[2023] 147 taxmann.com 449 (Nagpur - Trib.

)[07-10-2022]

INCOME TAX : Requirement of making a claim in return of income under section

80A(5) is directory in nature and, therefore, lower authorities were not justified in
rejecting assessee's claim of deduction under section 80P only on ground that such a
claim was not made in return but during course of assessment proceedings

■■■

[2023] 147 taxmann.com 449 (Nagpur - Trib.)

IN THE ITAT NAGPUR BENCH
Krushi Vibhag Karmchari Vrund Sahakari Pat Sanstha Maryadit
v.
Income-tax Officer*
R.S. SYAL, VICE PRESIDENT
IT APPEAL NO. 182 (NAG.) OF 2019
[ASSESSMENT YEAR 2009-10]
OCTOBER 7, 2022

Section 80P, read with sections 80A and 80AC, of the Income-tax Act, 1961 - Deductions -
Income of co-operative societies (Scope of provision) - Assessment year 2009-10 - Assessee,
a co-operative society, did not file its return of income - During course of assessment
proceedings it filed computation of income claiming deduction under section 80P - Assessing
Officer denied deduction on ground that section 80A(5), stipulated a condition of filing return
of income for claiming deduction, under relevant sections of Part C of Chapter VI-A -
Assessee contended that section 80A(5) did not apply where no return was furnished and
rather it was section 80AC which would govern case and because of omission of section 80P
in list of sections given in section 80AC, deduction should be granted - Whether provisions of
section 80AC does not deal with granting or non-granting of deduction under any other
sections of Part C of Chapter VI-A including section 80P except specified six sections
provided in it's list and, therefore, contention of assessee could not be accepted - Held, yes -
Whether as per section 80A(5) requirement of making a claim in return of income is directory
requirement and even if claim is made during course of assessment proceedings, such a
claim has to be allowed - Held, yes - Whether therefore, assessee's claim of deduction under
section 80P could not be rejected only on ground that such a claim was not made in return
but during course of assessment proceedings - Held, yes [Paras 6 & 13] [In favour of
assessee]
FACTS

■ The assessee was a co-operative society engaged in providing credit facilities to its members. It did not file
return of income for the year under consideration. During the course of assessment proceedings the assessee
filed computation of income in which it claimed deduction under section 80P.
■ The Assessing Officer denied the benefit of deduction under section 80P on ground that section 80A(5),
stipulated a condition of filing return of income for claiming deduction, inter alia, under Part C of Chapter
VI-A.
■ On appeal, the Commissioner (Appeals) upheld order of the Assessing Officer.
■ On appeal to the Tribunal :
HELD

