2022 (10) TMI 348 - AT - Income Tax

Denial of deduction u/s 80P - claim was not made in the return but during the course of assessment proceedings - Authorities below have canvassed a view that the assessee violated section 80A(5) and hence the deduction was not available - HELD THAT - On going through the judgments in G.M. Knitting Industries 2015 (11) TMI 397 - SC ORDER in juxtaposition to Wipro Limited 2022 (7) TMI 560 - SUPREME COURT the principle which emerges is that the fulfillment of requirement of making a claim for exemption under the relevant sections of Chapter III in the return of income is mandatory, but when it comes to the claim of a deduction, inter alia, under the relevant sections of Chapter VI-A, such requirement becomes directory. In the latter case, the making of a claim even after the filing of return but before completing the assessment, meets the directory requirement of making a claim in the return of income. The instant case involves deduction u/s 80P and hence, would be governed by the principle laid down in G.M. Knitting Industries (supra), as per which the making of a claim of deduction is mandatory but the timing is directory. Even if the claim is made during the course of assessment proceedings, such a claim has to be allowed. In view of the foregoing discussion, we are satisfied that the authorities below were not justified in rejecting the assessee s claim of deduction u/s 80P only on the ground that such a claim was not made in the return but during the course of assessment proceedings. The impugned order is ergo set aside and the matter is remitted to the file of the AO for examining the claim of deduction u/s 80P on merits. Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
Denial of deduction u/s 80P of the Income-tax Act, 1961 due to failure to file return of income and claim deduction therein.

Analysis:
1. The assessee, a cooperative society, did not file a return of income for the assessment year 2009-10. The Assessing Officer (AO) denied a deduction of Rs.11,70,858 u/s 80P of the Act based on the interpretation of section 80A(5), which requires filing a return of income for claiming deductions under Part C of Chapter VI-A of the Act.

2. The assessee contended that section 80A(5) applies only when the return is filed without claiming deductions, not when no return is filed. The assessee argued that section 80AC, which lists sections where deductions cannot be claimed without filing a return, does not include section 80P, thus the deduction should be allowed.

3. The Tribunal analyzed section 80AC, which mandates filing a return before the due date for claiming deductions under specific sections. It clarified that section 80AC does not apply to deductions under other sections, including section 80P. The Tribunal emphasized that section 80A(5) requires claiming deductions in the return of income.

4. Referring to judicial precedents, the Tribunal discussed the mandatory vs. directory nature of claiming deductions in the return of income. It cited cases where filing certain forms or declarations along with the return was considered mandatory for specific deductions, while in other cases, making claims during assessment proceedings was deemed sufficient compliance.

5. The Tribunal distinguished between exemption provisions under Chapter III and deduction provisions under Chapter VI-A of the Act. It emphasized that the requirement of making a claim for exemption under Chapter III is mandatory, while for deductions under Chapter VI-A, the timing of claiming deductions is directory. The Tribunal concluded that in the case of deduction u/s 80P, the timing of the claim is directory, allowing the claim made during assessment proceedings.

6. Consequently, the Tribunal set aside the denial of the deduction u/s 80P by the lower authorities and remitted the matter to the AO for a detailed examination of the deduction claim on its merits. The appeal was allowed for statistical purposes.