2025 (5) TMI 2225 - AT - Income Tax

Co-operative society's s.80P tax deduction claim fails due to late, invalid return u/s139; s.80A(5) applied

Deduction under s.80P was denied on the ground that the assessee, a co-operative society, failed to file a valid return of income within the time ... Denial of Deduction u/s 80P - interest income earned from mandatory deposit - assessee is a cooperative society engaged in the business of providing credit facility to its members and supply of fertilizers to its members - AO found that the assessee has not filed return of income, therefore as per the provision of section 80A(5) of the Act, the assessee is not eligible for deduction u/s 80P - HELD THAT:- In the present case, for assessment year 2017-18, the assessee has not filed any return within the time allowed under section 139(1) or section 139(4) of the Act. The return was submitted in response to the notice issued under section 142(1) of the Act and that too belatedly which does not satisfy the legal requirements to qualify for a deduction under section 80P of the Act, particularly when read with section 80A(5) of the Act. The Hon’ble Kerala High Court in Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sanghamhas [2023 (3) TMI 1055 - KERALA HIGH COURT] clarified that only a valid and timely filed return can carry a claim for deduction; otherwise, the return is non-existent in the eyes of law and cannot be acted upon.2023 (3) TMI 1055 - KERALA HIGH COURT Therefore, hold that the AO and the learned CIT(A) were justified in denying the deduction under section 80P of the Act. The fact that the assessee later furnished details or documents or that it misunderstood the notice issued does not change the outcome because the legal requirement of a valid return filed within time remains unfulfilled. Decided against assessee. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether deduction under section 80P could be allowed when the assessee did not file a return of income within the time permitted under section 139(1) or section 139(4), and the deduction claim was sought to be made only through a belated return furnished in response to notice under section 142(1). (ii) Whether section 80A(5) operated as a statutory bar to allowing deduction under section 80P in the absence of a valid return containing the claim filed within the time contemplated under the Act for the relevant assessment year. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i)-(ii): Allowability of section 80P deduction vis-à-vis non-filing / belated filing of return; application of section 80A(5) Legal framework (as discussed by the Tribunal): The Tribunal examined the statutory requirement that a claim for deduction under Chapter VI-A (including section 80P) must be made in a return of income, and applied section 80A(5) to the effect that where an assessee fails to make a claim in the return, no deduction shall be allowed. The Tribunal also applied the legal position (for the relevant period) that the return must be a valid return filed within the time contemplated under the Act (including under sections 139(1), 139(4), or within time stipulated pursuant to notices), for the claim to be admissible. Interpretation and reasoning: The Tribunal treated the absence of a return filed within the time allowed under section 139(1) or section 139(4) for the relevant assessment year as undisputed. It considered the assessee's plea that a return was later furnished on 24-09-2019 in response to notice under section 142(1), and that the assessment proceeded without considering it. The Tribunal held that a belated return furnished in response to section 142(1), if not filed within the time legally permissible, does not satisfy the statutory pre-condition for claiming section 80P. The Tribunal accepted and applied the principle that the deduction is a statutory benefit requiring strict compliance, and that failure to file a valid and timely return is not a procedural lapse capable of being ignored. The Tribunal further held that subsequent furnishing of details/documents or explanations regarding non-receipt/misunderstanding of notices does not cure the foundational defect of not filing a valid return within time. Conclusions: The Tribunal concluded that section 80A(5) barred allowance of deduction under section 80P because the assessee did not file a valid return within the time allowed under section 139(1) or section 139(4) for the assessment year in question, and the later return furnished in response to section 142(1) was belated and legally ineffective for the purpose of making a valid deduction claim. On this determinative ground, the Tribunal affirmed denial of deduction under section 80P and declined to interfere with the orders of the lower authorities, resulting in dismissal of the appeal. The stay petition was dismissed as infructuous upon disposal of the appeal.