ITAT Delhi Bench: CPC Cannot Deny Section 10AA Deduction Ignoring CBDT Extension, Amendment Not Retrospective

January 06, 2026 : ITAT Delhi Bench: CPC Cannot Deny Section 10AA Deduction Ignoring CBDT Extension, Amendment Not Retrospective

The Delhi Bench of the Income Tax Appellate Tribunal has ruled that the Centralised Processing Centre (CPC) was not justified in denying deduction under Section 10AA of the Income-tax Act, 1961 by ignoring the time extension granted by the Central Board of Direct Taxes for filing Form 56F and by applying a later statutory amendment to an assessment year to which it did not apply.

The Bench comprising Judicial Member Yogesh Kumar U.S. and Accountant Member S. Rifaur Rahman dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals), holding that MD Equipment Pvt. Ltd. was entitled to deduction under Section 10AA for Assessment Year 2023–24.

The dispute arose after the assessee, engaged in manufacturing and trading electrical enclosures from its unit located at Adani SEZ, Mundra, filed its return of income declaring ₹47.43 lakh under normal provisions and book profits of ₹3.23 crore under Section 115JB. The company claimed a deduction of ₹2.99 crore under Section 10AA after filing Form 56F, the prescribed audit report for SEZ-related deductions.

Due to technical issues on the income-tax portal, the online facility for filing Form 56F was not available before the original due date. Acknowledging this difficulty, the CBDT issued Circular No. 18 of 2023 extending the due date for filing Form 56F up to 31 December 2023. The assessee filed Form 56F on 27 November 2023, within the extended timeline, and had also filed its tax audit report under Section 44AB within the prescribed period.

However, while processing the return under Section 143(1), the CPC disallowed the Section 10AA deduction on two grounds. It treated Form 56F as having been filed belatedly and further denied the claim on the basis that the return of income was not filed within the due date specified under Section 139(1).

On appeal, the Commissioner of Income Tax (Appeals) accepted the assessee’s contention that Form 56F had been filed within the extended period allowed by the CBDT and held that the CPC’s treatment of the form as belated was incorrect. The appellate authority directed the Assessing Officer to verify compliance with the substantive conditions of Section 10AA. Following verification, the Assessing Officer granted appeal effect, recording that all statutory conditions for claiming the deduction were satisfied.

The Revenue challenged this relief before the Tribunal, arguing that Section 143(1)(v) mandated disallowance since Form 56F was allegedly not filed in time and that the CPC’s adjustment was legally valid.

Rejecting these submissions, the Tribunal noted that the CBDT had expressly extended the due date for filing Form 56F to 31 December 2023 and that the assessee had complied with this extension. The CPC’s conclusion that the form was filed late was therefore held to be factually incorrect and legally unsustainable.

On the issue of late filing of the return, the Tribunal observed that the proviso to Section 10AA, making timely filing of return under Section 139(1) a mandatory condition, was inserted by the Finance Act, 2023 with effect from 1 April 2024. The Bench held that this amendment was applicable only from Assessment Year 2024–25 onwards and could not be applied retrospectively to Assessment Year 2023–24.

Relying on earlier coordinate bench decisions, including Arvind Kumar Agarwal v. ITO and Arvind Kumar Agarwal v. Pr. CIT, the Tribunal reiterated that where the Legislature had consciously not imposed a condition of timely filing for earlier years, such a requirement could not be introduced through processing under Section 143(1).

Finding no infirmity in the order of the Commissioner of Income Tax (Appeals), the Tribunal dismissed the Revenue’s appeal and upheld the allowability of deduction under Section 10AA.

Cause Title: DCIT v. MD Equipment Pvt. Ltd.
Case No.: ITA No. 3523/Del/2025
Assessment Year: 2023–24