Statutory Scheme Permits Allowance Of Deduction U/s 80P Only If It Is Made In Return Filed Within Time Prescribed U/s 139(1): Bangalore ITAT

On finding that failure on the part of assessee to comply with the pre-condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts, the Bangalore ITAT ruled that the assessee is not eligible for deduction u/s. 80P of the Income Tax Act, 1961.

Relying on the decision of Kerala High Court in case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT [2023] 152 taxmann.com 347 (Kerala), the Bench comprising George George K. (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “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.” (Para 9)

As per the brief facts of the case, the assessee is in the status of AOP and did not file return within the time prescribed u/s. 139(1) & 139(4). Since assessee failed to furnish the return, notice u/s. 142(1) was issued for details and documents mentioned in the notice. The AO noticed that the assessee is a cooperative society mainly involved in the business of providing credit facilities to its members, and the interest received from Other Societies/Banks/Co-operative Banks is to be assessed under the head income from other sources u/s 56. Since the assessee did not file the return of income and therefore as per section 80A(5) and 80AC, the AO observed that the assessee is not eligible for deduction u/s. 80P, and issued a show cause notice to the assessee as to why the assessment should not be concluded u/s 144. Since there was no response from the assessee, the AO completed the assessment u/s. 144 denying deduction u/s. 80P. On appeal, the CIT(A) also held that without a valid return of income, deduction u/s 80P cannot be allowed.

The Bench observed 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 I-T Act.

It is trite law that a provision for deduction or exemption under a taxing Statute has to be strictly construed against the assessee, added the Bench.

The Bench noted that the assessee has received interest on deposits with DCC and earned profit inclusive of interest income, but did not file return of income u/s. 139(1) or 139(4).

From plain reading of section 80A(5), the Bench observed that for claiming deduction under Chapter VIA under the head, 'Deductions to be made in computing total income', which covers section 80P also, the assessee has to file return of income u/s 139(1).

Therefore, on finding the failure on assessee's part, the ITAT dismissed the assessee's appeal.

Counsel for Appellant/ Taxpayer: Sandeep Chalapathy

Counsel for Respondent/ Department: Ganesh R. Ghale

Case Title: Madhu Souharda Pathina Sahakari Niyamitha verses Income Tax Officer

Case Number: ITA No.969/Bang/2023

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