Mandatory Claim in Return of Income for Section 80-JJAA Deductions (Section 80A(5))
The Legal Issue
Whether a deduction under Section 80-JJAA (related to new employment generation) can be allowed if it was not claimed in the original or revised Return of Income (ITR), but was instead raised for the first time during appellate proceedings before the Commissioner (Appeals).
Facts of the Case (A.Y. 2018-19)
The Omission: The assessee, a business entity, failed to claim the deduction under Section 80-JJAA in its Return of Income filed for the Assessment Year 2018-19.
The New Claim: During the course of the appeal before the Commissioner (Appeals), the assessee introduced the claim for the first time, seeking the 30% deduction on additional employee costs.
Revenue’s Objection: The Revenue argued that Section 80A(5) acts as a statutory bar, prohibiting the allowance of any Chapter VIA deduction (under Heading C) unless it is specifically claimed in the ITR.
The Decision
Mandatory Requirement of Section 80A(5): The Tribunal held that Section 80A(5) is a restrictive provision. It explicitly states that no deduction under certain parts of Chapter VIA (which includes Section 80-JJAA under Heading C: Deductions in respect of certain incomes) shall be allowed if the assessee fails to make a claim in the return of income.
Heading ‘C’ Classification: Since Section 80-JJAA falls squarely under the category of “Deductions in respect of certain incomes,” the strict compliance rule of Section 80A(5) applies.
Power of Appellate Authorities: While appellate authorities generally have the power to admit new legal claims, they cannot override a specific statutory prohibition like the one found in Section 80A(5).
Conclusion: The claim was disallowed as it was not part of the ITR. [In favour of Revenue]
Key Takeaways for Tax Compliance
Claim it in the ITR: Unlike some business expenses under Section 37(1), Chapter VIA deductions (like 80-JJAA, 80-IA, 80-P, etc.) must be mentioned in the Return of Income. You cannot “save” them for the assessment or appeal stage.
Revised Return Opportunity: If you miss a deduction in the original return, ensure you file a Revised Return under Section 139(5) before the deadline. Once the window for a revised return closes, Section 80A(5) makes it nearly impossible to claim these specific deductions.
Form 10DA Timing: For Section 80-JJAA, filing the Audit Report in Form 10DA is also mandatory. While some courts are lenient on the timing of the audit report, they are strictly against the total absence of the claim in the ITR itself.
IN THE ITAT MUMBAI BENCH ‘C’
360 One Distribution Services Ltd.
v.
Deputy Commissioner of Income-tax*
SANDEEP SINGH KARHAIL, Judicial Member
and Vikram Singh Yadav, Accountant Member
and Vikram Singh Yadav, Accountant Member
IT APPEAL NO. 5282 (MUM) OF 2025
[Assessment year 2018-19]
[Assessment year 2018-19]
FEBRUARY 20, 2026
Pritesh Mehta for the Appellant. Virabhadra Mahajan, Sr. DR for the Respondent.
ORDER
Sandeep Singh Karhail, Judicial Member.- The assessee has filed the present appeal against the impugned order dated 30.07.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2018-19.
2. In this appeal, the assessee has raised the following grounds: –
“1. On the facts and in the circumstances of the case, necessary direction may be given to the learned assessing officer for granting deduction of Rs.3,06,30,724 u/s. 80JJAA claimed by the appellant.
2. On the facts and circumstances of the case as well as in law, the Learned CIT has erred in passing order u/s. 250, denying the appellant the benefit of deduction 80JJAA.
3. On the facts and circumstances of the case as well as in law, the Learned CIT has erred in passing order u/s. 250 without examining the claim of deduction u/s 80JJAA made by the appellant.
4. On the facts and circumstances of the case as well as in law, the Learned CIT has failed to appreciate that the appellant has substantially complied with all the conditions for availing deduction u/s. 80JJAA.
5. On the facts and circumstances of the case as well as in law, the Learned CIT has failed to appreciate that the benefit of deduction u/s 80JJAA cannot be denied to the appellant on account of mere procedural lapses when the appellant has substantially complied with all the conditions for availing deduction u/s. 80JJAA”
3. The solitary grievance of the assessee is against the denial of deduction claimed under section 80-JJAA of the Act.
4. The brief facts of the case are that the assessee is a public company engaged, inter alia, in the business of distribution of third-party investment products and providing investment advisory services to corporate and high-net-worth individuals. For the assessment year under consideration, the assessee filed its return of income on 31.10.2018, declaring a total income of Rs. 8,72,15,820/- under the normal provisions of the Act and book profit of Rs. 36,54,47,803/- under section 115JB of the Act. The return filed by the assessee was selected for scrutiny through CASS, and notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. The scrutiny proceedings culminated in the order dated 29.01.2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act, accepting the return income under the normal provisions of the Act.
5. In its appeal before the learned CIT(A), the assessee, inter alia, raised the ground claiming deduction under section 80-JJAA of the Act. The assessee submitted that an amount of Rs. 10,21,02,413/- was incurred as additional employee cost in respect of 757 new and regular workmen employed during the year. Accordingly, the assessee claimed a deduction of Rs. 3,06,30,724/- under section 80-JJAA of the Act, being 30% of the additional employee cost. In support of its claim before the learned CIT(A), the assessee also furnished the report from the Chartered Accountant in Form 10DA dated 30.10.2019.
6. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the assessee did not claim the deduction in its original return of income filed on 31.10.2018, nor was the claim raised during the course of assessment proceedings. The learned CIT(A) further noted that Form 10DA, being a mandatory requirement for claiming deduction under section 80-JJAA of the Act, was not filed within the prescribed due date under the Act and applicable Rules. Thus, it was held that due to non-fulfilment of the mandatory procedural requirements, the claim of the assessee cannot be entertained. Being aggrieved, the assessee is in appeal before us.
7. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee inadvertently failed to make the claim of deduction under section 80-JJAA of the Act at the time of filing its return of income, and the same was made for the first time before the learned CIT(A). The learned AR submitted that the claim of the assessee is duly supported by the report of the Chartered Accountant issued in Form 10DA. Therefore, the learned AR prayed that this issue be restored to the file of the AO for necessary verification of the claim made by the assessee.
8. On the other hand, the learned Departmental Representative (“learned DR”) submitted that the claim of the assessee is not only belated, but the same is also not in compliance with the mandatory provisions of the Act.
9. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee, for the first time, claimed a deduction under section 80-JJAA of the Act before the learned CIT(A) in respect of additional employee costs. The learned CIT(A) dismissed the ground raised by the assessee on this issue, by observing as follows: –
“4.4 Ground No. 4- Deduction of Rs.3,06,30,724/- under Section 80JJAA of the Act.
4.4.1 This ground relates to the appellant’s claim for deduction of Rs.3,06,30,724/- under Section 80JJAA of the Income Tax Act, 1961. The appellant has submitted that an amount of Rs.10,21,02,413/- was incurred as additional employee cost in respect of 757 new regular workmen employed during the previous year relevant to the assessment year under consideration. Accordingly, a deduction of Rs.3,06,30,724/- under Section 80JJAA of the Income-tax Act, 1961, being 30% of the additional employee cost, has been claimed. In support of this, the appellant has furnished a report in Form 10DA dated 30.10.2019, certified by a Chartered Accountant.
However, on verification of records, it is observed that the appellant did not claim this deduction in the original return of income filed on 31.10.2018, nor was the claim raised during the course of assessment proceedings. Further, the Form 10DA-being a mandatory requirement for claiming deduction under Section 80JJAA—was not filed within the prescribed due date under the Act and applicable Rules. This constitutes a violation of the statutory conditions for availing the deduction.
4.4.2 In view of the above, and considering the non-fulfilment of the mandatory procedural requirements, the appellant’s claim for deduction under Section 80JJAA cannot be entertained at this stage. Accordingly, this ground of appeal is dismissed, and the appeal is not allowed.”
10. Thus, the learned CIT(A) denied the claim of deduction under section 80-JJAA of the Act, on the following basis: –
| (a) | The assessee did not claim this deduction in its original return of income filed on 31.10.2018; |
| (b) | The claim was not raised during the course of assessment proceedings; and |
| (c) | Non-fulfilment of the mandatory procedural requirements for claiming deduction under section 80-JJAA of the Act. |
11. From the perusal of the impugned order, we find that in support of its claim made under section 80-JJAA of the Act before the learned CIT(A), the assessee furnished the report in Form 10DA dated 30.10.2019, certified by a Chartered Accountant. As per the learned CIT(A), inter alia, the said report was not filed before the prescribed due date under the Act and applicable Rules. During the hearing, the learned AR submitted that, since the claim could not be made at the time of filing the return, the report in Form 10DA could also not be filed within time.
12. From the perusal of Form 10DA, it is pertinent to note that the same has relevance only for the purpose of claiming a deduction under section 80-JJAA of the Act. Thus, in the present case, even though the Chartered Accountant issued Form 10DA on 30.10.2019 in respect of the claim of deduction under section 80-JJAA of the Act, there is no material available on record which prevented the assessee from raising a fresh claim and filing Form 10DA before the AO during scrutiny assessment proceedings, which were completed with passing of assessment order on 29.01.2021.
13. At this stage, it is also relevant to note the provisions of section 80A(5) of the Act, which reads as under: –
“(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder.”
(Emphasis supplied)
14. Therefore, as per section 80A(5) of the Act, no deduction shall be allowed to the assessee if a claim of deduction, inter alia, under any provisions of Chapter-VIA under the heading “C.—Deductions in respect of certain incomes” of the Act, is not made by the assessee in his return of income. In the present case, the assessee is seeking a deduction in respect of additional employee costs under section 80-JJAA of the Act, which forms part of Chapter-VIA under the heading “C.—Deductions in respect of certain incomes” of the Act. Further, undisputedly, the assessee did not make any claim of deduction under section 80-JJAA of the Act in its return of income filed for the year under consideration, and the said claim was made for the first time before the learned CIT(A). Therefore, without going into any other aspect of the matter in the present case, it is evident that section 80A(5) disentitles the assessee from claiming the deduction under section 80-JJAA of the Act.
15. Accordingly, the denial of the claim of deduction under section 80-JJAA of the Act is upheld. As a result, the grounds raised by the assessee are dismissed.
16. In the result, the appeal by the assessee is dismissed.