ITAT Permits Tax Deduction for Filing Audit Reports with Returns U/S 11(1)(a)

The Income Tax Appellate Tribunal (ITAT), Mumbai has permitted the deduction under Section 11(1)(a) of the Income Tax Act, 1961 since there was the subsequent filing of the audit report including the Income Tax Return.

The taxpayer, The Dadabhai Kavasji Tata School Trust is a charitable trust registered with Charity Commissioner, under the Income Tax Act. For the year beneath consideration, the taxpayer has furnished its ITR on a late note dated 30.3.2017. The taxpayer has furnished the audit report in Form 10B itself, including the ITR. As the audit report was filed belatedly beyond the due date prescribed u/s 139(1) of the Income Tax Act, the Assessing Officer denied the deduction claim under section 11 of the Act, being the amount of Rs.7,74,590/- that can be collected under section 11(1)(a) of the Act.

Neville Deboo, the assessee’s attorney, argued that the deduction sought under section 11(1)(a) of the Act is a broad deduction permitted by the Act’s provisions. It was argued that the Act does not specify a deadline for submitting an audit report in Form 10B for the year in question.

The Assessee also asserted, according to the Counsel, that the necessary time restriction for filing Form No. 10, which pertains to revenue accumulation under section 11(2) of the Act, was only added with effect as of 1.4.2016. The deduction sought under Section 11(1)(a) of the Act is not covered by the aforementioned clause.

The Bench, B.R. Baskaran, Accountant Member and Pavan Kumar Gadale, Judicial Member ruled that “In the instant case, we noticed earlier that the assessee has filed audit report in Form No. 10B along with the Income Tax Return filed on 30.3.2017. We noticed that the requirement of filing audit reports before the date prescribed in section 44AB has been brought into the statute only with effect from 1.4.2020, i.e., from AY 2020-21″.

“Accordingly, in the assessment year under consideration, viz., AY 2015-16, the requirement under the Act was to file an audit report along with the Income Tax Return. Accordingly, in our view, the assessee has complied with the conditions prescribed in sec. 12(1)(b) by furnishing an audit report along with the Income Tax Return. Accordingly, we set aside the order passed by learned CIT(A) and direct the Assessing Officer to allow deduction under section 11(1)(a) of the Act”