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Facts
The assessee, a credit cooperative society, did not file its income tax return for A.Y. 2017-18. Based on information about significant cash deposits during demonetisation, the AO initiated assessment and denied the Section 80P deduction and other expenses, making an addition. The assessee subsequently filed a belated return under Section 142(1) claiming Section 80P deduction, but both the AO and CIT(A) dismissed the claim, stating the return was not filed within due dates.
Held
The Tribunal held that the assessee, a cooperative society, is eligible for Section 80P deduction even if the return of income is filed belatedly under Section 142(1) but before the completion of assessment. Relying on judicial precedents, the Tribunal set aside the CIT(A)'s order and directed the AO to consider the belated return as valid and allow the Section 80P deduction.
Key Issues
Whether a co-operative society is eligible for deduction under Section 80P of the Income Tax Act if the return of income is filed belatedly under Section 142(1) but before the assessment is concluded, in light of Section 80A(5).
Sections Cited
133(6), 80P, 142(1), 37, 80A(5), 139(1), 139(4), 148, 80P(2)(a)(i), 80P(2)(d)
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2017-18, vide order dated 31.12.2024.
The assessee is a credit cooperative society had not filed its return of income for the assessment year 2017-18. Based on the information available with the department, the assessee had deposited a sum of Rs.10,00,000/- by way of cash
:-2-: ITA. No.:359/Chny/2025 during the demonetisation period. The statutory notices were issued to the assessee. Apart from that, a notice u/s.133(6) of the Act was sent to Kancheepuram Co-op. Bank Ltd., Kundrathur and obtained information of transactions of the assessee for the financial year 2016-17. The AO found that during the financial year 2016-17, the assessee had made a cash deposit of Rs.71,80,000/- during the demonetisation period out of which Rs.7,80,000/- was of SBNs. Further, the total cash deposits made during the impugned financial year 2016-17 was Rs.10,67,66,104/- and other credits in the bank account to the tune of Rs.17,18,96,242/-. During the assessment proceedings, the assessee filed its audited financials as on 31.03.2017 showing net profit of Rs.52,79,856/- and stated that the assessee is a registered credit co- operative society and collects deposits from its members and lending money to the members. Later, the AO issued a show cause notice by giving an opportunity of hearing requesting to show cause as to why the net profit of Rs.52,79,857/- should not be treated as society’s income along with the disallowance of provision for NPA, provision of overdue interest and provision for sundry debtors to the tune of Rs.15,85,057/-. In response, the assessee filed a reply stating that it is a co- operative society carrying on the business of advancing of credit to members, advancing of loans against the jewels and public distribution system of essential commodities by state government and subject to audit by the state co-operative audit, Government of Tamilnadu. Further, the income of the society is eligible for deduction u/s.80P of the Act and there is no liability to income tax. Further, the assessee also stated that they have filed the return of income u/s.142(1) of the Act for the impugned assessment year on 07.11.2019 by claiming a deduction under Chapter VIA (Section 80P of the Act). However, after considering the assessee’s reply, the AO was not convinced and concluded the assessment by passing an order
:-3-: ITA. No.:359/Chny/2025 dated 02.12.2019 by making a net addition of Rs.68,64,914/- by denying the deduction claimed u/s.80P of the Act along with the disallowances of expenses u/s.37 of the Act. Aggrieved by the order passed by the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi.
The assessee reiterated the claim of deduction u/s.80P of the Act before the ld.CIT(A) by filing a detailed response to the notices issued during the appellate proceedings. Further, the assessee stated that the return of income was filed u/s.142(1) of the Act before passing the order by the AO on 02.12.2019. Therefore, the claim of deduction u/s.80P of the Act has been made in the return of income and hence, the assessee is eligible to claim deduction u/s.80P of the Act. Therefore, the assessee prayed for allowing the deduction claimed u/s.80P of the Act. However, the ld.CIT(A) has dismissed the appeal of the assessee stating that the assessee had not filed the return of income before the due dates provided u/s.142(1) of the Act, apart from non-filing of the original return of income u/s.139(1) of the Act by passing an order dated 31.12.2024. Aggrieved by the order passed by the ld.CIT(A), the assessee is before us.
