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2021 (9) TMI 419 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee did not claim deduction u/s 80IB(10) - violation of section 80A(5) - HELD THAT - It is very much clear that even though the assessee might be fulfilling the conditions of the particular deduction provision; however, the mandatory conditions of section 80A(5) of the Act has to be fulfilled for claiming deduction. While laying down the aforesaid ratio, the Hon ble jurisdictional High Court took note of the ratio laid down in case of Goetze India Ltd vs CIT 2006 (3) TMI 75 - SUPREME COURT - Thus, the ratio laid down in the aforesaid decision of the Hon ble jurisdictional High Court EBR ENTERPRISES ANR. VERSUS UNION OF INDIA AND ANR. 2019 (6) TMI 484 - BOMBAY HIGH COURT squarely apply to the facts of the present appeal. It may be a fact that the assessee is otherwise eligible to claim deduction under section 80P(2)(a)(i) of the Act; however, the provision contained in section 80A(5) of the Act stands as a bar in allowing such deduction to the assessee. For the sake of completeness, we must observe, having carefully gone through the decisions cited by learned authorized representative of the assessee, we are of the view that in none of these decisions, the provision contained in section 80A(5) of the Act was taken note of. In case of ITO vs MSEB Employees Co-operative Credit Society Ltd 2014 (12) TMI 380 - ITAT PUNE as held that even if the assessee has not claimed a deduction in the return of income, the appellate authorities have power to allow deduction which is allowable under the provisions of the Act - it appears form a reading of the said decision, provision contained in section 80A(5) was not brought to the notice of the Tribunal - Tribunal did not have the benefit of the decision of the Hon ble jurisdictional High Court in case of EBR Enterprises vs UOI 2019 (6) TMI 484 - BOMBAY HIGH COURT which was subsequently rendered. Tribunal has allowed assessee s claim of deduction under section 80P(2)(a)(i) of the Act in assessment years 2010-11 and 2012-13. However, there is nothing on record to suggest that there was any violation of section 80A(5) of the Act. Therefore, the factual position based on which the decisions were rendered in assessment year 2010-11 and 2012-13 are different from the impugned assessment year - we hold that the assessee cannot be allowed deduction under section 80P(2)(a)(i) of the Act, insofar as, the impugned assessment year is concerned due to non fulfillment of conditions contained in section 80A(5) of the Act. Status of assessee - AOP or firm - assessee filed an application for rectification under section 154 of the Act seeking change of status from firm to AOP and to allow deduction under section 80P(2)(a)(i) - HELD THAT - As regards the correction of status of the assessee from firm to AOP, the assessing officer is directed to rectify the same after verifying all relevant facts.
Issues Involved:
1. Denial of assessee's claim of deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Correction of assessee's status from 'firm' to 'Association of Persons' (AOP). Issue-wise Detailed Analysis: 1. Denial of Assessee's Claim of Deduction under Section 80P(2)(a)(i): The primary dispute in this appeal concerns the denial of the assessee's claim for deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. The assessee, a co-operative society, filed its return of income electronically for the assessment year 2011-12, showing its status as a firm and did not claim any deduction under section 80P(2)(a)(i). The return was processed, and the total income was assessed. Subsequently, the assessee filed an application for rectification under section 154, seeking to change its status from firm to AOP and to allow the deduction under section 80P(2)(a)(i). The assessing officer rejected this application, and the Commissioner of Income Tax (Appeals) upheld this decision, citing section 80A(5) of the Act, which mandates that deductions must be claimed in the return of income. The Tribunal examined the provisions of section 80A(5), which states that if an assessee fails to claim a deduction in the return of income, no deduction shall be allowed. This provision applies to deductions under Chapter VIA, including section 80P. The Tribunal noted that the language of section 80A(5) is clear and unambiguous, making it mandatory for the assessee to claim the deduction in the return of income to be eligible. The Tribunal referenced the case of EBR Enterprises vs UOI, where the Hon’ble jurisdictional High Court held that even if an assessee fulfills the conditions for a deduction, the mandatory conditions of section 80A(5) must also be met. The High Court emphasized that the restriction in section 80A(5) applies to all authorities, including the Assessing Officer, Commissioner, and Appellate Tribunal. The Tribunal concluded that, despite the assessee being otherwise eligible for the deduction under section 80P(2)(a)(i), the failure to claim it in the return of income, as required by section 80A(5), bars the allowance of such deduction for the impugned assessment year. The Tribunal also noted that previous decisions in favor of the assessee for other assessment years did not involve a violation of section 80A(5). 2. Correction of Assessee's Status from Firm to AOP: Regarding the correction of the assessee's status from firm to AOP, the Tribunal directed the assessing officer to rectify the status after verifying all relevant facts. The Tribunal recognized the assessee's claim that it is a co-operative society and should be treated as an AOP. Conclusion: The appeal was partly allowed. The Tribunal upheld the denial of the deduction under section 80P(2)(a)(i) due to non-fulfillment of the conditions in section 80A(5). However, it directed the assessing officer to correct the status of the assessee from firm to AOP after proper verification. The order was pronounced on 08/09/2021.
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