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CMA Intermediate · Direct and Indirect Taxation · Self-Assessment and Intimation

A resident company files its return on time. It claims a deduction of Rs 2,40,000 under a provision where the statutory limit is Rs 1,50,000. Under section 270 processing, how is the excess treated?

The excess of Rs 90,000 can be disallowed at processing. A deduction exceeding the specified statutory limit is an incorrect claim apparent from the return under section 270(5)(a)(iii), which section 270(1)(a)(ii) permits to be adjusted, subject to prior communication.

  1. ANot adjustable at processing, since only the Assessing Officer may disallow it in a regular assessment
  2. BAdjustable as an incorrect claim apparent from the return, because the deduction exceeds the specified statutory limit, so Rs 90,000 may be disallowedCorrect
  3. CAdjustable only if the return was filed late
  4. DAdjustable as an arithmetical error, so the whole Rs 2,40,000 is disallowed

Explanation

Section 270(5)(a)(iii) treats a deduction exceeding the specified statutory limit as an incorrect claim apparent from the return. Under section 270(1)(a)(ii) it can be adjusted at processing, after the communication under sub-section (2). The excess is 2,40,000 - 1,50,000 = Rs 90,000. Disallowing the whole amount would be wrong because only the excess is beyond the limit.

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