2024 (1) TMI 1452 - AT - Income Tax

Assessment u/s. 144 denying deduction u/s. 80P - Assessee did not file return of income u/s. 139(1) or 139(4) - CIT(A) held that without a valid return of income deduction u/s. 80P cannot be allowed - HELD THAT - As 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. However the assessee did not file return of income at all and therefore the assessee is not eligible for deduction u/s. 80P. As relying on M/S. NILESHWAR RANGEKALLU CHETHU VYAVASAYA THOZHILALI 2023 (3) TMI 1055 - KERALA HIGH COURT we hold that the assessee is not eligible for deduction u/s. 80P. Appeal by the assessee is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue in this judgment is whether the assessee, a cooperative society, is eligible for deduction under Section 80P of the Income Tax Act when it failed to file a return of income within the prescribed time limits under Sections 139(1) and 139(4). The court also considered the applicability of Section 80A(5) and Section 80AC in determining eligibility for deductions when no valid return was filed. Additionally, the court examined whether the principles of liberal interpretation for cooperative societies could override statutory requirements for filing returns.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework revolves around Sections 80P, 80A(5), and 80AC of the Income Tax Act. Section 80P provides deductions for income earned by cooperative societies. Section 80A(5) stipulates that no deduction shall be allowed unless the claim is made in the return of income. Section 80AC, as amended by the Finance Act 2018, requires that the return be filed within the due date specified under Section 139(1) to claim deductions.

The court relied on the judgment of the Kerala High Court in Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT, which emphasized the necessity of filing a return within the prescribed time to claim deductions under Section 80P.

Court's Interpretation and Reasoning

The Tribunal interpreted that the statutory provisions clearly require the filing of a return within the prescribed time limits to claim deductions under Section 80P. The court noted that the statutory scheme under the Income Tax Act mandates strict compliance with the filing requirements as a pre-condition for claiming deductions. The Tribunal emphasized that the provisions for deductions must be strictly construed in favor of the Revenue and against the assessee.

Key Evidence and Findings

The assessee did not file a return of income for the assessment year 2017-18 within the prescribed time limits under Sections 139(1) and 139(4). Despite receiving multiple notices under Section 142(1) from the Assessing Officer (AO), the assessee failed to respond adequately, leading to an assessment under Section 144, denying the deduction under Section 80P.

Application of Law to Facts

The Tribunal applied Section 80A(5) to conclude that the assessee was not eligible for the deduction under Section 80P due to its failure to file a return of income. The Tribunal also applied the amended Section 80AC, which further restricted the allowance of deductions to returns filed within the due date under Section 139(1). The court found that the assessee's failure to meet these statutory requirements precluded it from claiming the deduction.

Treatment of Competing Arguments

The assessee argued for a liberal interpretation of the provisions, citing the cooperative nature of its operations and the judgment of the Supreme Court favoring cooperative societies. However, the Tribunal found these arguments unpersuasive in light of the clear statutory requirements and the Kerala High Court's judgment, which took precedence over earlier ITAT decisions favoring the assessee.

Conclusions

The Tribunal concluded that the assessee was not eligible for the deduction under Section 80P due to its failure to file a valid return of income within the prescribed time limits. The court upheld the decision of the CIT(Appeals) and dismissed the appeal.

3. SIGNIFICANT HOLDINGS

The Tribunal held that the statutory scheme requires strict compliance with the filing of returns within prescribed time limits to claim deductions under Section 80P. The court quoted the Kerala High Court's reasoning: "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."

The core principle established is that the statutory pre-condition of filing a return within prescribed time limits cannot be waived or relaxed, even for cooperative societies. The Tribunal affirmed the CIT(Appeals)'s decision, reinforcing that deductions under Section 80P are contingent upon compliance with Sections 80A(5) and 80AC.

The final determination was that the assessee's appeal was dismissed, and the denial of the deduction under Section 80P was upheld due to non-compliance with statutory filing requirements.