Section 80P Deduction Cannot Be Denied for Wrong ITR Column Selection: ITAT Nagpur

Buldana Zilla Parishad Employees Co-op. Society Ltd. Vs ITO (ITAT Nagpur)

The Income Tax Appellate Tribunal (ITAT), Nagpur Bench, allowed the appeal of a credit co-operative society after holding that deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 could not be denied merely because the assessee selected an incorrect column while filing its return of income. The appeal arose from an order of the Commissioner of Income Tax (Appeals) affirming the Assessing Officer’s denial of deduction for Assessment Year 2018-19.

The assessee, a credit co-operative society registered under the Maharashtra Co-operative Societies Act, 1960, was engaged in providing credit facilities to its members. In its return of income, it claimed deduction under Section 80P and declared nil income. The Assessing Officer observed that the deduction had been claimed under Section 80P(2)(c) instead of Section 80P(2)(a)(i) and treated the subsequent explanation as an afterthought. On that basis alone, the deduction under Section 80P(2)(a)(i) was denied. The Commissioner (Appeals) upheld the assessment, following which the assessee approached the Tribunal.

Before the Tribunal, the assessee contended that it was eligible for deduction under Section 80P(2)(a)(i) as its business consisted of providing credit facilities to its members. It pointed out that the audited financial statements reflected income from such activities and that the Tax Audit Report certified the admissibility of deduction under Section 80P amounting to Rs.76,75,476. The assessee also highlighted that deduction under Section 80P(2)(a)(i) had been consistently allowed in preceding and subsequent assessment years on identical facts. It submitted that the denial resulted solely from a clerical error in selecting the relevant clause in the return of income. The assessee further argued that the appellate order discussed issues relating to Sections 14A and 36(1)(iii), which had no connection with the dispute before it, indicating lack of application of mind.

The Revenue supported the orders of the Assessing Officer and the Commissioner (Appeals), contending that the disallowance of deduction and consequent assessment were in accordance with law.

After examining the record, the Tribunal found that the deduction under Section 80P had in fact been claimed in the return of income and that the Tax Audit Report certified the admissibility of the claim. It also noted that the deduction had been allowed in earlier and subsequent assessment years through assessment orders under Sections 143(3) and 143(1). The Tribunal held that denial of deduction solely because the wrong clause was selected in the return was unsustainable.

The Tribunal relied on the Bombay High Court’s decision in Infospectrum India Pvt. Ltd., which held that an incorrect mention of a statutory provision does not disentitle an assessee from claiming a deduction otherwise available under law. It further observed that although the Commissioner (Appeals) had reproduced the assessee’s submissions, no defect had been pointed out in those submissions and no findings had been recorded rejecting the factual contentions. Instead, the appellate order contained an unrelated discussion on Sections 14A and 36(1)(iii), which had no relevance to the present issue.

Considering the facts and circumstances, the Tribunal concluded that the assessee satisfied the conditions prescribed under Section 80P(2)(a)(i), that the deduction had been denied only because of an inadvertent clerical mistake, and that such a technical error could not defeat a substantive claim. Accordingly, it directed the Assessing Officer to allow deduction under Section 80P(2)(a)(i) amounting to Rs.76,75,476 and allowed the appeal.

Frequently Asked Questions (FAQs)

Why was the Section 80P deduction denied by the Assessing Officer?

The deduction was denied because the assessee selected the wrong clause while claiming the deduction in its return of income.

What was the assessee’s main contention before the Tribunal?

The assessee argued that it fulfilled all conditions for deduction under Section 80P(2)(a)(i) and that the error in the return was merely clerical.

What did the ITAT observe about the appellate order?

The Tribunal noted that the appellate order discussed Sections 14A and 36(1)(iii), which were unrelated to the issue, and did not reject the assessee’s factual submissions.

What legal principle did the Tribunal rely upon?

The Tribunal relied on the Bombay High Court’s decision holding that a wrong mention of a statutory provision does not disentitle an assessee from claiming an otherwise admissible deduction.

What was the final decision of the ITAT?

The ITAT allowed the appeal and directed the Assessing Officer to grant deduction under Section 80P(2)(a)(i) amounting to Rs.76,75,476.

FULL TEXT OF THE ORDER OF ITAT NAGPUR

This appeal filed by the assessee is directed against the order of National Faceless Appeal Centre, Delhi, (for short, “CIT(A)”), dated 19/08/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the assessment order dated 17.03.2021 passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act, for the Assessment Year (AY) 2018-19.

