Section 80AC – The condition imposed u/s 80AC of the Act is mandatory – Accordingly, upon non-fulfilment of condition of section 80AC, the assessee would be ineligible to claim deduction u/s 80IB(10) of the Act

8 Uma Developers vs.
ITO (Mum.) Members: Saktijit
Dey (J.M.) and N.K. Pradhan (A.M.) ITA No.
2164/Mum/2016 A.Y.: 2012-13 Date of order: 11^th
October, 2019

Counsel for Assessee
/ Revenue: Rajesh S. Shah / Chaudhary Arun Kumar Singh

Section 80AC – The condition imposed u/s 80AC of the Act is mandatory –
Accordingly, upon non-fulfilment of condition of section 80AC, the assessee would be ineligible to
claim deduction u/s 80IB(10) of the Act

FACTS

The assessee, a partnership firm, in its business as builders and
developers undertook construction of a housing project at Akash Ganga Complex,
Ghodbunder Road, Thane. For the assessment year under dispute (2012-13), the
assessee filed its return of income on 31^st March, 2013 declaring
nil income after claiming deduction u/s 80IB(10) of the Act. In the course of
assessment proceedings, the AO while examining the assessee’s claim of
deduction u/s 80IB(10) found that conditions of section 80AC have been
violated, issued show-cause notice requiring the assessee to show cause as to
why the deduction claimed u/s 80IB(10) should not be disallowed. In the said
notice, the AO also alleged several violations of various other conditions prescribed
u/s 80IB(10). The AO also conducted independent inquiry with the Thane
Municipal Corporation. In response, the assessee filed its reply justifying the
claim of deduction u/s 80IB(10). As regards non-compliance with the provisions
of section 80AC, the assessee submitted that the said provision is directory
and not mandatory.

The AO was of the
view that as per section 80AC, for claiming deduction u/s 80IB(10) the assessee
must file its return of income within the due date of filing return of income u/s
139(1). He held that since the assessee had not filed its return within such
due date, as per section 80AC the assessee would not be eligible to claim
deduction u/s 80IB(10). The AO also held that certain conditions of section
80IB(10) have also not been fulfilled by the assessee. The AO rejected the
assessee’s claim of deduction u/s 80IB(10).

Aggrieved, the
assessee preferred an appeal to the CIT(A) who was of the view that due to
non-compliance with the provisions of section 80AC, the assessee is not eligible
to claim deduction u/s 80IB(10). Since he upheld the disallowance, he did not
venture into other issues relating to non-fulfilment of conditions of section
80IB(10) itself.

Aggrieved, the
assessee preferred an appeal to the Tribunal.

HELD

The Tribunal
observed that the issue before it lies in a very narrow compass, viz., whether
the condition imposed u/s 80AC is mandatory and, if so, whether on
non-fulfilment of the said condition, the assessee would be ineligible to claim
deduction u/s 80IB(10).

It held that on a
reading of section 80AC of the Act, the impression one gets is that the
language used is plain and simple and leaves no room for any doubt or
ambiguity. Therefore, the provision has to be interpreted on the touchstone of
the ratio laid down in the Constitution Bench decision of the Hon’ble
Supreme Court in the case of Commissioner of Customs (Import) vs. Dilip
Kumar & Co. & Ors., C.A. No. 3327/2007, dated 30^th July,
2018.

Having discussed
the ratio of this decision (Supra), the Tribunal held that
applying the principle laid down in the aforesaid decision of the Supreme Court
to the facts of the present case, it is quite clear that as per the provision
of section 80AC, which is very clear and unambiguous in its expression, for
claiming deduction u/s 80IB(10) it is a mandatory requirement that the assessee
must file its return of income within the due date prescribed u/s 139(1),
notwithstanding the fact whether or not the assessee has actually claimed
deduction in the said return of income. Once the return of income is filed
within the due date prescribed u/s 139(1), even without claiming deduction
under the specified provisions, the assessee can claim it subsequently either
in a revised return filed u/s 139(5) or by filing a revised computation during
the assessment proceeding. In that situation, the condition of section 80AC
would stand complied. The words used in section 80AC of the Act being plain and
simple, leave no room for a different interpretation.

Therefore, as per
the ratio laid down by the Supreme Court in the decision cited (Supra),
the provision contained in section 80AC has to be construed strictly as per the
language used therein. Otherwise, the very purpose of enacting the provision
would be defeated and the provision would be rendered otiose.

The Tribunal noted
that –

(i)    The Pune Bench of the Tribunal in the case of
Anand Shelters and Developers supports the
condition of the AR that the provision of section 80AC is directory. It
observed that the foundation of this decision is the decision of the Andhra
Pradesh High Court in ITO vs. S. Venkataiah, ITA No. 114/2013, dated 26^th
June, 2013, as well as some other decisions of the Tribunal;

(ii)    The Calcutta High Court in the case of CIT
vs. Shelcon Properties Private Limited [(2015) 370 ITR 305 (Cal.)] and
the Uttarakhand High Court in Umeshchandra Dalakot [ITA No. 07/2012,
dated 27^th August, 2012 (Uttarakhand HC)] have clearly and
categorically held that the provision contained in section 80AC is mandatory;

(iii)   The Special Bench of the Tribunal in Saffire
Garments [(2013) 140 ITD 6] while considering pari material
provision contained under the proviso to section 10A(1A) of the Act, has
held that the condition imposed requiring furnishing of return of income within
the due date prescribed u/s 139(1) for availing deduction is mandatory.

The Tribunal
observed that the Delhi High Court in CIT vs. Unitech Ltd., ITA No.
236/2015, dated 5^th October, 2015 while considering a
somewhat similar issue relating to the interpretation of section 80AC has
observed that while the decisions of the Calcutta High Court in Shelcon
Properties Pvt. Ltd. (Supra) and of Uttarakhand High Court in Umeshchandra
Dalakot (Supra) are directly on the issue and support the case of the
Revenue that section 80AC is mandatory, but the Court observed that the
decision of the Andhra Pradesh High Court in S. Venkataiah (Supra) was
one declining to frame a question of law thereby affirming the order of the
Tribunal. Thus, ultimately the Delhi High Court left open the issue whether the
provision of section 80AC is directory or mandatory.

The Tribunal also
held that:

(a)   after the decision of the Supreme Court in Dilip
Kumar & Co. & Ors. (Supra) the legal position has materially
changed and the provisions providing for exemption / deduction have to be
construed strictly in terms of the language used therein, and if there is any
doubt, the benefit should go in favour of the Revenue;

(b)   the Pune Bench of the Tribunal, while deciding
the issue on the basis that if there are two conflicting views on a particular
issue, the view favourable to the assessee has to be taken, did not have the
benefit of the aforesaid judgment of the Supreme Court while rendering its
decision;

(c)   the condition imposed u/s 80AC has to be
fulfilled for claiming deduction u/s 80IB(10). Since the assessee has not
fulfilled the aforesaid condition, the deduction claimed u/s 80IB(10) has been
rightly denied by the Department.

The Tribunal upheld
the order passed by the CIT(A) and dismissed the appeal filed by the assessee.