DCIT, CIRCLE - 19(1), DELHI V. PRESUDE LIFESCIENCES PVT. LTD., DELHI

ITA 3421/DEL/2024

AI Insights

The case revolves around the appeal by the Revenue against the order of the CIT(A), Mysore, which had allowed the deduction claimed by Presude Lifesciences P. Ltd. under section 80-IAC for the assessment year 2022-23. The Revenue's primary contention was the disallowance of a deduction of Rs.6,52,77,987 due to the late filing of the audit report in Form 10CCB, which was filed six days after the due date. The CIT(A) found that the delay was not due to the assessee but rather the Department's delayed approval for claiming the deduction. The Tribunal supported the CIT(A)'s decision, emphasizing that the requirement to file the audit report was a directory condition and not mandatory, and that substantial compliance was achieved.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633120 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2022-2023
• Other Referred Cases: CIT Vs. Panama Chemicals Works, CIT Vs. Panama Chemicals Works in [2007] 165 Taxman 135 (Madhya Pradesh)/[2007] 292 ITR 147 (Madhya Pradesh), Hon'ble HIGH COURT OF GUJARAT in [1993] 201 ITR 325 (Gujarat), Hon'ble HIGH COURT OF BOMBAY in [1994] 75 Taxman 93 (Bombay)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI AGARWAL
• Assessee Lawyers: MANINDER KAUR

