The Government Servants Co-Op Credit Society Ltd., Vadodara V. The ITO, Ward-3(1)(2), Vadodara

ITA 442/AHD/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7705 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 26-08-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Period of limitation; Reasonable cause; Condonation of delay; Set aside
• Section: 28; 143(3); 234B; 80P; 264; 64; 194A; 72; 153

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ D’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 442/AHD/2020 िनधाᭅरण वषᭅ/Asstt. Year: 2012-13 The Government Servants Co-op. Credit Society Ltd., Hindi Bhavan, Sanstha Vasahat Raopura, Vadodara-390001. PAN: AABAT5146J Vs. I.T.O., Ward-3(1)(2), Vadodara. (Applicant) (Respondent) Assessee by : Shri Amrin Pathan, A.R Revenue by : Shri Purushottam Kumar, Sr..D.R सुनवाई कᳱ तारीख/Date of Hearing : 18/01/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 28/02/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-3, Vadodara, dated 11/01/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13. ITA no.442/AHD/2020 A.Y. 2012-13 2 2. The assessee has raised the following grounds of appeal: All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax (Appeals) - 3, Vadodara [''the CIT(A)"] erred in fact and in law in confirming the action of the Income Tax Officer, Ward 3(1 )(2), Vadodara ("the AO") in treating income of Rs. 1,02,86,929 as income from other sources taxable u/s.56 of the Income Tax Act, 1961 ("the Act") instead of business income. 2. The learned C1T(A) erred in fact and in law in confirming the action of the learned AO in not allowing deduction u/s. 80P(2) of the Act on the income of Rs. 1.02.86,929. 3. The learned CIT(A) erred in fact and in law in taxing the gross amount instead of net amount. 4. The learned CIT(A) erred in fact and in law in confirming the action of AO in charging interest 234B of the Act. 5. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. 3. At the outset, we note that there was a delay of 1226 days in filing the appeal by the assessee. There was condonation petition filed by the assessee dated 12 th January 2022. It was contended that its members are the employees of Government/semi- government organisations who manage the affairs of the society. Some of the members are the retired employees of these organisations. These persons are not the regular employees of the assessee. These persons offer their services on rotational and voluntary basis. Thus in the absence of permanent employees, it became difficult for the assessee to keep a track of the status of the cases pending for adjudication. 3.1 It was also submitted that the assessee filed all other appeals, involving identical dispute, before the Tribunal within the statutory time except the one on hand. As per the assessee the mistake was committed inadvertently. The assessee being a co-operative society does not have any profit motive. Therefore, the assessee is not going to get any benefit on account of non-filing of the appeal before ITA no.442/AHD/2020 A.Y. 2012-13 3 the Tribunal, particularly in the present situation where the ITAT has already granted partial relief to it in other years. The assessee in support of the condonation petition has also filed the notarised affidavit. 3.2 In view of above the Ld. AR for the assessee before us submitted that the delay in filing the appeal occurred due to unavoidable situation. Therefore the delay in filing the appeal should be condoned. 4. On the other hand the ld. DR opposed to condone such inordinate delay. 5. We have perused the records and heard the rival submissions of both the sides. There was a delay of 1226 days in filing the appeal by the assessee before us. Now the controversy arises for our adjudication whether there was genuine cause on the part of the assessee for the delayed filing of appeal in the given facts and circumstances. In this regard we note that the Hon’ble Madras High Court in the case of Sreenivas Charitable Trust v. Dy. CIT reported in 280 ITR 357 has held that : “3. The Supreme Court in Vedabai v. Shantaram Baburao Patil [2002] 253 ITR 798held as under : "In exercising discretion under section 5 of the Limitation Act the Courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression ‘sufficient cause’, the principle of advancing substantial justice is of prime importance." (p. 799) 4. The Calcutta High Court in CIT v. Orissa Concrete & Allied Industries Ltd. [2003] 264 ITR 186 held as under : ". . .what is really indicated in the various decisions cited and in section 5 of the Limitation Act itself, is that a litigant would be required to explain why the appeal and/or application could not be filed within the period prescribed by limitation and explain the delay for such period for the purpose of linking up the circumstances which had caused the delay during the period of limitation and thereafter." (p. 192) 5. Recently, the Allahabad High Court in Ganga Sahai Ram Swarup v. ITAT [2004] 