■ It is an undisputed fact that the assessee did not file return of income for the year under consideration either
originally or pursuant to notice under section 148. Computation of income was filed during the course of
assessment proceedings in which the deduction under section 80P was claimed. Whereas, the authorities
below have canvassed a view that the assessee violated section 80A(5) and hence the deduction was not
available; the assessee has made out a case that section 80A(5) does not apply where no return is furnished
and rather it is section 80AC which would govern the case and because of omission of section 80P in the list
of sections given in section 80AC, the deduction should be granted. [Para 5]
■ On going through the provision of section 80AC it is crystallized that the requirement of filing return before
the time under section 139(1) is sine qua non for claiming deduction under the six sections (80-IA or 80-
IAB or 80-IB or 80-IC or 80-ID or 80-IE). In other words, if a return is filed belatedly under section 139(4)
or under any other section, claiming deduction under any of the six sections, the writ of the section 80AC
will operate to prevent its granting. This section does not deal with granting or non-granting of deduction
under any other sections of Part C of Chapter VI-A, including section 80P. Thus, to infer that since section
80AC does not cover section 80P, the latter section is immune from any other statutory requirement, is
wholly incorrect. In fact, section 80AC is alien to deduction under any section except the specified six
sections. [Para 6]
■ Now, coming to section 80A(5), this section provides that where an assessee fails to make a claim in his
return of income for any deduction, amongst others, the sections enshrined in Part C to Chapter VI-A
(including section 80P and six sections as given in section 80AC), then the deduction shall not be allowed.
A perusal of the mandate of section 80A(5) divulges that the claiming of deduction under various sections
of part C of Chapter VI-A in the return of income is essential. The reference in this provision is only to
return of income, without any further qualification. The return may be under section 139(1) or 139(4) or any
other relevant section. [Para 8]
■ On a conjoint reading of sections 80A(5) and 80AC, it gets manifest that claiming of deduction under
various sections of Part C of Chapter VI-A in the return of income is essential. However, an additional
requirement for claiming deduction under section 80-IA or 80-IAB or 80-IB or 80-IC or 80-ID or 80-IE is
that such deduction must be claimed in a return filed under section 139(1). In one sense, section 80AC is an
exception to section 80A(5), making the mandate of the latter section more stringent in the prescribed cases.
Whereas other deductions of Part C of Chapter VI-A, including section 80P, can be claimed in the return
filed under any section, including section 139(4); the six deductions as referred to in section 80AC must
necessarily be claimed in the return filed under section 139(1) only. Ex consequenti, the contention that
since section 80P is not covered under section 80AC, the deduction under this section becomes
automatically allowable without adhering to the requirement of section 80A(5), is bereft of force and hence
dismissed. [Para9]
■ Now coming to the requirements of section 80A(5), which stipulates that no deduction under other sections
including 80P shall be allowed if the assessee fails to make such a claim in the return of income. Thus, there
are twin conditions, viz., first, claiming deduction under section 80P and second, claiming such deduction in
the return of income. There is no dispute on the first condition, which has been satisfied in this case as the
assessee did claim the deduction albeit during the course of assessment proceedings. The whole controversy
revolves around the second condition, which says that the claim should be made in the return of income.
The assessee in the instant case did not file any return of income, but made a claim of the deduction in
computation of income filed during the course of the assessment proceedings. The moot question is whether
the requirement of making a claim in the return of income is a mandatory or a directory requirement. If it is
held as mandatory, then the claim must be made in the return of income, failing which the benefit of
deduction would be lost. Au contraire, if it is held as directory, then the claim made either in the return of
income or in any manner before the conclusion of assessment proceedings, as is the case under
consideration, would validate the entitlement. [Para 10]
■ On going through the catena of decisions, the principle which emerges is that the fulfillment of requirement
of making a claim for exemption under the relevant sections of Chapter III in the return of income is
mandatory, but when it comes to the claim of a deduction, inter alia, under the relevant sections of Chapter
VI-A, such requirement becomes directory. In the latter case, the making of a claim even after the filing of
return but before completing the assessment, meets the directory requirement of making a claim in the
return of income. The instant case involves deduction under section 80P and hence, making of a claim of
deduction is mandatory but the timing is directory. Even if the claim is made during the course of
assessment proceedings, such a claim has to be allowed. In view of the foregoing discussion, the lower
authorities were not justified in rejecting the assessee's claim of deduction under section 80P only on the
ground that such a claim was not made in the return but during the course of assessment proceedings. The
impugned order is ergo set aside and the matter is remitted to the file of the Assessing Officer for examining
the claim of deduction under section 80P on merits. [Para 13]
CASE REVIEW

CIT v. Shivanand Electronics [1994] 75 Taxman 93/209 ITR 63/119 CTR 94 (Bom.) (para 11) approved.
CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015] 376 ITR 456/279 CTR 534 (SC)
(para 13) followed.
CASES REFERRED TO

CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015] 376 ITR 456/279 CTR 534 (SC)
(para 11), CIT v. Shivanand Electronics [1994] 75 Taxman 93/209 ITR 63/119 CTR 94 (Bom.) (para 11) and
Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1 (SC) (para 12).
Jayant Ranade for the Appellant. G.J. Ninawe for the Respondent.
ORDER

