Late Filing causes Disallowance of Section 80P Deduction: ITAT directs Taxation on Net Profit After Verification [Read Order]
The tribunal observed that interest income claimed on a gross basis should be taxed after allowing related expenses, and set aside the CIT(A)’s finding for AO verification.
ITAT - directs Taxation - Net Profit - taxscan
ITAT - directs Taxation - Net Profit - taxscan
The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) directs taxation on the net profit after verification, while noting that late filing disallowed the deduction under section 80P of Income Tax Act,1961.
Prathamika Krishi Pattina Sahakara Sangha Ltd., appellant-assessee, was a co-operative society that did not file its income tax return on time. Consequently, the AO denied a deduction of ₹9,86,986 under section 80P(2)(a)(i) and section 80AC. The Commissioner of Income Tax (Appeals)[CIT(A)] upheld this decision, and the assessee appealed before us.
The assessee counsel before us admitted that the deduction under section 80P(2)(a)(i) of the Act for the assessment year 2018-19 was denied due to non-filing of the return within the time prescribed under section 139(1), a decision upheld by the ITAT in ITA No. 1344/Bang/2024 on 17 October 2024. He submitted that the same denial could apply for the year in dispute.
However, he argued that the assessee had claimed the interest income of ₹9,86,986 on a gross basis, without accounting for the related expenses, and therefore the net income, not the gross interest, should be taxed.
The Departmental counsel could not dispute this claim but pointed out that no evidence was provided to show that the deduction was claimed on a gross basis, and stated that this needed verification by the AO.
The two member bench comprising Keshav Dubey (Judicial Member) and Waseem Ahmed (Accountant Member) heard the contentions of both parties and examined the record. The AO had held that, due to late filing, the assessee was not eligible for deduction under section 80P. While the assessee was indeed ineligible for the deduction, the tribunal observed that income should be taxed on the net profit after allowing all related expenses.
The departmental counsel did not produce any evidence against the CIT(A)’s findings. The tribunal held that the net profit shown in the books should be taxed, but since this was not provided by the assessee, it set aside the CIT(A)’s finding and directed the AO to tax the assessee’s income based on net profit after verification.
Accordingly the appeal was allowed for statistical purposes.
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