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April 5, 2023

It is not warranted to deny a deduction under Section 80P if a return is not filed by the deadline set forth in Section 139(1)

It is not warranted to deny a deduction under Section 80P if a return is not filed by the deadline set forth in Section 139(1)

Fact and issue of the case

The solitary issue involved in all these appeals is denial of exemption u/s. 80P of the Act on the ground that the Return was filed belatedly u/s. 139(4) of the Act. Since common issues are involved in all the appeals and the same are disposed of by this common order.

ITA No. 269/Rjt/2022 in the case of Aliudepur Seva Sahakari Mandali Ltd. as the lead case.

The assessee is a Co-operative Society duly registered under the Gujarat Co-operative Societies Act vide Registration No. 1460/1955 dated 19.08.1955. The assessee is engaged in the business of providing credit facilities (financing) to its members only. The assessee has earned interest income from its members and from its investments with other Co-operative Society. The assessee filed its Return of Income on 30.11.2020 belatedly u/s. 139(4) of the Act, claiming deduction u/s. 80P of Rs.7,83,615/-. The Return of Income filed by the assessee was processed by the Centralized Processing Centre, Bengaluru vide Intimation u/s. 143(1) dated 28.12.2020 thereby denying the benefit of claim of deduction under section 80P for the reason that the Return of Income was not filed within the due date prescribed u/s. 139(1) of the Act. Thus the CPC, Centre demanded a sum of Rs. 3,50,420/-as tax payable by the assessee.

Aggrieved against the same, the assessee filed an appeal before CPC Centre claiming that there was no provision in section 143(1)(a) to make adjustment to the returned income by disallowing u/s. 80P, if the returned income is not filed within the due date specified u/s. 139(1) of the Act. Further there was an amendment in section 143(1)(a)(v) in the Finance Act, 2021 w.e.f. 01.04.2021 such disallowances is possible under the 143(1) proceedings only from the Assessment Year 2022-23.

In support of the same, the assessee relied upon Mumbai Tribunal decision in the case of New Ideal Cooperative Housing Society Ltd. vs. ITO in ITA No. 2681/Mum/2019 dated 03.02.2021 wherein it was held that adjustments made to the returned income by denial of deduction u/s. 80P(2)(d) and 80P(2)(c)(ii) did not fall in any other adjustments prescribed in Section 143(1) of the Act and that a Co-operative society will not get exemption was not something which was a subject matter of adjustment u/s. 143(1)(a) of the Act and the appeal of the assessee was liable to be allowed.

Observation of the court

We have given our thoughtful consideration and perused the materials available on record. It is apparent from the Ld. NFAC order when the assessee has clearly pointed out the amendment in Section 143(1) made by Finance Act, 2021 which is not applicable for the present assessment year 2019-2020. However the same was not been considered by the Ld. NFAC and erroneously dismissed the assessee’s appeal.

6.1 The Co-ordinate Bench of this Tribunal in Lunidhar Seva Sahakari Mandali Ltd. (cited supra) considered the above amendment and held as follows:

We have heard the rival contentions and perused the material on record. In the instant facts, admittedly the assessee did not file return of income within the time permissible under section 139(1) of the Act. However, the assessee filed its return of income belatedly on 30-11-2020 and claimed deduction of Rs. 2,22,704/- under section 80P of the Act. The issue for consideration before us is that whether once the return of income is filed beyond the prescribed date under section 139(1) of the Act, can the deduction under section 80P of the Act be denied to the assessee, by way of adjustment under section 143(1) of the Act. On going through the statutory provisions, we observe that 80AC of the Act provides that no such deduction under section 80P of the Act shall be allowed to an assessee unless he furnishes a return of his income on or before the due date specified under section 139(1) w.e.f. assessment year 2018-19 onwards. However, section 143(1)(a)(v) of the Act provides that disallowance of deduction claimed under any of the provisions of Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” (which includes deduction under section 80P of the Act), can be made if the return is furnished beyond the due date specified under sub-section (1) of section 139. This amendment has been introduced w.e.f. 1-4-2021. Accordingly, the above amendment would not apply to the impugned assessment year. Further, section 143(1)(ii) of the Act permits adjustment in case of an incorrect claim, if such incorrect claim is apparent from any information in the return. However, Explanation to the aforesaid section specifies the following cases where the claim made in the return of income can be said to be “incorrect” for the purposes of this sub-section:

In the result, the appeal filed by the Assessee is hereby allowed.

ITA Nos. 276 and 277/Rjt/2022 are an identical nature and therefore for the reasonings stated in ITA No. 269/Rjt/2022 will be squarely applicable. Thus the appeals filed by the assessees are also allowed.

In the result, all the appeals filed by the respective Assessees in ITA Nos. 269, 276 & 277/RJT/2022 are hereby allowed.

Order pronounced in the open court on 24 -02-2023


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here


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