Before us the ld.AR for the assessee submitted that the assessee is a society registered under Tamilnadu Co-Operative Societies Act and the books of account of the assessee are audited by the department of co-operative audit, Government of Tamilnadu. Further, during the assessment proceedings the assessee had filed its audited books of accounts and the AO has considered the net profit declared by the assessee in the audited books of account as profit earned by the society for the purpose of taxation. Further, the ld.AR submitted that the return of income filed beyond the date prescribed u/s.142(1) of the Act has to be considered as valid return
:-4-: ITA. No.:359/Chny/2025 to allow the claim of deduction u/s.80P of the Act. This has been affirmed by the coordinate bench of the Tribunal in the case of DCIT Vs. M/s.DAE Employees Coop Thrift & Credit Society Ltd. in 593 & 594/Chny/2023 & CO Nos. 23, 24 & 25/Chny/2023 dated 28.06.2023 and hence, prayed for deleting the disallowance of deduction u/s.80P of the Act by setting aside the order of the ld.CIT(A) and to allow the appeal of the assessee.
Per contra, the ld.DR for the revenue submitted that the assessee had not filed the return of income either u/s.139(1) of the Act or before the date provided u/s.142(1) of the Act. Hence, the assessee is not eligible for deduction u/s.80P of the Act since the claim has not been made in the valid return of income as prescribed u/s.80A(5) of the Act and prayed for dismissing the appeal of the assessee.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with case laws relied on. Admittedly, the assessee is a cooperative society registered under The Tamil Nadu Co-Operative Societies Act and the books of accounts are audited by the co- operative department, Government of Tamil Nadu. The assessee had not filed its return of income u/s.139(1) of the Act and filed its return of income u/s.142(1) of the Act on 07.11.2019 which is beyond the date provided by the AO. However, we find that the assessee had filed the return of income u/s.142(1) of the Act before concluding the assessment order dated 02.12.2019 by claiming deduction u/s.80P of the Act to the tune of Rs.68,64,914/- (as per the return of income – Form ITR -5 – Page No.44.)
Further, we find that the AO and that of ld.CIT(A) has rejected the deduction u/s.80P of the Act claimed by the assessee stating that the return was not filed as :-5-: ITA. No.:359/Chny/2025
per the provisions of Section 80A(5) of the Act. However, we find that the issue is clearly covered by this Tribunal’s decision in DCIT Vs. M/s.DAE Employees Coop Thrift & Credit Society Ltd. (supra) wherein the Tribnual has held that the assessee is eligible for deduction u/s.80P though the return of income has been filed beyond the period stipulated u/s.139(1) or 139(4) or 142(1) or 148 of the Act by holding as under: “9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in appellant’s own case for assessment year 2013-14 in dated 10.11.2020, where under identical set of facts, the Tribunal held that the assessee is entitled for deduction u/s. 80P of the Act, towards income derived from its business activities including interest income earned from fixed deposits with other cooperative banks. The relevant findings of the tribunal are as under: “8. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below along with various case laws cited by both the parties. There is no dispute with regard to the fact that the assessee is a credit co-operative society registered under the TamilNadu Co- operative Societies Act, 1983. It is also not in dispute that the assessee is engaged in the business of providing credit facilities to its members. The AO has disallowed deduction claimed u/s.80P(2)(a)(i) of the Act primarily on two grounds. The first objection of the AO is with regard to claim of deduction in the light of provisions of Section 80A(5) of the Act which restricts the deduction unless such deduction is claimed in the return of income. We have gone through the provisions of Section 80P read with Section 80A(5) of the Act and found that nowhere in Section 80P or in Section 80A(5) of the Act it is mentioned that the assessee is required to file its return of income within the prescribed time provided u/s.139(1) or 139(4) of the Act. But, what is required to be seen is whether the assessee has made a claim in the return of income filed for the relevant year or not, even though such return is not filed within due date. In this case, the assessee although not filed its return of income for the impugned assessment year u/s.139 of the Act but such return of income has been filed in response to the notice issued u/s.148 of the Act and in the said return of income the assessee has made a claim for deduction u/s.80P(2)(a)(i) of the Act. Therefore, we are of the considered view there is no merit in the arguments taken by the ld.DR that the assessee is not entitled for deduction u/s.80P unless such deduction is claimed by filing return of income within the prescribed time allowed u/s.139(1) or 139(4) of the Act. This view is fortified by the decision of the Hon’ble Kerala High Court in the case of Chirakkal Service Co operative Bank Ltd., vs. CIT (2016) 384 ITR 490 (Ker), where the Hon’ble Kerala High Court held that “a return filed by the assessee beyond the period stipulated u/s.139(1) or 139(4) or 142(1) or 148 of the Act can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the IT Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under Section 80P of the Act.”
