The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restored the deduction under Section 10AA of Income Tax Act,1961 for Assessment Year ( AY ) 2017-18, despite the late submission of Form 56F.
Nachiket Dipak Shah,appellant-assessee, filed the return for AY 2017-18 on November 7, 2017, declaring an income of ₹16,30,680 after claiming a ₹26,81,185 deduction under Section 10AA. He provided IT-enabled services under “Brain Teclabs” within a Kandla SEZ-approved IT/ITES SEZ.
The Centralized Processing Center ( CPC ), disallowed the deduction under Section 143(1) due to the absence of Form 56F, as required under Section 10AA(8) read with Section 10A(5) of the Act. Rectification petitions under Section 154 were also dismissed, leading to a ₹5,32,110 demand.
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The assessee appealed against the rectification order, but the Commissioner of Income Tax (Appeals)[CIT(A)] upheld the disallowance, stating that Form 56F was mandatory for claiming the deduction under Section 10AA of the Act.
The assessee appealed before the tribunal aggrieved by the decision of the CIT(A).
The assessee’s counsel argued that filing Form 56F was procedural, not mandatory. It was submitted before the Section 143(1) order, and the delay should not affect substantive compliance. The counsel relied on several precedents.
In response, the revenue counsel argued that filing Form 56F with the return was mandatory, and non-compliance made the claim invalid. Since the deadline was extended to November 7, 2017, there was enough time to comply. The counsel also requested the matter be sent back to the AO for verification.
The two member bench comprising Suchitra Kamble ( Judicial Member ) and Makarand V.Mahadeokar ( Accountant Member ) noted that the Section 10AA deduction was allowed in AY 2016-17 and cited the Gujarat High Court’s ruling that procedural delays should not override valid claims if documents were submitted before assessment.
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It observed that Form 56F, filed on November 22, 2017, was a necessary certification and was on record before the Section 143(1) intimation on September 24, 2018. Since no further verification was needed, the bench rejected the revenue’s request for remand.
Holding that Section 10AA aimed to promote exports and SEZs, the tribunal found the disallowance unjustified, restored the deduction, and ruled out remand.
As a result the appeal filed by the assessee was allowed.
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