M/s Bangalore Credit Co-Operative Society Ltd., Bangalore V. ITO, Bangalore

ITA 1454/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77000 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: S RANGANATH
• Keywords: Benefit of exemption
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.1454/BANG/2012 ASSESSMENT YEAR : 2008-09 M/S. BANGALORE CREDIT CO-OPERATIVE SOCIETY LTD., NO.723, 10 TH MAIN, 4 TH BLOCK, JAYANAGAR, BANGALORE 560 011. PAN : AAAAB 1598B VS. THE INCOME TAX OFFICER, WARD 4(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RANGANATH, FCA RESPONDENT BY : SHRI C.H. SUNDAR RAO, CIT-((DR) DATE OF HEARING : 07.07.2014 DATE OF PRONOUNCEMENT : 11.07.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 20.9.2012 OF THE CIT, BANGALORE PASSED U/S. 263 OF THE INCOME-TA X ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] RELATING TO ASSESSMENT YEAR 2008-09. ITA NO.1454/BANG/2012 PAGE 2 OF 5 2. THE ASSESSEE IS A CREDIT CO-OPERATIVE SOCIETY. IT FILED A RETURN OF INCOME FOR THE A.Y. 2008-09 ON 22.9.2008 DECLARING NIL INCOME, AFTER CLAIMING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. T HE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT BY ORDER DATED 11.8.2010, ACCEPTING THE RETURN FILED BY THE ASSESSEE. 3. THE CIT, IN EXERCISE OF HIS POWERS U/S. 263 OF T HE ACT, WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO WAS ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THIS REGARD, THE CIT WAS OF THE VIEW THAT SECTION 80P(4) OF THE ACT WAS INTRODUCED W.E.F. 1.4 .2007, WHEREBY IT WAS MADE CLEAR THAT THE PROVISIONS OF SECTION 80P SHALL NOT APPLY TO ANY CO- OPERATIVE BANK, OTHER THAN A PRIMARY AGRICULTURAL C REDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL OR RURAL DEVELOPMENT BANK . ACCORDING TO THE CIT, THE ASSESSEE DID NOT FALL WITHIN ANY OF THE EXCEPTI ONS MENTIONED IN SECTION 80P(4) OF THE ACT AND THEREFORE THE AO WHILE COMPLE TING THE ASSESSMENT U/S. 143(3), OUGHT NOT TO HAVE ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. A SHOW CA USE NOTICE WAS ACCORDINGLY ISSUED BY THE CIT. 4. THE ASSESSEE, IN REPLY TO THE SHOW CAUSE NOTICE, SUBMITTED THAT THE PROVISIONS OF SECTION 80P(4) OF THE ACT APPLY ONLY TO A CO-OPERATIVE BANK AND NOT TO A CO-OPERATIVE SOCIETY CARRYING ON BANKI NG ACTIVITY. THE CIT, HOWEVER, DID NOT ADJUDICATE THE ISSUE RAISED BY THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE, BUT HELD THAT WHILE COMPLETING T HE ASSESSMENT, THE AO ITA NO.1454/BANG/2012 PAGE 3 OF 5 HAS NOT CONDUCTED PROPER ENQUIRIES BEFORE ALLOWING DEDUCTION 80P(2)(A)(I) OF THE ACT. HE THEREFORE SET ASIDE THE ORDER OF TH E AO AND DIRECTED THE AO TO FRAME AN ORDER AFRESH AFTER CONSIDERING THE CLAI M OF THE ASSESSEE AS SET FORTH IN REPLY TO THE SHOW CAUSE NOTICE U/S. 263 OF THE ACT. 5. THE CIT ALSO FOUND THAT THE ASSESSEE HAD DEBITED IN THE PROFIT & LOSS ACCOUNT A SUM OF RS.1,81,210 TOWARDS PROVISION FOR GRATUITY. THE CIT HELD THAT THE PROVISION CANNOT BE ALLOWED AS A DEDUCTION AS IT IS NOT AN ASCERTAINED LIABILITY. HE THEREFORE DIRECTED THE A O TO WITHDRAW THE DEDUCTION ON ACCOUNT OF PROVISION FOR GRATUITY. 6. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING, IT WAS BROUGHT TO OUR NO TICE THAT IN ASSESSEES OWN CASE FOR THE A.Y. 2007-08, THIS TRIBUNAL HAD HE LD THAT THE ASSESSEE WILL BE ENTITLED TO DEDUCTION 80P(2)(A)(I) OF THE ACT. A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.737/BANG/2011 DATED 11.4.2012 WAS FILED BEFORE US. SIMILAR ORDER FOR THE A.Y. 2009-10 IN ITA NO.1659/BANG/2010 DATED 13.6.2013 IN ASSESSEES OWN CASE WAS ALSO RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE. OUR ATTENTION WAS ALSO D RAWN TO THE RECENT JUDGMENT DATED 5.2.2014 OF THE HONBLE HIGH COURT O F KARNATAKA IN CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA BAGALKOT IN ITA NO.5006/2013 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT TOOK THE ITA NO.1454/BANG/2012 PAGE 4 OF 5 VIEW THAT WHEN THE STATUS OF THE ASSESSEE IS A CO-O PERATIVE SOCIETY AND NOT A CO-OPERATIVE BANK, THE ORDER PASSED BY THE AO EXT ENDING THE BENEFIT OF EXEMPTION FROM PAYMENT OF TAX 80P(2)(A)(I) OF THE A CT IS CORRECT AND SUCH AN ORDER IS NOT ERRONEOUS AND THEREFORE, JURISDICTI ON U/S. 263 OF THE ACT CANNOT BE INVOKED. IT WAS ALSO A CASE WHERE THE CI T INVOKED JURISDICTION U/S. 263 OF THE ACT RELYING ON THE PROVISIONS OF SE CTION 80P(4) OF THE ACT. IN VIEW OF THE AFORESAID JUDGMENT OF THE HONBLE JURIS DICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE ORDER OF THE AO, ALLOWING DEDUCTION 80P(2)(A)(I) OF THE ACT TO THE ASSESSEE, CANNOT BE SAID TO BE ERRON EOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. CONSEQUENTLY, THE ORD ER U/S. 263 IS LIABLE TO BE QUASHED AND IS HEREBY QUASHED, INSOFAR AS THE IMPUG NED ORDER RELATES TO DEDUCTION 80P(2)(A)(I) OF THE ACT. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPECT OF THE PROVISION FOR GRATUITY WHICH WAS DISALLOWED, THE SA ME WOULD GO TO ENHANCE THE ASSESSED INCOME FROM BUSINESS AND FOR SUCH ENHA NCED AMOUNT, THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF SECTION 8 0P(2)(A)(I) OF THE ACT. AS FAR AS THIS CLAIM OF THE ASSESSEE BEFORE US IS C ONCERNED, WE ARE OF THE VIEW THAT THE SAID CLAIM CAN BE MADE BEFORE THE ASS ESSING OFFICER IN THE PROCEEDINGS PURSUANT TO THE ORDER U/S. 263 OF THE A CT, WHO SHALL DECIDE THE SAME IN ACCORDANCE WITH THE LAW. TO THE EXTENT OF DISALLOWANCE OF PROVISION FOR GRATUITY, THE IMPUGNED ORDER OF THE L D. CIT IS UPHELD, AS THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE TO THAT EXTENT. ITA NO.1454/BANG/2012 PAGE 5 OF 5 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF JULY, 2014 . SD/- SD/- ( RAJENDRA) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDI CIAL MEMBER BANGALORE, DATED, THE 11 TH JULY , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.