Claim Of Deduction Under Section 80P Is Conditional On Filing A Return Within The Due Date: Kerala High Court

The Kerala High Court has held that the pre-condition for claiming the deduction under Section 80P of the IT Act has now been made more stringent by reducing the time available to an assessee for making the claim.

The bench of Justice A.K. Jayasankaran Nambiar and Justice Mohammed Nias C.P. has observed that the claim for deduction under Section 80P is conditional on filing a return within the due date prescribed under Section 139(1) of the Income Tax Act.

The appellant/assessee is a Labour Co-operative Society that was formed for the financial and social welfare of toddy tappers and workers and for tapping and selling toddy within the jurisdiction of Nileshwar.

For the assessment year 2009–10, the appellant did not file any return of income. Believing that the appellant had income chargeable to tax that had escaped assessment, the Department issued a notice under Section 148 to the appellant, requiring the appellant to furnish a return of income within 30 days of receipt of the notice.

The appellant failed to file the return of income in response to the notice under Section 148. A return was, however, filed by the appellant on 5.7.2012, which was much beyond the date for filing a return in terms of Section 139(4) of the Income Tax Act. The return of income for the assessment year 2009–10 should have been filed on or before 31.3.2011 in terms of Section 139(4).

Since the return of income was filed after the expiration of the time allowed under Section 139(4) and much after the due date mentioned in the notice under Section 148, the Assessing Officer treated it as invalid and proceeded to complete the assessment.

While completing the assessment, the claim of the appellant for deduction under Section 80P was disallowed on the ground that the claim for deduction had not been made in a valid return filed by the appellant.

The Assessing Officer opined that, in view of the provisions of Section 80A(5) of the Income Tax Act, the claim for deduction could not be considered.

The issue raised was whether the claim for deduction under Section 80P(2)(a)(iii) made by the assessee in returns stated to be filed on 5.7.2012 for the assessment years 2009–10 and 2010–11 can be seen as validly made for the purposes of the Income Tax Act.

The appellant contended that a plain reading of Section 80A(5) makes it clear that a claim in respect of a deduction, inter alia, under Section 80P, has to be made in a return of income filed in order for the deduction to be allowed.

The court held 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 Income Tax 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 favor of the revenue. Thus viewed, a failure on the part of an assessee to comply with the precondition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts.

Case Title: M/S. Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Versus The Commissioner Of Income Tax

Case No.: I.T.A. No. 120 Of 2019

Date: 14.03.2023

Citation: 2023 LiveLaw (Ker) 203

Counsel For Petitioner: S.Arun Raj

Counsel For Respondent: Christopher Abraham

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