Introduction

The case of Shree Lunidhar Seva Sahkari Mandali Ltd., Lunidhar, Taluka Kunkavav, Dist. Amreli v. Assessing Officer (CPC), Bangalore was adjudicated by the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, on February 22, 2023. This case addresses the critical issue of whether the denial of a deduction under Section 80P of the Income Tax Act, 1961, is justified when the tax return is filed after the due date specified under Section 139(1) but within the extended period provided under Section 139(4).

Summary of the Judgment

The appellant, Shree Lunidhar Seva Sahkari Mandali Ltd., a cooperative society, filed its income tax return on November 30, 2020, declaring a total income of NIL and claiming a deduction of ₹2,22,704 under Section 80P. The Assessing Officer (CPC), Bangalore, disallowed this deduction, citing the late filing of the return under Section 139(1). The matter was escalated to the National Faceless Appeal Centre (NFAC), Delhi, which upheld the CPC's decision based on an amendment to Section 80AC introduced by the Finance Bill 2018. The appellant challenged this decision before the ITAT Rajkot Bench, arguing that the amendment to Section 143(1)(a)(v) was not applicable to the assessment year 2019-20. The ITAT deliberated on the applicability of the amendment and cited relevant precedents before overturning the NFAC's decision, thereby allowing the deduction under Section 80P.

Analysis

Precedents Cited

The Tribunal referenced several key judgments to substantiate its decision:

• Chirakkal Service Co-Operative Bank Ltd. v. CIT (2016): The Kerala High Court held that a return filed beyond the prescribed periods could still be considered for deductions under Section 80P if relevant provisions were pending in the statutory hierarchy.
• ASR Engg. & Projects Ltd. v. ITAT Hyderabad (2019): The ITAT emphasized that for deductions under Chapter VI-A sections like 80-IA to be valid, the return of income must be filed under Section 139(1), even if the claim in the original return was made in a revised return.
• Lanjani Co-Operative Agri Service Society Ltd. v. DCIT (2023): The ITAT clarified that amendments introduced in April 2021 to Section 143(1)(a)(v) cannot retrospectively affect cases pertaining to assessment years before the amendment.

Legal Reasoning

The crux of the Tribunal's reasoning hinged on the temporal applicability of the amendment introduced in Section 143(1)(a)(v) by the Finance Bill 2021:

• Non-Applicability to AY 2019-20: The amendment came into effect on April 1, 2021. Since the assessment year in question was 2019-20, the provision did not apply.
• Interpretation of Section 143(1)(a)(ii): The Tribunal analyzed whether the denial of deduction fell under 'incorrect claims' as per the explanation to this section. It concluded that late filing under Section 139(1) does not equate to an incorrect claim within the statutory framework.
• Consistency with Precedents: By referencing prior judgments, the Tribunal reinforced that deductions under Chapter VI-A should not be unjustly denied due to procedural lapses unless explicitly stated by law.

Impact

This judgment has significant implications for cooperative societies and other entities claiming deductions under Chapter VI-A provisions:

• Clarification on Temporal Applicability: It underscores the importance of considering the effective dates of legislative amendments, ensuring that taxpayers are not unfairly penalized for filing within extended periods that were in effect at the time.
• Reinforcement of Taxpayer Rights: By allowing the deduction, the Tribunal reinforces the principle that procedural technicalities should not override substantive rights conferred by the law.
• Guidance for Future Cases: This judgment serves as a precedent for similar cases where the applicability of amendments is in question, providing a clear framework for assessing such scenarios.

Complex Concepts Simplified

Section 80P of the Income Tax Act

Section 80P provides deductions to cooperative societies on their income to encourage the co-operative movement. This deduction helps reduce the taxable income of such societies.

Section 139(1) vs. Section 139(4)

Section 139(1) specifies the due date for filing income tax returns, whereas Section 139(4) allows for the filing of belated returns after the due date under certain circumstances.

Prima Facie Adjustment

A prima facie adjustment refers to an initial assessment by the tax authorities based on the information available, which can be contested by the taxpayer if deemed incorrect.

Chapter VI-A Deductions

This chapter encompasses various deductions available to taxpayers, such as Sections 80C to 80U, designed to incentivize savings and investments.

Conclusion

The ITAT Rajkot Bench's decision in the case of Shree Lunidhar Seva Sahkari Mandali Ltd. establishes a pivotal stance on the applicability of legislative amendments concerning tax deductions. By discerning that the amendment to Section 143(1)(a)(v) was not retroactively applicable to the assessment year 2019-20, the Tribunal safeguarded the taxpayer's entitlement to deductions under Section 80P despite the late filing of the return within the extended period. This judgment reinforces the necessity for tax authorities to adhere strictly to the temporal boundaries of legal provisions and ensures that taxpayers are not unjustly deprived of their lawful deductions due to procedural technicalities.