Delay in filing Form 56F only procedural lapse no ground for denial of deduction u/s 10AA

Delay in filing Form 56F was only a procedural lapse and that cannot be a ground for not granting the deduction claimed under Section 10AA of the Act. 

In a recent judgment, the Madras High Court has upheld that delay in filing Form 56F was only a procedural lapse and that cannot be a ground for not granting the deduction claimed under Section 10AA of the Act.

ABCAUS Case Law Citation:
4600 (2025) (06) abcaus.in HC

In the instant case, the Revenue had challenged the order passed by the ITAT in in allowing the assessee’s claim of deduction under Section 10AA where the assessee had failed to file the statutory Form 56F within the time limit prescribed. The respondent assessee had filed return of income for the relevant Assessment Year which was processed under Section 143(1) of the Act. 

The assessee had claimed deduction under Section 10AA of the Act. However, while processing the return under Section 143(1) of the Act, the deduction claimed by assessee under Section 10AA was disallowed, since the audit report in Form 56F, which is to be filed along with the return, was not filed by assessee. Assessee filed a rectification application under Section 154 of the Act and a rectification order was passed again rejecting the claim of the assessee.

The rectification order was challenged by the assessee before the Commissioner of Income Tax (Appeals) who allowed the appeal and observed that the delay in filing Form 56F was only a procedural lapse and that cannot be a ground for not granting the deduction claimed under Section 10AA of the Act.  The order passed by the CIT(A) was affirmed by the ITAT.

Before the Hon’ble High Court, the Revenue contended that the Tribunal was unjustified in holding that filing of Form 56F was directory in nature by placing reliance on the judgment which is contrary to the direction of the Apex Court while dealing with 10B(8) wherein it was held that the twin conditions of furnishing the declaration to the Assessing Officer in writing and that the same must be furnished before the due date for filing of the return of income under Section 139(1) of the IT Act must be satisfied, whereas assessee failed to do while claiming deduction under Section 10B.

The Hon’ble High Court observed that the assessee had filed Form 56F with a delay of approx. 50 days.  However, Revenue was unable to show any provision which provides that after the due date an assessee is barred from filing Form 56F.  Admittedly, Form 56F was filed and, in effect, the delay in filing had been condoned.

The Hon’ble High Court concurred by the view taken by the ITAT that the facts in the case decided by the Apex Court were different.  In that case, assessee initially made the claim and did not seek to carry forward losses, but during the assessment proceedings, the assessee had taken an altogether different stand and sought withdrawal of the initial deduction claimed in the return of income and sought to carry forward losses.  In the case at hand, the deduction under Section 10AA of the Act had been claimed in the original return of income which was filed within the prescribed time, but Form 56F was filed about 50 days later.

The Hon’ble High Court observed that assessee having duly fulfilled the substantial requirement as well as the procedural requirement, though there is a minor technical breach in fulfillment of the procedural requirement, the CIT(A) as well as the ITAT had opined that the delay in filing Form 56F would not be fatal to the substantive claim of the assessee.   In fact, what also weighed in the mind of the ITAT was that the same claim had been allowed to assessee and this was the sixth assessment year of claiming the amount of deduction.

In the above circumstances, the Hon’ble High Court held that no substantial question of law arose and dismissed the appeal of the Revenue.

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