2023 (4) TMI 1423 - AT - Income Tax

Deduction u/s 80P - Claim denied due to delay in filing return - adjustment u/s 143(1)(a)(v) for simple reason that section 143(1)(a)(v) HELD THAT - If any return is filed beyond due date u/s 139(1) of the Act then no deduction u/s 80P shall be allowed. However clause (v) was inserted by the Finance Act 2021 w.e.f. 01-04-2021. The case of the assessee on the other hand is for F.Y. 2018-19 relevant to A.Y. 2019-20 which is the period prior to amendment brought in by the Finance Act 2021. Before this amendment clause (v) did not include and cover deduction u/s 80P. So therefore in the present Case of the assessee though admittedly return was filed beyond the time limit prescribed u/s 139(1) of the Act but still section 143(1)(a)(v) is not applicable to the assessee since the case of the assessee is for A.Y. 2019-20 which is before the amendment. We also accept the argument of assessee that even if the revenue intends to invoke clause (ii) of section 143(1)(a) that would also not be permissible since in the definition of incorrect claim as provided in the provision the deduction u/s 80P is not included anywhere and is therefore outside the purview of the said provision. Therefore rigors of provisions of section 143(1)(a)(ii) and clause (v) are not applicable to the case of the assessee. On this legal ground itself the assessee succeeds.

Summary

The core legal questions considered in this appeal are:

1. Whether the deduction claimed under section 80P of the Income Tax Act, 1961 can be disallowed solely on the ground of delay in filing the return of income beyond the due date prescribed under section 139(1).

2. Whether the provisions of section 143(1)(a)(v) of the Act, as amended w.e.f. 1st April 2021, are applicable to assessment year 2019-20, and consequently, whether denial of deduction under section 80P on the basis of delayed filing is justified.

3. Whether the claim of deduction under section 80P can be denied under section 143(1)(a)(ii) on the ground of an "incorrect claim apparent from any information in the return" when the return is filed late.

4. Whether the appellant cooperative society qualifies as an eligible person to claim deduction under section 80P, considering the nature of its business and maintenance of relevant books and documents.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P Due to Delay in Filing Return

Legal Framework and Precedents: Section 80P of the Income Tax Act provides deduction to cooperative societies engaged in certain specified activities, including providing credit facilities to members. The general requirement under section 139(1) is that the return of income must be filed within the prescribed due date. Section 143(1)(a) allows the Assessing Officer to make certain adjustments during processing of the return, including disallowance of deductions under specified conditions.

Section 143(1)(a)(v), introduced by the Finance Act, 2021 w.e.f. 1st April 2021, explicitly provides that deductions under Chapter VI-A (including section 80P) shall not be allowed if the return is filed beyond the due date under section 139(1).

Court's Interpretation and Reasoning: The Tribunal noted that the appellant filed the return for A.Y. 2019-20 on 30-09-2020, which was beyond the due date prescribed under section 139(1). The Assessing Officer disallowed the deduction under section 80P relying on the amended provision of section 143(1)(a)(v), which was not in force for the relevant assessment year.

The Tribunal held that since the amendment to section 143(1)(a)(v) was effective only from 1st April 2021, it was not applicable to assessment year 2019-20. Prior to this amendment, there was no provision explicitly denying deduction under section 80P on account of delayed filing. Therefore, disallowance on this ground was unsustainable.

Key Evidence and Findings: The timing of the amendment and the assessment year under consideration were crucial. The return was admittedly late, but the legal provision relied upon for denial was not yet in force.

Application of Law to Facts: The Tribunal applied the principle of non-retroactivity of amendments and concluded that the amended section 143(1)(a)(v) could not be invoked against the appellant for A.Y. 2019-20.

Treatment of Competing Arguments: The revenue contended that the deduction was rightly disallowed due to late filing, but the Tribunal rejected this, emphasizing the temporal applicability of the amendment.

Conclusion: Deduction under section 80P could not be denied merely because the return was filed late for A.Y. 2019-20.

