Deduction under section 80P cannot be denied merely because it was claimed during assessment, not in return

ITAT (AT) allowed the appeal, holding that denial of deduction under section 80P solely because the claim was made during assessment and not in the return was unjustified. Relying on SC precedents distinguishing Chapter III exemptions from Chapter VI-A deductions, the tribunal held the timing of claiming a deduction is directory; a deduction claimed during assessment must be considered. The impugned order was set aside and the matter remitted to the AO to examine the 80P deduction on merits. Appeal allowed for statistical purposes.

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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.

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