2. Assessee has raised the following grounds of appeal:

1. The order passed by Commissioner of Income Tax (Appeals), Delhi u/s 250 of I.T. Act 1961 is illegal, invalid and bad in law.

2. The Learned CIT(A) ought to have allowed the appeal of assessee considering the submission reproduced in the appellate order.

3. The Learned CIT(A) erred in recording findings at para 5 which are not related to grounds of appeal as raised in the memo of appeal.

4. The income declared at Rs.NIL after claim of deduction u/s 80P ought to have been accepted in the assessment framed.

5. The income determined by learned A.O. at Rs.76,25,475/-denying deduction u/s 80P is unjustified, unwarranted and bad in law.

6. The learned A.O. erred in denying benefit of deduction u/s 80P(2)(a) of I.T. Act 1961 by holding that assessee is not eligible for same.

7. The learned A.O. ought to have granted deduction u/s 80P(2)(d) in respect to interest received from Co-operative Societies.

8. The assessment of income from interest received from Co­operative Society is unjustified, unwarranted and bad in law.

9. The assessee denies liability to be assessed to interest under section 234A, 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234A, 234C and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive.

10. Any other ground that shall be prayed at the time of hearing.

3. Facts of the case in brief are that assessee is Credit Co­operative Society registered under Maharashtra Co-operative Society Act 1960 and is engaged in the business of providing credit facilities to its members. Assessee in return of income had claimed deduction u/s 80P and declared income at Rs. Nil. The Ld. AO observed that assessee society has claimed deduction u/s 80P(2)(c) and therefore assessee is not eligible for deduction u/s 80P(2)(a) of the Act. The Ld. AO noted that assessee has to fill appropriate column in its return of income for claiming the particular deduction. The Ld. AO observed that mistake in claim of deduction u/s 80P submitted by the assessee is nothing but just an afterthought. With these observations, Ld. AO denied the benefit of deduction u/s 80P(2)(a)(i) to the assessee.

4. Being aggrieved by the order of Ld. AO, assessee preferred appeal before the Ld. CIT(A), who dismissed the appeal filed by assessee. Now assessee is in appeal before this Tribunal.

5. Learned Counsel for assessee furnished gist of submission which is as under:

A) Assessee is credit co-operative society engaged providing credit facilities to its members and income of assessee is eligible for deduction u/s 80P(2)(a)(i) of I.T. Act 1961. The aforesaid facts are evident from the audited financial statements submitted along with return of income.

B) Audited Profit & Loss Account (P- 19) indicates gross revenue from credit facilities extended to members of Co­operative Credit Society.

C) In Tax Audit Report, Auditor has certified allowable deduction u/s 80P at Rs.76,75,474/-. (P- 29)

D) In return in ITR-5 deduction u/s 80P is claimed at Rs.76,75,476/-. (P- 78)

E) Deduction u/s 80P(2)(a)(i) of I.T. Act 1961 has been granted in the case of assessee for immediately two preceding assessment years and subsequent assessment years. Orders have been passed in the case of assessee for Asstt. Year 2016-17, 2017-18 and 2020­21 u/s 143(3) of I.T. Act 1961 granting deduction u/s 80P(2)(a)(i) of I.T. Act 1961. Activity of assessee remains same as that during the previous year and subsequent year under consideration.

F) A. O. has disallowed the deduction u/s 80P on account of clerical mistake in the return in column of claim of deduction 80P(2)(c)(ii) as against correctly allowable u/s 80P(2)(a) of I.T. Act 1961 (P- 77). A.O. has denied the deduction only because of clerical error in mentioning the section in the return. No other reason is assigned for non-grant of deduction u/s 80P(2)(a)(i) of I.T. Act 1961 (P- 2 & 3 of assessment order).

G) Before CIT(A) entire case of assessee was explained and reliance has been made on the circular of Board dated 11/04/1955 apart from reliance on the decision of ITAT, Nagpur Bench in the case of M/s Infospectirum India Pvt. Ltd. and judgement of Hon’ble Jurisdictional High Court in the aforesaid case. Written submission and documentary evidence has been reproduced and discussed in the appellate order from pages 4 to 17 of appellate order. The aforesaid submission as made has not been found faulted by CIT(A), Faceless Appeal Centre. In the appellate order at para 5 at pages 17 to 19 it has noted details with provisions of section 14A and section 36(1)(iii) of I.T. Act 1961. It appears to be of some other assessee and not that of the facts and submission as made in the case of assessee. Dismissal of appeal is without proper application of mind.

H) H) Issue covered in favour assessee.

i. ITA No.3010 & 3011/Pun/2025 Vishnuanna Patil Credit Co-operative Society Ltd. ITO, order dated 20/02/2026.

