Filing of Return of Income Mandatory to claim Deduction u/s 80P: ITAT [Read Order]

The Visakhapatnam Bench of the Income Tax Appellate Tribunal (ITAT) has held that filing of return of income is a mandatory precondition for claiming deduction under Section 80P of the Income Tax Act, 1961.

The assessee, The Chatrai Primary Agricultural Cooperative Credit Society Limited, a cooperative society, had not filed its return of income for the relevant assessment year. Consequently, during assessment proceedings, the AssessingOfficer invoked the provisions of Section 80A(5) and denied the claim of deduction under Section 80P(2)(a)(i) of the Income Tax Act. The net profit reflected in the profit and loss account was brought to tax as business income, resulting in an addition.

Before the Commissioner of Income Tax (Appeals), the assessee subsequently filed its return of income and claimed deduction under Section 80P in respect of the entire profit. However, the appellate authority upheld the denial of deduction on the ground that eligibility for such claim is contingent upon filing of return of income under the relevant provisions, including Sections 139(1), 139(4), 142(1), or 148 of the Income Tax Act and that such requirement is mandatory even for earlier assessment years prior to 2018–19.

The assessee contended before the Tribunal that Section 80P of the Income Tax Act being an incentive provision should be interpreted liberally, and the deduction ought to be granted even in the absence of a return filed within the prescribed time.

The counsel further submitted that the provisions of section 80P are beneficial in nature and hence, the same should be interpreted in a liberal manner and deduction under Section 80P of the Income Tax Act should be granted, even though no return of income was filed and section 80AC of the Income Tax Act is not applicable to their case.

The Tribunal of Udayan Das Gupta, Judicial Member and Omkareshwar Chidara, Accountant Member rejected the contention and observed that the primary requirement for claiming any deduction under the Income Tax Act is the filing of a return of income before completion of assessment.

It was noted that an identical issue had already been decided by a coordinate bench in the case of Chinnampeta Primary Agricultural Cooperative Credit Society Limited, wherein it was held that filing of return of income is mandatory for claiming deductions, including those under Section 80P.

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