The CBDT Circular No.14 date1955 has explained that the proceeds should not take benefit of the inexperience of the assessee and the A.O. should assist the tax for requesting of his legitimate allowance or disallow. As stated earlier, deduction under section 10B and 10A of the I.T. Act is pari-materia (not comparable). When claiming under section 10B of the I.T. Act was denied, the assessee made substitute claim under section 10A of the I.T. Act. The A.O did not consider the alternative claim of deduction under section 10A of the I.T. Act. Nor the CIT.
Section 10A of Income Tax Act
In the awareness of justice and equity, the issue of claim of deduction under section 10A of the I.T. Act is returned to the A.O. The A.O. will inspect whether the assessee has fulfilled the circumstances mentioned for requesting deduction under section 10A of the I.T. Act and according to grant deduction. The assessee needs to files an audit report in Form No. 56F to claim the substitute claim of assumption under section 10A of the I.T. Act.
The provision concerning the filing of audit report with the return of income is the only director and not compulsory. The audit statement can be filed moreover during assessment proceeding or the appellate proceeding. In this context, We rely on the judgment of the Honorable Delhi High Court in the case of CIT v. Web Commerce Private Limited reported in (2009) 318 Income tax return 135. Consequently, even if the audit report is not filed in Form No.56F along with the original return, it is not fatal, if the assessee then files the same and gratify all other conditions mentioned for demanding deduction under section 10A of the I.T.Act. It is accordingly ordered.
Judgment of ITAT Cochin bench
The ITAT (Income Tax Appellate Tribunal), Cochin bench has held that the provision concerning the filing of audit reports with the return of income is the only directory and not mandatory under the Income Tax Act, 1961. The return initially filed by the assessee was reviewed for claiming deduction under section 10A of the Income Tax Act[1]. Likewise, for the assessment year 2011-2012, the claim under section 10A of the Income Tax Act was made the first appellate authority, and Form No56F is submitted. The CIT, on the first appeal, held that he could not divert the claim under section 10A, which was not elevated before the Assessing Authority.
Conferring to him, the claim was not originating from the assessment as the restriction to entertain an alternate new application except through filing a revised return applies only to the evaluating authority and not to the appellate authority.
Interpretion of Hearing and Circular
- CBDT Circular No.14 date 1955 has explained that the proceeds should not take benefit of the inexperience of the assessee and the A.O. should assist the tax for requesting of his legitimate allowance or disallow. As stated earlier, deduction under section 10B and 10A of the I.T. Act is pari-materia (not comparable).
- The ITAT (Income Tax Appellate Tribunal), Cochin bench has held that the provision concerning the filing of audit reports with the return of income is the only directory and not mandatory under the Income Tax Act, 1961
The Tribunal after hearing distance both sides practical that the CBDT Circular No.14 dated 11.04.1955 has explained that the revenue should not take advantage of the ignorance of the assessee and the A.O. should assist the taxpayer for demanding of his legitimate allowance or disallow. “As mentioned earlier, deduction under section 10B and 10A of the I.T. Act is Pari Materia.
When claiming under section 10B of the I.T. Act was denied, the assessee made alternative claim under section 10A of the I.T. Act. The A.O did not consider the alternative claim of deduction under section 10A of the I.T. Act nor the CIT. In the concentration of justice and equity, the issue of claim of deduction under section 10A of the Income Tax Act is restored to the A.O.
Conclusion
The A.O. will inspect whether the assessee has satisfied the circumstances stated for claiming deduction under section 10A of the Income Tax Act and accordingly grant conclusion,” the Tribunal said. Permitting the plea of the assessee, the Tribunal held that “the assessee had filed audit report in Form No.56F for claiming the alternative claim of deduction under section 10A of the Income Tax Act. The provision concerning the filing of audit report along with the return of income is the only directory and not required.”
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