1. This appeal by the assessee is directed against the order dated 28-05-2019 passed by the CIT(A)-2, Nagpur in
relation to the assessment year 2009-10.
2. A small but interesting issue raised in this appeal is against denial of deduction of Rs. 11,70,858 u/s 80P of
the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
3. Pithily put, the factual panorama of the case is that the assessee is a co-operative society engaged in
providing credit facilities to its members. It did not file return of income for the year under consideration. The
Assessing Officer (AO) received AIR information about the assessee having deposited cash of Rs. 64,86,880/-
in its bank account. Notice u/s 148 was issued. The assessee did not file any return. It, however, filed certain
details before the AO, like, Balance sheet, audit report, copy of bank statements and computation of income
claiming deduction u/s 80P of the Act. The AO noted that the assessee had shown profit of Rs. 10,87,858,
against which deduction was claimed u/s 80P at Rs. 8,06,746. In the absence of any co-operation forthcoming
from the side of the assessee, the AO was left with no option but to complete the assessment u/s 144 r.w.s. 147
at Rs. 11,70,858/-, denying the benefit of deduction u/s 80P of the Act. Denial of the deduction was based on
his interpretation of section 80A(5), which stipulates a condition of filing return of income for claiming
deduction, inter alia, under Part C of Chapter VI-A of the Act. The assessee challenged the denial of deduction
u/s 80P before the ld. first appellate authority contending that the return could not be filed as it faced some
difficulty in getting PAN under the correct status and the consequential inability to file return of income. The
ld. CIT(A) echoed the denial of deduction u/s 80P. This has brought the assessee before the Tribunal.
4. At the outset, the ld. AR submitted that section 80A(5) applies only where the assessee files his return
without claiming deduction therein; and not where the return itself is not filed. Since the return per se was not
filed, the ld. AR contended that section 80A(5) would have no application. Rather, he invoked section 80AC,
which refers to six sections under which deduction cannot be claimed without furnishing the return of income.
As section 80P does not figure in the list of sections specified in section 80AC, the ld. AR contended that the
deduction u/s 80P ought to have been allowed. In the oppugnation, the ld. DR strongly relied on the impugned
order.
5. I have heard both the sides and scanned through the relevant material on record. It is an undisputed fact that
the assessee did not file return of income for the year under consideration either originally or pursuant to notice
u/s 148. Computation of income was filed during the course of assessment proceedings in which the deduction
u/s 80P was claimed. Whereas, the authorities below have canvassed a view that the assessee violated section
80A(5) and hence the deduction was not available; the assessee has made out a case that section 80A(5) does
not apply where no return is furnished and rather it is section 80AC which would govern the case and because
of omission of section 80P in the list of sections given in section 80AC, the deduction should be granted. In
order to appreciate the contention of the ld. AR, it would be apposite to reproduce section 80AC, before its
substitution by the Finance Act, 2018 w.e.f 1-4-2018, which reads as under:
" Where in computing the total income of an assessee of any previous year relevant to the assessment year
commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible
under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE,
no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment
year on or before the due date specified under sub-section (1) of section 139."
6. On going through the above provision, it is crystallized that the requirement of filing return before the time
u/s 139(1) is sine qua non for claiming deduction under the six sections (80-IA or 80-IAB or 80-IB or 80-IC or
80-ID or 80-IE). In other words, if a return is filed belatedly u/s 139(4) or under any other section, claiming
deduction under any of the six sections, the writ of the section 80AC will operate to prevent its granting. This
section does not deal with granting or non-granting of deduction under any other sections of Part C of Chapter
VI-A, including section 80P. Thus, to infer that since section 80AC does not cover section 80P, the latter
section is immune from any other statutory requirement, is wholly incorrect. In fact, section 80AC is alien to
deduction under any section except the specified six sections.
7. Now, I turn to section 80A(5), which has been pressed into service by the AO for denying the benefit of
deduction u/s 80P of the Act, which runs as under:
'Where the assessee fails to make a claim in his return of income for any deduction under section 10A or
section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading "C.
—Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder.'
8. This section provides that where an assessee fails to make a claim in his return of income for any deduction,
amongst others, the sections enshrined in Part C to Chapter VI-A (including section 80P and six sections as
given in section 80AC), then the deduction shall not be allowed. A perusal of the mandate of section 80A(5)
divulges that the claiming of deduction under various sections of part C of Chapter VI-A in the return of
income is essential. The reference in this provision is only to return of income, without any further
qualification. The return may be u/s 139(1) or 139(4) or any other relevant section.
9. On a conjoint reading of sections 80A(5) and 80AC, it gets manifest that claiming of deduction under various
sections of Part C of Chapter VI-A in the return of income is essential. However, an additional requirement for
claiming deduction under sections 80-IA or 80-IAB or 80-IB or 80-IC or 80-ID or 80-IE is that such deduction
must be claimed in a return filed u/s 139(1) of the Act. In one sense, section 80AC is an exception to section
80A(5), making the mandate of the latter section more stringent in the prescribed cases. Whereas other
deductions of Part C of Chapter VI-A, including section 80P, can be claimed in the return filed under any
section, including section 139(4); the six deductions as referred to in section 80AC must necessarily be claimed
in the return filed u/s 139(1) only. Ex consequenti, the contention that since section 80P is not covered under
section 80AC, the deduction under this section becomes automatically allowable without adhering to the
requirement of section 80A(5), is bereft of force and hence dismissed.