(P- 125 – 131) (P- 129 – 130)

ii. ITA No.176/Nag/2009 ACIT vs M/s Infrospectirum India Pvt. Ltd., Nagpur

(P- 91 – 95) (P- 91 – 94)

iii. ITA No.61/2010 (Bombay High Court, Nagpur Bench, Nagpur). CIT-I, Nagpur v/s Infrospectirum India Pvt. Ltd.

(P- 96 – 97) (97)

iv. (2014) 34 ITR (Tri.) 505 (Mumbai) ITO vs. Accentia Technologies Ltd.

(P- 98 – 101)(P- 98, 100, 101)

v. (2017) 396 ITR 0371 (AP) Vavveru Co-operative Rural Bank Ltd. vs. CIT and Another

(P- 111 – 124) (P- 123)

vi. (2013) 359 ITR 0001 (Mad.) CIT vs. Heartland KG Information Ltd.

(P- 102 – 124) (P- 103, 105, 107, 108)

I) Considering the facts as mentioned hereinabove grounds of appeal of assessee be allowed. Income be directed to be `determined at NIL.

6. Ld. Departmental Representative (DR) relied upon the orders of Ld. AO as well as Ld. CIT(A). It is submitted that disallowance of deduction u/s 80P amounting to Rs.76,75,476/-resulting in assessment of total income by the Ld. AO and sustained by Ld. CIT(A) is in accordance with law. It was accordingly submitted that order of Ld. CIT(A) deserves to be upheld and appeal filed by the assessee be dismissed.

7. We have heard rival submissions and perused the material available on record. We find that deduction u/s 80P of the Act has been denied by the Ld. AO for incorrect column filled in the return of income. It is noted from the record that deduction at Rs.76,75,476/- u/s 80P was claimed in return of income which is verifiable at page 78 of paper book. The Tax Audit Report indicates that auditors have certified the admissibility of deduction u/s 80P at Rs.76,75,476/-. It is matter of record that deduction u/s 80P(2)(a) has been allowed in past as well as subsequent assessment years in the orders passed u/s 143(3)/143(1) of the Act. The details of orders wherein claim of deduction u/s 80P has been accepted are as under:

Assessment orders relating to above mentioned assessment years are available in paper book. The same clearly demonstrate that assessee has consistently been allowed deduction u/s 80P and therefore denial of such deduction during the year under consideration merely on account of technical mistake in return of income is unsustainable in law.

8. The Hon’ble Bombay High Court in the case of Infospectrum India Pvt. Ltd. in ITA No.61/2010 vide order dated 11/07/2017 has concluded that mere wrong mention of section does not disentitle an assessee from claiming and relief being granted in relation to deduction otherwise allowable during the course of assessment proceedings. The ratio laid down by the Hon’ble Jurisdictional High Court squarely applies to the facts of the present case. Therefore, assessee cannot be denied deduction u/s 80P(2)(a)(i) merely because of an inadvertent mistake in selecting relevant column while filing return of income.

9. We find from the appellate order that assessee had specifically submitted before the Ld. CIT(A) that deduction u/s 80P amounting to Rs.76,75,476/- was duly claimed in the return of income and that issue arose only because of wrong mention of relevant clause of section 80P in the return. The Ld. CIT(A) has reproduced the submissions of assessee in the appellate order. Ld. CIT(A) has neither pointed out any defect in the submissions nor recorded any finding rejecting the factual contentions advanced by the assessee. It is further observed that in para 5 of appellate order (Pages 17 to 19) the discussion pertains to the provisions of section 14A and section 36(1)(iii) of the Act. The said discussion has no relevance whatsoever to the issue involved in the present case.

10. Considering the entirety of facts and circumstances of case and material available on record, we find that assessee had duly claimed deduction u/s 80P in return of income and same was also certified in the Tax Audit Report. The deduction has been denied merely on account of wrong mention of the relevant clause in return of income and not on account of any failure of assessee to satisfy the conditions prescribed u/s 80P(2)(a)(i) of the Act. It is further matter of record that deduction u/s 80P has been consistently allowed to assessee in preceding as well as subsequent assessment years on identical facts. Respectfully following the ratio laid down by Hon’ble Bombay High Court in the case of Infospectrum India Pvt. Ltd. (supra), we hold that assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. Accordingly, A.O. is directed to allow deduction u/s 80P(2)(a)(i) amounting to Rs.76,75,476/-. Thus the grounds of appeal raised by the assessee are allowed.

11. In the result, appeal filed by the assessee is allowed.

Order pronounced in open Court on 19.06.2026