Loading judgment…
Facts
The assessee, a co-operative society, failed to file its income tax return within the due date. Consequently, the Assessing Officer denied the deduction under Section 80P(2)(a)(i) amounting to ₹9,86,986.00, citing Section 80AC. The CIT(A) upheld this decision.
Held
The Tribunal held that while the assessee is not eligible for deduction under Section 80P(2)(a)(i) due to late filing, the income to be taxed should be the net profit after allowing all allowable costs, not the gross interest income. The case was remitted to the AO for verification of net profit.
Key Issues
Whether the denial of deduction under Section 80P(2)(a)(i) for late filing is justified, and if so, whether the taxable income should be gross receipt or net profit.
Sections Cited
139, 80P, 80P(2)(a)(i), 80AC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-1, Visakhapatnam vide order dated 14/03/2025 in DIN No. ITBA/APL/S/250/2024-25/1074504947(1) for the assessment year 2017-18.
The only issue raised by the assessee is that the learned CIT(A) erred in denying the benefit of deduction claimed by the assessee under section 80P of the Act, on account of non-filing of the return of income within the due date specified under section 139 of the Act.
In the present case, the assessee is a co-operative society. The assessee failed to file the return of income under section 139(1) of the Act. Accordingly, the deduction under section 80P(2)(a)(i) of the Act amounting to ₹9,86,986.00 was denied by the AO under the provisions of section 80AC of the Act on account of non-filing of the return of income within the time stipulated under section 139(1) of the Act. On appeal, the learned CIT(A) confirmed the finding of the AO.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us fairly admitted that the assessee was denied the benefit of section 80P(2)(a)(i) of the Act for the assessment year 2018–19 on account of non-filing of the return of income within the stipulated time specified under section 139(1) of the Act. Such denial of deduction was also upheld by the ITAT in for the assessment year 2018–19, vide order dated 17 October 2024.
Accordingly, the learned AR submitted that the benefit of deduction under section 80P of the Act can also be denied for the year in dispute. However, the learned AR further submitted that the assessee has claimed deduction of the interest income under section 80P(2)(a)(i) of the Act on a gross basis i.e. ₹₹9,86,986.00 which has been made subject to addition. This means that the corresponding cost incurred by the assessee against such interest income was not allowed while . calculating the income of the assessee. According to the learned AR, the net income of the assessee should be made subject to taxation, instead of the gross receipt representing interest ₹9,86,986.00 only.
On the other hand, the learned DR could not controvert the arguments advanced by the learned AR for the assessee but submitted that there is no information brought on record by the learned AR of the assessee suggesting that the deduction under section 80P(2)(a)(i) of the Act for ₹9,86,986.00 only was claimed on gross basis. As per the learned DR this aspect needs verification at the level of the AO.
We have heard the rival contentions of both parties and perused the materials available on record. The AO held that since the return was filed late, the assessee is not eligible for deduction under section 80P of the Act. It is true that the assessee is not eligible for deduction under section 80P(2)(a)(i) of the Act, but it has to be seen how the income of the assessee should be calculated for taxation. In our considered view, it is the net income of the assessee which should be brought to tax after allowing the deduction of all the corresponding costs within the provisions of law. At the time of hearing, the learned DR also did not bring anything on record contrary to the findings of the learned CIT(A). Accordingly, we hold that it is the amount of net profit shown by the assessee in the books of accounts which should be brought to tax. In the present case, such net profit has not been brought on record by the ld. AR for the assessee. Therefore, we set aside the finding of the learned CIT(A) and direct the AO to tax the income of the assessee at Net profit after necessary verification as per law. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in court on 1st day of September, 2025