:-6-: ITA. No.:359/Chny/2025
9. Coming back to the issue of interest income earned from fixed deposits and claimed deduction u/s.80P(2)(d) of the Act. The AO has denied deduction claimed u/s.80P(2)(d) of the Act in respect of interest income earned from a co-operative bank on the ground that as per the said provisions, interest earned from any other co-operative society is only eligible for deduction u/s.80P(2)(a)(i) of the Act. The AO has taken support from the decision of the Hon’ble Supreme Court in the case of M/s. Totagars Co-operative Sales Society Ltd., supra. We have gone through the findings recorded by the AO in the light of the decision of the Hon’ble Supreme Court in the said case and find that the fact of the case before the Hon’ble Supreme Court is entirely different from the facts of the present case. In the case before the Hon’ble Supreme Court, the assessee was a co-operative sales society which is engaged in the business of trading in agricultural produce for its members and during the course of its business it has parked surplus funds in other co- operative banks / nationalized banks and earned interest. In those facts, the Hon’ble Supreme Court came to the conclusion that the assessee is not entitled for deduction towards interest income u/s.80P(2)(d) of the Act, because such interest is not earned from its business activity. In this case, the assessee is primarily engaged in the business of providing credit facilities to its members and in the course of its business it has parked funds collected from its members in other co-operative banks / nationalized banks as per the statutory requirements of the co-operative societies Act. The assessee has treated interest earned from other co-operative banks as part of its business activity. Once the assessee has earned interest income as part of its business activity and such interest income is earned out of the funds belonging to its members, then the assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of such interest income. Therefore, we are of the considered view that the case laws relied upon by the ld.AO in the case of Totogars Co-operative Sales Society Ltd., is not applicable to the present facts. We further noted that an identical issue was considered by the Hon’ble Madras High Court in the case of CIT vs. Veerakeralam Primary Agricultural Co- operative Credit Society (2016) 388 ITR 492 (Mad), where the Hon’ble High Court after referring to the decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Sales Society Ltd., held that the benefit of deduction u/s.80P of the Act is excluded for co-operative banks but credit co-operative societies are entitled to claim deduction u/s.80P of the Act in respect of interest income earned from deposits kept in other co-operative banks.
In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the ld.CIT(A) was right in allowing the benefit of deduction claimed u/s.80P of the Act in respect of income derived from the activity including interest income earned from fixed deposits. We do not find any error or infirmity in the order of the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.” 10. In this view of the matter and consistent with view taken by the coordinate bench in appellant’s own case, we are of the considered view that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act, in respect of income derived from its business activity including interest income earned from fixed deposits with other cooperative banks/societies. The ld. CIT(A), after considering relevant facts has rightly directed the Assessing Officer to delete additions made towards disallowance of deduction claimed u/s. 80P(2)(a)(i) of the Act and thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeals filed by the revenue for assessment years 2012-13, 2014-15 & 2017-18.
:-7-: ITA. No.:359/Chny/2025
Therefore, in the present facts and circumstances of the case, since the assessee has filed the return of income on 07.11.2019 which is before concluding the assessment order dated 02.12.2019 and hence, eligible for deduction u/s.80P of the Act. In this view of the matter and consistent view taken by the coordinate bench decision, we are of the view that the assessee is entitled for deduction u/s.80P of the Act and hence, we set aside the order of the ld.CIT(A) and direct the AO to consider the return of income filed by the assessee as valid for the A.Y. 2017-18 and allow the deduction claimed u/s.80P of the Act . We order accordingly by allowing the grounds of appeal raised by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the court on 15th July, 2025 at Chennai.