specified date referred to in Section 44AB. The Court observed that prior to this amendment, the requirement of filing the audit report along with the return of income was not mandatory but directory in nature. Accordingly, the audit report could be furnished at any time before the framing of the assessment.
Applying this principle to the facts of the case, the Court noted that it was undisputed that the assessee had furnished the audit report during the course of the assessment proceedings relating to assessment year 2009-10. Therefore, the Court held that the assessee had complied with the requirements of Section 80IA(7) and was entitled to the deduction claimed under Section 80IA.
The High Court also referred to the Karnataka High Court’s decision in Sutures India (P) Ltd. v. Commissioner of Income Tax, wherein it had been held that an assessee could claim deduction under Section 80IA even if the audit report was furnished at the appellate stage. Reference was also made to earlier decisions recognising that such procedural requirements could be satisfied during the course of assessment or appellate proceedings.
Consequently, the substantial question of law was answered in favour of the assessee and against the Revenue. The tax case appeal filed by the Revenue was dismissed, and the orders of the CIT(A) and the ITAT were affirmed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This appeal is filed at the instance of the appellant/Revenue against the order dated 11.06.2013 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Chennai, in I.T.A. No. 2265/Mds/2012 relating to the assessment year 2009-2010.
2. The respondent / assessee is engaged in the business of manufacture and sale of cements. They filed its return of income for the assessment year 2009-2010 admitting a total income of Rs.1,58,55,60,958/- on 28.09.2009. After processing the same under Section 143 (1) of the Income Tax Act (in short, “the Act”), notice under Section 143 (2) was issued by the appellant. Upon receipt of the same, the representative of the respondent / assessee appeared for enquiry and produced the required particulars called for by the appellant. Thereafter, the assessing officer passed the assessment order dated 29.12.2011 under section 143 of the Act, inter alia disallowing the claim under section 80IA. Aggrieved by the same, the respondent/assessee preferred an appeal, which was allowed by the CIT(A) by order dated 03.09.2012, on the ground that the the provisions of section 80-IA(7) requiring filing of audit report along with return are not mandatory, but directory and if the audit report is filed at any time before framing of assessment, then requirement of section 801A(7) would be met. Challenging the same, the appellant / Revenue filed an appeal before the ITAT, which, by order dated 11.06.2013, dismissed the same. Therefore, this tax case appeal by the appellant / Revenue.
3. The learned senior standing counsel appearing for the appellant submitted that during the course of hearing, the Assessing Officer required the respondent / assessee to produce the copy of audit report of Chartered Accountant as required under Section 801A evidencing the purchase of windmill, income derived thereon and expenditure incurred. However, the respondent /assessee did not file the same. Therefore, the Assessing Officer rightly disallowed the claim of the assessee under Section 80IA for want of report of the Chartered Accountant. However, the CIT(A) erred in holding that filing of audit report along with the return of income is not mandatory, but directory; and the audit report can be filed at any time before the framing of assessment and if it is filed, then it can be construed that the requirements under Section 80IA(7) would be met and accordingly, allowed the appeal filed by the respondent / assessee, which was also affirmed by the Tribunal. The learned counsel further submitted that section 80IA(7) specifically requires the assessee to produce the report of audit in the prescribed form along with the return of income and hence, it cannot be dispensed with. Thus, according to the learned senior standing counsel submitted that the order of the Tribunal is contrary to the mandatory requirement as indicated in Section 80IA(7) of the Act, which is liable to be set aside.
4. On the other hand, the learned counsel for the respondent / assessee would contend that for claiming deduction under section 80IA, it is not mandatory for the assessee to produce the audit report along with the return of income and it can be furnished at any time before the framing of assessment. In this context, the learned counsel placed reliance on the decision of the Karnataka High Court in Sutures India (P) Ltd. v. Commissioner of Income Tax, Bangalore [2021 (125) com 226 (Karnataka)] wherein it was held that “the assessee is entitled to deduction under Section 80IA of the Act even if the audit report is filed at the appellate stage”. Therefore, the learned counsel submitted that the order of the Tribunal does not warrant any interference by this court.
5. We have heard the learned counsel for both sides and perused the materials placed on record.
6. This Court, by order dated 02.04.2014 admitted the appeal on the basis of the following substantial question of law for consideration:
“Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that provisions of Section 80IA(7) is not mandatory and only directory when Section 80IA(7) clearly stipulates that the report should be filed along with the return of income?”
7. For better appreciation, the provisions of section 80IA(7) is extracted below:
“The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the explanation below sub-section(2) of Section 288, [before the specified date referred to in section 44AB and the assessee furnishes by that date]* the report of such audit in the prescribed form duly signed and verified by such accountant.”
* substituted for “and the assessee furnishes, along with his return of income” by the Finance Act, 2020 with effect from 1-4-2020.
8. Thus, it is crystal clear from the aforesaid provisions that the assessee should furnish the audit report along with his return of income, only pursuant to the amendment by the Finance Act, 2020 with effect from 01.04.2020. Prior to that, the requirement of filing the audit report along with the return of income is not mandatory, but directory and the audit report can be filed at any time before framing of assessment, so as to meet out the requirement of section 80IA(7). It is also settled law that the taxing statute should be read prospectively and not retrospectively. Applying the said legal proposition to the facts of the present case, wherein it is an admitted fact that the respondent / assessee furnished the audit report during the course of assessment relating to the assessment year 2009-10 and they very well complied with the requirement of section 80IA(7) for claiming deduction under section 80IA. Therefore, the CIT(A) allowed the claim of the respondent / assessee, which was also rightly affirmed by the ITAT and the same do not call for any interference at the hands of this Court.
9. At this juncture, it is apposite to refer to the decision of the Karnataka High Court in Sutures India (P) Ltd., v. Commissioner of Income Tax, Bangalore, referred to above by the learned counsel for the respondent / assessee, wherein it was categorically held as under:
“…8. In the backdrop of aforesaid well settled legal position, we may advert to the facts of the case. The Assessee had filed Form No.10CCB of the Act along with written submissions before the Commissioner of Income-tax (Appeals), which was acknowledged by him in the order dated 11-3-2008. A bench of this court in CIT v. Ace Multitaxes Systems (P.) Ltd [2009] 317 ITR 207 (Kar.) has taken a view that assessee is entitled to deduction under Section 80IA of the Act even if the audit report is filed at the appellate stage. Similar view has been taken by Madras High Court in CIT v. A.N.Arunachalam [(1994) 75 Taxman 529 / 208 ITR 481 (Mad)]. Thus, the view taken by the assessing officer with regard to eligibility of the assessee to claim deduction under Section 80IA of the Act was one of the possible views. We are fortified in our aforesaid conclusion in view of the order passed by the Commissioner of Income-tax under Section 263 of the Act. The relevant extract of which reads as under:
“The order u/s.143(3) dated 14-06-2005 is, therefore, modified to the extent that deduction claimed u/s.80IA is withdrawn and for the purpose of computing deduction u/s.80HHC, deduction allowable u/s.80IA has to be reduced from the business profits. Since deductions u/s 80IA is being denied, there will be no change in the computation of deduction u/s.80HHC for the time being. However, in case it is held by the appellate authority that the assessee is entitled to deduction u/s.80IA, the deduction u/s.80HHC will have to be recomputed keeping in mind the provisions of Section 80IA(9).”
10. In such view of the matter, the substantial question of law is decided in favour of the respondent / assessee and against the Revenue. Accordingly, the Tax case Appeal fails and it is dismissed. No costs.
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