2019 (5) TMI 1124 - AT - Income Tax

Denial of deduction u/s 80P(2) - no return of income was filed by the assessee - HELD THAT - Hon ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. 2016 (4) TMI 826 - KERALA HIGH COURT held that the return of income whether filed belatedly before the appellate authority has to be considered for claiming deduction u/s 80P(2) Thus the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether its activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) of the I.T.Act in accordance with law. - Appeals filed by the assessee are allowed for statistical purposes

Summary

Issues:
- Denial of deduction u/s 80P(2) for non-filing of income tax return by the assessee.

Analysis:
1. The appeals were against the CIT(A)'s order denying deduction u/s 80P(2) due to non-filing of income tax return by the assessee for the assessment years 2010-2011 and 2011-2012. The assessee, a primary agricultural credit society, contended that being exempt from filing returns due to its cooperative society status, it belatedly filed returns and sought the deduction.

2. The High Court judgment in the case of Chirakkal Service Co-operative Bank Ltd. was pivotal. It clarified that belatedly filed returns must be considered for claiming deductions u/s 80P(2) of the IT Act. The Court emphasized that the inhibition against allowing deductions applies when no returns are filed. It also highlighted that returns filed beyond stipulated periods can be accepted for exemption consideration.

3. The Full Bench of the High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT further emphasized that the Assessing Officer must inquire into the factual activities of the assessee society to determine eligibility for deduction u/s 80P. Each assessment year is separate, and eligibility must be verified annually. The Court stressed that the registration certificate alone does not guarantee eligibility; the AO must assess the society's activities.

4. Consequently, the Tribunal allowed the appeals for statistical purposes, restoring the issue of deduction u/s 80P(2)(a)(i) to the Assessing Officer. The AO was directed to examine the society's activities under the Kerala Co-operative Societies Act, 1969, and grant the deduction if compliant with cooperative society activities, in line with the law.

This detailed analysis showcases the legal intricacies and precedents considered in the judgment, emphasizing the importance of filing returns, eligibility verification, and compliance with cooperative society regulations for claiming deductions under the IT Act.