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Unfolding Section 80AC – ‘Deductions not to be allowed unless return furnished’

2 Jul    Direct Taxation
Jul 2

Unfolding Section 80AC – ‘Deductions not to be allowed unless return furnished’

Interpretation of section 80AC of the Income Tax Act, 1961 (the Act) has its various phases but a section defined in a law cannot have two separate meanings.

Today we are going to learn about true interpretation of Section 80AC of the Act from conversation of Madhav and Vidya.

Madhav: Vidya, today I was solving an income tax notice of a co-operative housing society, in which I found out that they have claimed deduction u/s 80P, the issues mentioned in the notice are solved and I am about to revise the income tax return.

Vidya: Then what is the issue?

Madhav: Don’t be so casual Vidya, if I revise the return I won’t be able to claim deduction u/s 80P as per the provisions of section 80AC. And the deduction amount is pretty huge.

Vidya: Madhav, I think you have not read the section carefully. Let us see what the section actually says,

As per Section 80AC of the Act, “Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after—

(i) the 1st day of April, 2006 but before the 1st day of April, 2018, 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;

(ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”,

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 subsection(1) of section 139.”

As you can see Madhav, this section previously talked about specific 6 deductions till the Government introduced clause (ii) with an objective of bringing uniformity in all income-based deductions, in which it is proposed that the scope of section 80AC should be extended to all similar deductions which are covered under the heading “C—Deductions in respect of certain incomes” under Chapter VIA i.e from Sections 80HH to 80RRB.

And it says that deduction shall be allowed only if Original Return is filed on or before the due date specified u/s 139(1). To explain further, you can claim deductions by furnishing an income tax return on or before the due dates specified under sections other than section 139(1), i.e. 139(4), 139(5), provided that you have furnished original return on or before the due date specified u/s 139(1).

Madhav: Oh! I was totally unaware about this fact. But how can you be so sure?

Vidya: Madhav,

1.         As per the decision in ACIT Vs. Precot Meridian Limited ITA 1214/Mds/2012 (Chennai Tribunal), it was observed that the section does not speak of a claim to be made in the return filed under section 139(1). The section speaks of filing a return within the time specified under section 139(1) and nothing else.

2.         Further as per the decision in Parmeshwar Cold Storage (P) Limited Vs. ASCIT (2011) 16 com88(Ahd.), it was also observed that, Section 80AC does not require that the claim under section 80-IB should be made only through the original return in time. It only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim. In other words, it is not a requirement to make the claim in the original return itself, which is to be filed within the time. It was further explained that for claiming deduction under section 80-IB, the only condition is that the original return should be filed in time, but the claim need not necessarily be made in the original return, it can be made subsequent thereto also.

Madhav: That means, in my case I wouldn’t have to worry about losing the deduction claimed by the Co-operative society in its income tax return file within the due dates specified u/s 139(1).

Vidya: You got it absolutely right Madhav!

Madhav: Thank you, Vidya. It is quite an interesting section.

Vidya: Since you’ve understood the concept, can you conclude so that our readers can understand?

Madhav: Yes, why not?

Conclusion –

1. If Original Income Tax Return is not furnished on or before the due dates specified u/s 139(1), you cannot claim deductions specified in Part C of Chapter VI-A.

2. If Original Income Tax Return is furnished on or before the due dates specified u/s 139(1), you can claim deductions specified in Part C of Chapter VI-A on or before the due dates specified in the section 139.

3. If original return is filed within due dates prescribed under section 139(1), and deductions are not claimed in that original return and return needs to be revised, then return can be revised and deductions can be claimed.