Jaybhole Cold Storage v Pr. CIT — s.35AD(7) imports s.80-IA(7), so a specified business must file the accountant's report, and an Assessing Officer who never asked about it leaves the order open to s.263
ITATHelps departmentNo later treatment found
The Principal Commissioner has revised my client's assessment under section 263 because no accountant's report was filed with the section 35AD claim for its agricultural warehouse. The section itself says nothing about a form. Can the revision stand?
On this Tribunal's view, yes. On 31 July 2024 the ITAT Ahmedabad held that section 35AD(7), which applies section 80A(6) and section 80-IA(7) and (10) to section 35AD in respect of goods, services or assets held for the specified business, carries with it the obligation to furnish the report required by section 80-IA(7); and that an assessee claiming section 35AD is "required under law to furnish requisite form, duly certified by Chartered Accountant in terms of Section 80-IA(7) of the Act". The assessee, a firm operating a warehousing facility for storage of agricultural produce, had claimed Rs 7,75,12,899 under section 35AD for AY 2017-18. The Principal Commissioner revised the assessment under section 263 on the ground that no report in Form No. 10CCB had been filed and that the Assessing Officer had neither called for it nor verified it. The assessee's answer was that Form 10CCB and rule 18BBB make no reference to section 35AD, and that the auditors had certified the deduction in Form 3CD. The Tribunal did not decide whether the filing is mandatory or merely procedural. It rested on the failure to enquire: no specific query about the section 35AD claim had been raised in the assessment, the claim was substantial, and the Assessing Officer had not enquired whether the requisite form had been furnished. On that ground it held that the assessment order was erroneous in so far as it was prejudicial to the interests of the Revenue.
Statutory position — s.35AD(3) and (4): claim s.35AD and you lose s.10AA and every Chapter VI-A 'C' deduction for that business, for that year and every other year
CBDT Circulars & InstructionsCuts both ways
We claimed section 35AD on a hotel and also want a Chapter VI-A deduction on the profits of the same hotel in a later year. The Assessing Officer says we cannot have both. Is that right, and does it affect only the year of the section 35AD claim?
The Assessing Officer is right, and the bar is wider than most people expect. Section 35AD(3) provides that where a deduction under section 35AD is claimed AND ALLOWED in respect of a specified business for any assessment year, no deduction shall be allowed under section 10AA or under Chapter VI-A under the heading "C.—Deductions in respect of certain incomes" in relation to that specified business "for the same or any other assessment year". So one year's section 35AD claim closes off the profit-linked deductions for that business permanently, not merely for that year. Section 35AD(4) is the companion rule and works on the expenditure rather than the profits: no deduction of the expenditure referred to in sub-section (1) is allowed under any other section in any previous year, or under section 35AD itself in any other previous year, if the deduction has been claimed or opted by the assessee and allowed under section 35AD. Section 35AD(3) did not always include section 10AA — those words were added by the Finance (No. 2) Act, 2014 with effect from 1 April 2015, so for AY 2014-15 and earlier the bar reached only Chapter VI-A heading C; and the words "or opted" in sub-section (4) came in with the Finance Act, 2020 (Act 12 of 2020) with effect from 1 April 2020, when the deduction itself became optional.
