Section 80JJAA Deduction Allowed Despite Late e-Verification of Form 10DA: ITAT Jaipur Clarifies Law

Background and Core Controversy

In Raniwala Jewelers Pvt. Ltd. Vs Asstt. /DCIT (ITAT Jaipur), the Jaipur Bench of the Income Tax Appellate Tribunal examined whether a perfectly valid claim for deduction under Section 80JJAA of the Income Tax Act 1961 could be rejected merely because the prescribed report in Form No. 10DA was digitally verified after the statutory due date, even though it had been uploaded before that date.

The assessee, a company, had:

• Filed its return of income declaring total income of Rs. 10,30,96,000/-
• Claimed deduction of Rs. 1,44,412/- under Section 80JJAA towards additional employee cost
• Got the Chartered Accountant’s report in Form No. 10DA (as mandated by Rule 19AB) uploaded on the e-filing portal on 17.10.2023
• Filed the ITR on 31.10.2023
• Digitally verified Form No. 10DA on 21.12.2023

The Centralized Processing Centre (CPC), while processing the return under Section 143(1) on 27.05.2024, disallowed the entire Section 80JJAA deduction on the ground that the report in Form No. 10DA was not furnished/verified within the due date of filing the return. The Ld. Addl./JCIT (A) – 6, Mumbai, confirmed this adjustment.

The assessee took the matter in further appeal to the Tribunal, contending that the delay in e-verification was a purely procedural lapse and that the substantive condition of obtaining and furnishing the report before processing of the return was fulfilled.

The Jaipur Bench of the ITAT had to decide:

Whether a mere delay in digital verification of Form No. 10DA, despite its timely upload and availability before processing under Section 143(1), is sufficient to deny deduction under Section 80JJAA.

Grounds Raised by the Assessee

The assessee’s appeal essentially rested on the following grounds:

1. Procedural nature of delay

   • The assessee argued that Form No. 10DA was uploaded on 17.10.2023 (before the due date) and only its digital verification on 21.12.2023 was belated.
   • Such delay, according to the assessee, was only procedural and did not affect the substantive eligibility to claim deduction under Section 80JJAA.

2. Deduction disallowed solely on technicality

   • The CPC and the first appellate authority had denied the deduction of Rs. 1,44,412/- only because Form No. 10DA was not digitally verified before the due date, ignoring that:
     • The form was available on the portal
     • It was accepted before processing of the return
   • The assessee contended that such technical non-compliance cannot override the substantive right to deduction.

3. Right to amend grounds

   • The assessee also reserved its right to amend or modify grounds before the hearing, a standard protective ground in appellate proceedings.

Revenue’s Reliance on Supreme Court Decisions

While dismissing the assessee’s first appeal, the Ld. Addl./JCIT (A) relied heavily on two Supreme Court judgments:

• Principal Commissioner of Income-tax vs. Wipro Ltd. [2022] 140 taxmann.com 223 (SC)
• Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company [2018] 95 taxmann.com 327 (SC)

Brief essence of Wipro Ltd.

In Wipro Ltd., the Supreme Court dealt with Section 10B(8) (exemption for 100% EOU) and held:

• To avail benefit under Section 10B(8), two conditions must be strictly met:
  1. A declaration in writing must be furnished to the Assessing Officer
  2. Such declaration must be filed before the due date prescribed under Section 139(1)
• Both conditions were treated as mandatory, and a revised return filed under Section 139(5) after the due date could not cure the delay.
• The Court emphasized literal and strict construction in the context of an exemption provision.

Brief essence of Dilip Kumar & Company

In Dilip Kumar & Company, a Constitution Bench of the Supreme Court laid down that:

• Exemption notifications in taxation statutes must be strictly interpreted.
• The burden is on the assessee to show that it fits squarely within the exemption.
• Any ambiguity in an exemption notification has to be resolved in favour of the Revenue and not the assessee.
• However, for charging provisions, ambiguity is interpreted in favour of the assessee.