In a recent ruling, the Pune Bench of the Income Tax Appellate Tribunal (ITAT) allowed a cooperative society’s claim for deduction under Section 80P of the Income Tax Act, 1961.
The assessee, Sahakari Patsanstha Maryadit, a cooperative credit society engaged in lending and investment activities, filed income tax returns for AY 2015-16 and 2016-17. Based on information regarding cash deposits of ₹1.37 crore and ₹74.13 lakh, the Assessing Officer (AO) issued notices under Sections 148, 143(2), and 142(1) of the Income Tax Act.
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The appellant then filed returns in response to the notice under Section 148, claiming a deduction under Section 80P. The AO disallowed the deduction, stating that the returns were not filed within the due date under Section 139(1).
Aggrieved by this order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], where the commissioner upheld the AO’s decision, leading the appellant to approach the ITAT, where the authorised representative for the assessee argued that Section 80AC of the Act is not applicable about the claim of deduction under Section 80P of the Act for the AYs under consideration.
The AR argued that the amendment took effect on April 1, 2018, making it applicable prospectively rather than retrospectively. It also claimed that the returns were filed in response to notice under Section 148, which should be treated as valid compliance.
The Departmental Representative (DR) argued that the appellant failed to file returns within the due date under Section 139(1). This made the assessee not eligible for Section 80P deductions, relying on the post-2018 amendment to Section 80AC.
After hearing the arguments made by both sides, the tribunal observed that the amendment to Section 80AC through the Finance Act 201 will only apply prospectively from AY 2018-19 onward. The tribunal noted that for AY 2015-16 and AY 2016-17, the condition of filing a return within the due date under Section 139(1) did not apply to Section 80P.
The ITAT asserted that since the appellants had filed returns in response to notice under Section 148, they could not be denied the deduction solely on the grounds of delayed filing.
The tribunal relied on a ruling by the Nagpur Bench of ITAT in Krushi Vibhag Karmachari Vrund Sahakari Pat Sanstha Maryadit vvsITO (2022) that Section 80P deductions were not restricted by Section 80AC before its amendment in 2018.
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The ITAT Bench, which consisted of Dr Manish Borad (Accountant Member), held that the disallowance under Section 80P was incorrect. The ITAT remanded the case to the Assessing Officer (AO) for determining the quantum of deduction, directing that the appellant must provide a copy of the registration certificate to prove cooperative society status and that the audited financial statements for both years should be reviewed.
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