2. Applicability of Section 143(1)(a)(ii) Regarding Incorrect Claims

Legal Framework and Precedents: Section 143(1)(a)(ii) permits disallowance of claims that are "incorrect claims apparent from any information in the return." The Explanation defines "incorrect claim" as one that is inconsistent with other entries, lacks required information, or exceeds statutory limits.

Court's Interpretation and Reasoning: The appellant argued that the deduction claimed under section 80P did not fall within the definition of an incorrect claim under section 143(1)(a)(ii). The Tribunal agreed, noting that the deduction was properly claimed, supported by relevant books and documents, and no inconsistency or statutory limit breach was apparent.

Key Evidence and Findings: The appellant's cooperative society maintained proper records and carried on the business of providing credit facilities to members, qualifying it under section 80P.

Application of Law to Facts: Since the claim was not incorrect or inconsistent, section 143(1)(a)(ii) could not be invoked to deny the deduction.

Treatment of Competing Arguments: The revenue sought to rely on this provision as an alternative ground for denial, but the Tribunal held that the claim did not meet the definition of an incorrect claim.

Conclusion: Section 143(1)(a)(ii) was not applicable to deny the deduction under section 80P in this case.

3. Eligibility of the Cooperative Society to Claim Deduction under Section 80P

Legal Framework and Precedents: Section 80P allows deductions to cooperative societies engaged in specified activities, including providing credit facilities to members. Eligibility depends on the nature of the society's business and compliance with record-keeping requirements.

Court's Interpretation and Reasoning: The Tribunal noted that the appellant was a cooperative society engaged in providing credit facilities to its members and maintained relevant books and documents. Therefore, it qualified as an eligible person under section 80P.

Key Evidence and Findings: The appellant's admitted business activities and maintenance of proper records supported its eligibility.

Application of Law to Facts: The Tribunal found no merit in denying the deduction on eligibility grounds.

Treatment of Competing Arguments: No substantive dispute was raised regarding eligibility.

Conclusion: The appellant cooperative society was entitled to claim deduction under section 80P.

Significant Holdings:

"Section 143(1)(a)(v) of the Act spells out that if any deduction is claimed under any of the provisions of Chapter VI-A which include deduction u/s 80P such deduction has to be allowed only if the return is filed within due date specified under sub-section 139(1) of the Act. ... However, clause (v) was inserted by the Finance Act, 2021 w.e.f. 01-04-2021. The case of the assessee, on the other hand, is for F.Y. 2018-19 relevant to A.Y. 2019-20 which is the period prior to amendment brought in by the Finance Act, 2021. Before this amendment, clause (v) did not include and cover deduction u/s 80P. So therefore, in the present Case of the assessee though admittedly return was filed beyond the time limit prescribed u/s 139(1) of the Act but still section 143(1)(a)(v) is not applicable to the assessee since the case of the assessee is for A.Y. 2019-20, which is before the amendment."

"Even clause (ii) of section 143(1)(a) would not be applicable in the case of the assessee ... in the definition of incorrect claim as provided in the provision, the deduction u/s 80P is not included anywhere and is therefore, outside the purview of the said provision."

"On this legal ground itself, the assessee succeeds and any other grounds on merits, if any, becomes academic in nature."

Core principles established include:

• The non-retroactivity of legislative amendments: provisions introduced after the relevant assessment year cannot be applied retrospectively.
• Deduction under section 80P cannot be denied solely due to delayed filing of return for assessment years prior to the 2021 amendment.
• Claims under section 80P do not fall within the definition of "incorrect claim" under section 143(1)(a)(ii) for the purpose of disallowance during return processing.
• Eligibility for deduction under section 80P depends on the nature of the cooperative society's business and maintenance of records, which was satisfied here.

Final determinations on each issue were that the deduction under section 80P should not have been disallowed due to delay in filing, the relevant amended provisions were inapplicable for the assessment year in question, and the appellant was entitled to the deduction on eligibility grounds.