Delay in Filing ITR Can’t Deny S. 80P Benefits to Cooperative Societies: Madras High Court

The Madurai Bench of the Madras High Court has held that the delay in filing Income Tax Return (ITR) cannot deny Section 80P benefits to cooperative societies. The bench of Justice D. Bharatha Chakravarthy granted significant relief to hundreds of Cooperative Societies across Tamil Nadu by setting aside orders rejecting applications for condonation of delay in filing Income Tax Returns and directing that such delays be treated as condoned. The ruling is expected to safeguard the tax exemption benefits available to Cooperative Societies under Section 80P of the Income Tax Act, 1961. The petitioners contended that they are Cooperative Societies engaged in activities such as providing credit facilities to members and are entitled to deductions under Section 80P of the Income Tax Act. However, after the introduction of Section 80AC with effect from April 1, 2018, timely filing of income tax returns became a mandatory condition for claiming such deductions. Failure to file returns within the prescribed due date resulted in denial of the exemption benefits. The societies argued that delays occurred mainly because statutory audits under the Tamil Nadu Cooperative Societies Act, 1983 could not be completed on time. They also cited lack of technical expertise and disruptions caused by the COVID-19 pandemic. To address these hardships, the Central Board of Direct Taxes (CBDT) had issued Circular No. 13/2023 dated July 26, 2023, empowering Chief Commissioners of Income Tax to condone delays in deserving cases. Despite filing applications seeking condonation, many societies received rejection orders on the ground that they had not furnished adequate particulars or explanations regarding the delay. These orders became the subject matter of the writ petitions. The Cooperative Societies argued that the CBDT circular was issued precisely to alleviate genuine hardships faced by societies that were unable to file returns on time due to audit-related delays. They relied upon earlier decisions of the Madras High Court and other High Courts which emphasized that procedural delays should not deprive assessees of substantive tax benefits, especially where there was no allegation of tax evasion. The petitioners further submitted that most of the difficulties arose during the initial years following the introduction of the filing requirement and during the pandemic period, and that societies were now complying with filing obligations more regularly. The Income Tax Department opposed the petitions, arguing that many societies continued to delay compliance even after completion of statutory audits. It was contended that several applicants failed to furnish information sought by the authorities regarding audit completion dates and reasons for delay. The Department maintained that the rejection orders were justified and cautioned that prolonged non-compliance adversely affects the tax administration system. The High Court examined the legislative framework governing deductions available to Cooperative Societies under Section 80P and the requirement introduced through Section 80AC mandating timely filing of returns. The Court observed that the substantive entitlement to deduction was undisputed in these cases and that the dispute revolved only around procedural compliance. Justice Bharatha Chakravarthy emphasized the important role played by Cooperative Societies in promoting rural development, providing micro-credit, supporting agricultural activities and advancing socio-economic equality. The Court noted that the cooperative movement serves a public purpose and has received constitutional recognition through Article 43B. The Court held that denial of tax benefits solely on account of delay in filing returns amounted to elevating procedural requirements over substantive rights. It found that the hardships faced by the societies were genuine and that the CBDT circular had been issued specifically to address such situations. The Court observed that the authorities interpreted the CBDT circular in an unduly restrictive and hyper-technical manner, insisting on exhaustive explanations and applying a stringent standard inconsistent with the benevolent purpose of the circular. According to the Court, the circular should have been construed liberally to further the objective of providing relief to Cooperative Societies facing genuine hardships rather than to deny benefits on technical grounds. During the proceedings, the Court suo motu impleaded the Registrar of Cooperative Societies and sought details regarding measures being taken to prevent recurrence of such delays. In response, the Registrar informed the Court that instructions had already been issued directing societies to file returns within prescribed timelines and not wait for completion of statutory audits. The Registrar also disclosed development of an e-RCS software platform to monitor compliance relating to income tax and GST filings. The Court recorded these undertakings and stressed that supervisory authorities must ensure timely filing of returns in future and provide necessary professional and technical assistance to Cooperative Societies. Allowing all the writ petitions, the High Court set aside the impugned orders rejecting applications for condonation of delay. The Court directed that the applications filed by the Cooperative Societies shall stand allowed. The Court further directed that the assessment authorities shall consider the delayed returns while completing assessments where proceedings are pending. Appellate authorities shall treat delays in filing returns as condoned in pending appeals and pass appropriate orders. Societies that have not yet filed appeals against assessment orders may do so, and the delay in filing such appeals shall also be condoned in appropriate cases. Supervisory authorities must take effective steps to ensure timely compliance in future. Case Details Case Title: T943 Vickrapandiyam Primary Agricultural Co-operative Credit Society Ltd. Versus The Chief Commissioner of Income Tax Citation: JURISHOUR-1512-HC-2026(MAD) Case No.: W.P.(MD)Nos.7261 to 7276 Date: 01.06.2026 Counsel For Petitioner: Karthika Ashok Counsel For Respondent: N.Dilip Kumar, Senior Standing Counsel Click Here To Read Order Read More: No GST Exemption On Annuity Paid For Road Construction: Meghalaya High Court

Delay in Filing ITR Can’t Deny S. 80P Benefits to Cooperative Societies: Madras High Court

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