9911796707🚨 Important Update for Our Users
We are transitioning to our new and improved portal - www.taxtmi.com - for a better experience.
Follow us:
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (6) TMI 1905 - AT - Income TaxDisallowance u/s.80P - appellant did not file the return of income placing reliance on the provisions of section 80A(5) - HELD THAT - No doubt the appellant co-operative society is incorporated with the object of accepting deposits from its members and lending money to its members and the appellant is classified as a primary agricultural credit society. No return of income was filed either under the provisions of sec.139(1) of the Act nor in response to the notice issued u/s.142(1) of the Act. In terms of the provisions of sec.80A(5) of the Act in order to claim deduction u/s.80P of the Act it is mandated that the appellant should make the claim in the return of income for deduction u/s.80P of the Act. Since the appellant had not filed the return of income the provisions of sec.80A(5) is squarely applicable in view of the ratio laid down in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham 2023 (3) TMI 1055 - KERALA HIGH COURT to hold that the appellant-cooperative society is not entitled for deduction u/s.80P - Decided against assessee.
The core legal questions considered in this appeal relate primarily to the entitlement of a cooperative society to claim deduction under section 80P of the Income-tax Act, 1961 ("the Act") for the assessment year 2017-2018, in the context of non-filing of a valid return of income within the prescribed time under section 139(1) of the Act. Specifically, the issues are:
Issue-wise Detailed Analysis: 1. Entitlement to Deduction under Section 80P without Filing Return under Section 139(1) The legal framework governing the claim of deduction under section 80P is interlinked with the provisions of sections 80A(5) and 80AC of the Act. Section 80P provides exemption to cooperative societies on income derived from specified activities, subject to compliance with procedural requirements. Section 80A(5) mandates that the claim for deduction under section 80P must be made in the return of income filed by the assessee. Section 80AC, as amended by the Finance Act 2018 effective from 1-4-2018, further tightened the conditions by requiring the return to be filed within the due date prescribed under section 139(1) to be eligible for the deduction. The Court referred extensively to the jurisdictional High Court's ruling in Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham (supra), which clarified that prior to the 2018 amendment, claims for deduction under section 80P could be made in returns filed under sections 139(1), 139(4), 142(1), or 148, provided they were filed within the respective due dates. Post amendment, the statutory scheme mandates that only returns filed within the due date under section 139(1) can be considered valid for claiming the deduction. The Court emphasized that the statutory scheme is clear in making the filing of a valid return within the prescribed time a pre-condition for claiming deduction under section 80P. This requirement is not merely procedural but substantive, and non-compliance results in forfeiture of the benefit. The Court underscored the principle of strict construction of exemption provisions against the assessee and in favor of the Revenue, reinforcing that failure to meet the pre-condition cannot be condoned. 2. Interpretation of Section 80A(5) and Section 80AC in Light of Amendments and Judicial Precedents The Court analyzed the interplay between sections 80A(5) and 80AC, particularly after the 2018 amendment. Section 80A(5) requires that the claim for deduction under section 80P be made in a return of income filed by the assessee. Section 80AC, prior to amendment, allowed claims in returns filed under various provisions within the prescribed time. The amendment restricted this to returns filed within the due date under section 139(1) only. The Court noted that the High Court's decision in Nileshwar Range (supra) explicitly overruled earlier contrary views, such as those expressed in the Chirakkal Service Co-operative Bank Ltd. case, which had allowed claims in returns filed beyond the due date. The High Court held that such views were per incuriam and inconsistent with the statutory scheme. The amendment to section 80AC reinforced the stricter interpretation, making timely filing under section 139(1) mandatory for claiming deduction under section 80P. 3. Status of Returns Filed in Response to Notice under Section 142(1) and Consequences on Claim of Deduction In the present case, the appellant did not file any return under section 139(1) or in response to the notice under section 142(1) within the prescribed time. Although some information was furnished during assessment proceedings, no valid return was filed. The Assessing Officer treated the returns filed in response to the notice as non-est and did not allow the claim under section 80P. The Court concurred with this approach, holding that returns filed beyond the due date or in response to notices under section 142(1) do not qualify as valid returns for the purpose of claiming deduction under section 80P, especially post the 2018 amendment. The Court rejected any contention that such returns could be treated as valid for the deduction claim, aligning with the statutory mandate and judicial precedent. 4. Application of Law to Facts and Treatment of Competing Arguments The appellant cooperative society was registered under the Kerala Co-operative Societies Act, 1969, and engaged in lending money to members, qualifying as a primary agricultural credit society. Despite the Assessing Officer's notice and the opportunity to file a return, the appellant failed to file a return under section 139(1) within the due date. The appellant's explanation regarding cash deposits during demonetization was accepted, but the disallowance of the claim under section 80P was upheld. The Court found no merit in the appellant's claim for deduction under section 80P in the absence of a valid return filed within the prescribed time. The Court relied heavily on the binding precedent of the jurisdictional High Court and the clear statutory language post amendment. The Court also emphasized the principle that exemptions and deductions must be strictly construed, and procedural non-compliance cannot be excused. Conclusions: The Court concluded that the appellant cooperative society was not entitled to claim deduction under section 80P of the Act for the assessment year 2017-2018, due to non-filing of a valid return within the due date prescribed under section 139(1). The statutory provisions, as amended, and the binding judicial precedent mandate such compliance as a pre-condition for claiming the deduction. Consequently, the orders of the authorities below denying the deduction were upheld, and the appeal was dismissed. Significant Holdings: The Court preserved the following crucial legal reasoning verbatim from the jurisdictional High Court's ruling, which forms the core principle guiding the decision: "11. On a consideration of the rival submissions and on a perusal of the statutory provisions, we find that a reading of section 80A(5) and Section 80AC of the IT Act as they stood prior to 1-4-2018, when the latter provision was amended by Finance Act 2018, would reveal that the statutory scheme under the IT Act was to admit only such claims for deduction under section 80P of the IT Act as were made by the assessee in a return of income filed by him. That return can be under sections 139(1), 139(4), 142(1) or section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under section 80A(5), the claim for deduction under section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under any of the above provisions. The amendment to Section 80AC with effect from 1-4-2018, however, mandated that for an assessee to get a deduction under section 80P of the IT Act, he had to furnish a return of his income for such assessment year on or before the due date specified in section 139(1) of the IT Act. In other words, after 1-4-2018, even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under section 80P of the IT Act only if it is made in a return recognised as such under the IT Act, and after 1-4-2018, only if that return is one filed within the time prescribed under section 139(1) of the Act." Further, the Court highlighted the principle that: "The requirement of making the claim for deduction in a return of income filed by the assessee can be seen as a statutory pre-condition for claiming the benefit of deduction under the IT Act. It is trite that a provision for deduction or exemption under a taxing Statute has to be strictly construed against the assessee and in favour of the Revenue. Thus viewed, a failure on the part of an assessee to comply with the pre-condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts." These holdings establish the core principle that the entitlement to deduction under section 80P is conditional upon the timely filing of a valid return under section 139(1), and failure to comply with this statutory pre-condition results in forfeiture of the deduction. On the final determinations, the Court dismissed the appeal, upholding the disallowance of the section 80P deduction due to non-filing of a valid return within the prescribed time, thereby affirming the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals).
|
