Finance Act 2018’s Section 80AC Timely-Filing Requirement Applies Only from AY 2018-19: ITAT allows S.80P Deduction Despite Late ITR [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that the deduction under section 80P can be allowed as the amendment to section 80AC came in the year 2018, and it cannot be applied retrospectively.

The assessee, Dholka Nagaric Bachat Sahakari Mandali Ltd is a co-operative credit society registered under the Gujarat Co-operative Societies Act. It is engaged in the business of providing credit facilities to its members and accepting deposits from them. The assessee maintained regular books of account, which the Sub-Registrar, Co-operative Societies audits.

For the year under consideration, the assessee did not file its return of income within the prescribed time. Subsequently, a notice was issued, but no return was filed. A show-cause notice was later issued on and in response, the assessee submitted that since its income after deduction under Section 80P was below the taxable limit, return filing was not mandatory.

The Assessing Officer, however, held that under the sixth proviso to section 139(1), if the gross total income before the exemption under Section 80P exceeds the taxable limit, the assessee is mandatorily required to file its return within the prescribed time. Since the assessee failed to do so, the deduction under Section 80P was disallowed, and tax was computed accordingly.

Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the CIT(A). The CIT(A) upheld the disallowance on similar reasoning as made by the Assessing Officer and passed an ex parte order, as the assessee did not respond to notices issued. Aggrieved, the assessee filed an appeal before the Tribunal.

The assessee submitted that it was a co-operative society engaged in providing credit facilities to its members, and it qualifies for deduction under Section 80P(2)(a)(i) of the Act. The assessee contended that it was under a bona fide belief that its income was exempt and a return was not required.

The assessee also submitted that the amendment to section 80AC requiring the timely filing of a return as a precondition for availing a deduction under Chapter VIA was made by the Finance Act, 2018 and came into effect from AY 2018-19 onwards; therefore, the said condition was not applicable for AY 2017-18.

The Tribunal observed that the disallowance made by the Assessing Officer and upheld by the CIT(A) is not justified, as the requirement of filing the return within the due date to claim deductions under Chapter VIA was only introduced through the amendment to section 80AC by the Finance Act, 2018.

The tribunal, after considering the relevant issues, observed that this amendment came into effect from 01.04.2018 and applies from Assessment Year 2018–19 onwards. The two-member bench comprising Siddhartha Nautiyal (Judicial Member) and Dr B.R.R. Kumar (Vice President) held that in the present case, the relevant assessment year is 2017–18, and hence, the amended provisions of section 80AC do not apply.

The tribunal observed that before this amendment, the law did not mandate filing of a return within the prescribed time as a precondition for availing deduction under Section 80P of the Act and held that the deduction under Section 80P(2)(a)(i) cannot be denied to the assessee for AY 2017–18 merely on the ground that the return was not filed within the time prescribed. Accordingly, the disallowance of deduction under Section 80P(2)(a)(i) of the Act of Rs.7,21,430/- was directed to be deleted.

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