10. Now I advert to the requirements of section 80A(5), which stipulates that no deduction under other sections
including 80P shall be allowed if the assessee fails to make such a claim in the return of income. Thus, there are
twin conditions, viz., first, claiming deduction u/s 80P and second, claiming such deduction in the return of
income. There is no dispute on the first condition, which has been satisfied in this case as the assessee did claim
the deduction albeit during the course of assessment proceedings. The whole controversy revolves around the
second condition, which says that the claim should be made in the return of income. The assessee in the extant
case did not file any return of income, but made a claim of the deduction in computation of income filed during
the course of the assessment proceedings. The moot question is whether the requirement of making a claim in
the return of income is a mandatory or a directory requirement. If it is held as mandatory, then the claim must
be made in the return of income, failing which the benefit of deduction would be lost. Au contraire, if it is held
as directory, then the claim made either in the return of income or in any manner before the conclusion of
assessment proceedings, as is the case under consideration, would validate the entitlement.
11. The Hon'ble Supreme Court in CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015]
376 ITR 456/279 CTR 534 came across a situation in which the assessee claimed additional depreciation in
Form 3AA but the Form was not furnished along with the return of income. Such Form was submitted during
the course of assessment proceedings. The AO denied the claim on the ground that the Form 3AA was required
to be statutorily filed along with the return of income. The view of the AO was reversed by the Tribunal as well
as the Hon'ble High Court by holding that even if the Form was filed during the course of assessment
proceedings, it amounted to sufficient compliance. The Hon'ble Supreme Court, taking note of the judgment in
CIT v. Shivanand Electronics [1994] 75 Taxman 93/209 ITR 63/119 CTR 94 (Bom.), approved the view of the
Hon'ble High Court having the effect that the requirement of filing Form 3AA was a necessary ingredient for
claiming additional depreciation, but the timing of filing the Form was a directory requirement, which was
fulfilled on filing it even during the course of assessment proceedings. The Hon'ble Bombay High Court in
Shivanand Electronics (supra) dealt with the requirement of filing audit report for the purpose of claiming
deduction u/s 80J, which required that the report should be filed "along with return of income'' under s.
80J(6A). It held that such requirement of filing the audit report along with the return of income was not
mandatory, but directory in the sense that if assessee complied with the same before completion of assessment,
deduction under s. 80J, on the basis of such report, was allowable.
12. Recently, the Hon'ble Supreme Court was confronted with the claim of benefit u/s 10B in Pr. CIT v. Wipro
Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1. The assessee furnished original return taking
the benefit of section 10B and did not carry forward the loss. Thereafter, a revised return was filed foregoing
the claim of deduction u/s 10B. The AO rejected the withdrawal of exemption under section 10B by holding
that assessee did not furnish the necessary declaration in writing before due date of filing return of income,
which was an essential requirement for not claiming the benefit of section 10B. The Hon'ble High Court
decided the issue in favour of the assessee by holding that the requirement of filing the declaration was
mandatory but filing it along with the return of income u/s 139(1) was a directory requirement. The matter was
brought by the Revenue before the Hon'ble Supreme Court. The assessee, inter alia, relied on the judgment of
the Apex Court in G.M. Knitting Industries (P.) Ltd. (supra). Their Lordships held that the requirement of filing
the report in support of deduction u/s 10B was not a directory but a mandatory requirement. It further held that
both the conditions of - filing the declaration and filing it before the time limit u/s 139(1) - were mandatory and
had to be cumulatively satisfied. Rejecting the reliance on G.M. Knitting Industries (P.) Ltd. (supra), the
Hon'ble Supreme Court held that that decision was relevant in the context of deduction provisions and not the
exemption provisions as given under Chapter III of the Act. As the Hon'ble Summit Court in Wipro Ltd. (supra)
was dealing with section 10B, falling under Chapter III of the Act, it held qua G.M. Knitting Industries (P.) Ltd.
(supra) that: 'Therefore, the said decision shall not be applicable to the facts of the case on hand, while
considering the exemption provisions. Even otherwise, Chapter III and Chapter VI-A of the Act operate in
different realms and principles of Chapter III, which deals with "incomes which do not form a part of total
income", cannot be equated with mechanism provided for deductions in Chapter VI-A, which deals with
"deductions to be made in computing total income". Therefore, none of the decisions which are relied upon on
behalf of the assessee on interpretation of Chapter VI-A shall be applicable while considering the claim under
section 10B (8) of the IT Act.'
13. On going through the judgments in G.M. Knitting Industries (P.) Ltd. (supra) in juxtaposition to Wipro Ltd.
(supra), the principle which emerges is that the fulfillment of requirement of making a claim for exemption
under the relevant sections of Chapter III in the return of income is mandatory, but when it comes to the claim
of a deduction, inter alia, under the relevant sections of Chapter VI-A, such requirement becomes directory. In
the latter case, the making of a claim even after the filing of return but before completing the assessment, meets
the directory requirement of making a claim in the return of income. The instant case involves deduction u/s
80P and hence, would be governed by the principle laid down in G.M. Knitting Industries (P.) Ltd. (supra), as
per which the making of a claim of deduction is mandatory but the timing is directory. Even if the claim is
made during the course of assessment proceedings, such a claim has to be allowed. In view of the foregoing
discussion, I am satisfied that the authorities below were not justified in rejecting the assessee's claim of
deduction u/s 80P only on the ground that such a claim was not made in the return but during the course of
assessment proceedings. The impugned order is ergo set aside and the matter is remitted to the file of the AO
for examining the claim of deduction u/s 80P on merits.
14. In the result, the appeal is allowed for statistical purposes.
NEETU
*In favour of assessee.