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, NEW DELHI ]BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER ITA No.3421/Del/2024 Assessment Year : 2022-23 DCIT, Cir.19(1) Delhi. Vs. Presude Lifesciences P. Ltd. Plot No.RZ-6 (B-6) Upper Ground Floor OM Vihar, Uttam Nagar West Delhi Delhi 110 059. PAN : AAJCP 7759 d अपीलाथ\u0007 अपीलाथ\u0007 अपीलाथ\u0007 अपीलाथ\u0007/ (Appellant) \b य \b य \b य \b यथ\u0007 थ\u0007 थ\u0007 थ\u0007/(Respondent) Revenue by : Ms. Nidhi Agarwal, CA Assesseeby : Dr. Maninder Kaur, Sr.DR सुनवाई क तारीख/Date of Hearing : 09/04/2025 घोषणा क तारीख /Date of Pronouncement: 09/04/2025 आदेश आदेश आदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above appeal has been filed by the Revenue against the order passed by the ld. Commissioner of Income Tax (Appeals), Mysore dated 27,95,2924 under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), for the assessment year 2022-23. 2. The only ground raised by the Revenue reads as under: “Whether on the facts and circumstances of the case and in law, the ld.CIT(A) is correct in deleting the addition on disallowance of deduction u/s.80IAC of Rs.6,52,77,987/- made by the CPC, Bangalore on account of non-filing of audit report in Form 10CCB within due date” ITA No.3421/DEL/2024 2 3. The solitary issue in the present appeal relates to the claim of deduction of profits under section 80-IAC, which was denied to the assessee in theintimation made under section 143(1) of the Act for the reason that the report required to be furnished by the assessee in form 10CCB was delayed. 4. The assessee is a start-up company and in terms of provisions of section 80-IAC of the Act, it was eligible to claim deduction of its entire profits. During the impugned year, it had claimed deduction of its profits to the tune of Rs.6,52,77,986/-. One of the requirements for claiming deduction was thatthe assessee was required to file a report of an Accountant in Form No.10CCBwhich report was tobe filed within a prescribed period of time i.e. 30 days before the due date of filing of the return of income. The assessee filed the said report by delay of six days, and for this reason the assessee’s claim of deduction of Rs.6.52 crores was disallowed, and added to its income in the intimation made under section 143(1) of the Act. 5. The assessee carried the matter in appeal, who deleted the disallowance noting that – i) the delay in filing Form No.10CCB was not attributable to the assessee and was on account of delay by the Department itself in granting approval to the assessee to claim deduction under section 80-IAC of the Act; ii)thatthere was no doubt about the eligibility of the claim of the assessee to deduction of its profit under section 80IAC of the Act, being approved for claiming such deduction by the Department itself; ITA No.3421/DEL/2024 3 iii) Delay in any case wasof only six days, and noting that Courts in a number of decisions, have held the requirement of filing reports for claiming deduction to be a directory condition, and not a mandatory condition, and that if the report is filed during assessment proceedings, though belatedly, the assessee should not be denied this otherwise eligible for claim of deduction. The relevant finding of the ld.CIT(A) in this regard at para 8.1 to 8.4 of the impugned order is as under: 8.1. Having heard the appellant and having gone through the material on record,the only question which falls for consideration is whether to allow the deduction claimed as per the Return of Income since the company has already obtained the necessary approvals to claim the same. Before adjudicating the appeal matter, it is pertinent to discuss the provisions of the section 80-IAC of the Act. The relevant portion of the section 80-IAC is reproduced as under: “80-IAC. Special provision in respect of specified business (1) Where the gross total income of an assessee, being an eligible start-up, includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any three consecutive assessment years out of [ten] years beginning from the year in which the eligible start-up is incorporated. -----” As seen from the above, any company being an eligible start- up can claim deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years. In this case, the appellant being a eligible start-up has obtained the approval as per the provisions of section 80IAC of the Act starting from A.Y. 2022-23. The appellant has submitted that the disallowance of the deduction would cause a greater hardship and have impact on future expansion. ITA No.3421/DEL/2024 4 8.1.1. The section 80IAC has been inserted from 01/04/2017. The government’s intention behind the insertion is to encourage startup business in India. The purpose of the section is as below: i) Section 80-IAC intends to facilitate the growth of startups during their initial phase by providing tax benefits ii) It aims to reduce the evasion of taxes. Consequently, this tax benefit inspires young entrepreneurs to become genuine taxpayers. iii) It came into effect to encourage innovation, use research and development, and foster a dynamic entrepreneurial system in India. iv) It presents section 80-IAC of the Income Tax Act,1961, which offers a tax incentive to domestic companies for endorsing investments in startups and other eligible businesses 8.2. In this regard, it is held that though it is mandatory in nature to furnish the audit report within due date, the substantial compliance is required to be made. In the present case, the appellant had produced the details before the appellate authority. The approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, AO- CPC might be justified in denying the deduction due to late filing of audit report, but the appellant, which is a start-up company which substantially satisfies the conditions for availing such deduction u/s. 80-IAC, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay. 8.3. The reliance is placed on Hon’ble HIGH COURT OF MADHYA PRADESH, INDORE BENCH’s decision in the case of CIT Vs. Panama Chemicals Works in [2007] 165 Taxman 135 (Madhya Pradesh)/[2007] 292 ITR 147 (Madhya Pradesh) dated 29/08/2006, wherein it is held that “when assessee fails to file audit report in Form No. 10CCB along with return and files it subsequently, but before completion of assessment, it will not be fatal to claim of assessee under section 80-I and ITO will have power to accept same if he is satisfied that delay in filing same was for good and sufficient reasons.” In the present case, it is seen that late filing of the audit report was mainly due to delayed approval from the revenue authorities. Moreover, the appellant satisfies all the conditions to claim such deduction. The reliance is also placed on the decisions of Hon’ble HIGH COURT OF GUJARAT in [1993] 201 ITR 325 (Gujarat) and Hon’ble HIGH COURT OF BOMBAY in [1994] 75 Taxman 93 (Bombay), wherein similar issues are dealt with. 8.4. Applying the said principle and respectfully following the case laws referred, the petition is liable to be allowed. Hence, the sole ground of the appeal is allowed. ITA No.3421/DEL/2024 5 6. Before us, the ld.DR was unable to convert neither the factual finding of the ld.CIT(A) that (i) the delay was not attributable to the assessee, but was on account of delayed approval given by the Department to the assessee for claiming deduction under section80-IAC of the Act, and (ii) delay in any case only of six days. Nor was the ld.DR able to distinguish the case laws relied upon by the ld.CIT(A) in support of the proposition of law that requirement of filing necessary reports is only directory condition and not mandatory for claimingthe deduction. The ld.DR was unable to bring to our notice any decision of the jurisdictional High Court holding to the contrary, or for that matter, of the Hon’ble Supreme Court in this regard. 7. In the light of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the disallowance of deduction claimedby the assessee under section 80IAC of the Act amounting to Rs.6,52,77,986/- in the intimation made under section 143(1) of the Act. The ground raised by the Revenue is dismissed. 8. In effect the appeal of the Revenue is dismissed. Order pronounced in the Court on 9th April, 2025 at Delhi. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Delhi, dated 20/06/2024 ITA No.3421/DEL/2024 6 vk* आदेश क\u0007 \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0013 / The Appellant 2. \b\u0014यथ\u0013 / The Respondent. 3. संबंिधत आयकर आयु / Concerned CIT 4. आयकर आयु ) अपील ( / The CIT(A)- 5. िवभागीय \bितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Delhi, 6. गाड\" फाईल /Guard file. आदेशानुसार/ BY ORDER, सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Delhi "