271 ITR 512 has taken the view that liberal view ought to have been taken by the authority as the delay was only of a very short period and the appellant was not going to gain anything from it. ITA no.442/AHD/2020 A.Y. 2012-13 4 6. Applying the ratio laid down by the Apex Court as well as various High Courts, we find, it is stated in the petition filed by the assessee for condonation of delay that the order copy was misplaced and thereafter it was found and sent to counsel for preparing the appeal and then, the appeal was prepared and filed before the Tribunal and in that process, the delay of 38 days occurred. As held by the Apex Court, no hard and fast rule can be laid down in the matter of condonation of delay and the Courts should adopt a pragmatic approach and the Courts should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. We are, therefore, of the opinion that the Appellate Tribunal ought to have condoned the delay in filing the appeal, considering the reasons given by the assessee for the delay.” 5.1 From the above it is clear that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay. 5.2 We also note that the case on merit is partly in favour of the assessee. But there is a technical defect in the appeal since the appeal was not filed within the period of limitation. There was the affidavit filed by the assessee explaining the reasons for the delay in filing the appeal before us. However, the Revenue has not filed any counter-affidavit to deny the allegation made by the assessee. 5.3 It is also important to note that Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down certain principles for considering the condonation petition for filing the appeal which are reproduced hereunder: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. ITA no.442/AHD/2020 A.Y. 2012-13 5 (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 5.4 From the above judgment of the Hon’ble Apex Court, we note that the substantial justice deserves to be preferred rather than deciding the matter on the basis of technical defect. We also note that there is no allegation from the Revenue that the appeal was not filed within the deliberately. Therefore, we are inclined to prefer substantial justice rather than technicality in deciding the issue. We also find that if we reject the application of the assessee for condoning the delay then it would amount to legalise injustice on technical ground whereas the Tribunal is capable of removing unfairness and to do justice. 5.5 If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of 1226 days has to be condoned. 6. The next controversy arises whether the delay of 1226 days was excessive or inordinate. There is no question of any excessive or inordinate when there was reasonable cause which prevented assessee in filing the appeal. As such we need to consider the cause for the delay and not the length of the delay. Accordingly in our considered view when there was a reasonable cause, the period of delay may not be relevant factor. We find support from the judgment of the Hon’ble Madras ITA no.442/AHD/2020 A.Y. 2012-13 6 High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors reported in 153 ITR 596 wherein it was held as under : “Since in this case the assessee had been prosecuting other remedies, the time taken by those proceedings should naturally be taken while determining the question whether the assessee had sufficient cause for not presenting the appeal in time. Therefore, the revenue was not right in submitting that the appeal filed under section 17 was an appeal against the original order of assessment under the Act, which was passed about 20 years ago, as it was evident that the appeal was against an order of rejection of relief by the assessing authority. Thus, though the Tribunal's view that there was no question of limitation in such cases, was not correct yet the AAC was right in condoning the delay and entertaining the appeal.” 6.1 From the above we note that the Hon’ble Madras High Court in the above case was pleased to condone the delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. The delay in the instant case is just of 1226 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 7330 days approximately. 6.2 In view of the above we are of the opinion that when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period of the delay. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 1226 number of days. Thus, we condone the delay of 1226 days in filing the appeal and proceed to hear the appeal on merit for the adjudication. Now we proceed to adjudicate the matter on merit: 7. The only issue raised by assessee in this appeal is that learned CIT-A erred in confirming the order of the AO by sustaining the addition of ₹ 1,02,86,929.00 on account of income from other sources and denying the deduction under section 80P(2)(i) of the Act. ITA no.442/AHD/2020 A.Y. 2012-13 7 8. The AO during the assessment proceedings found that the assessee has claimed deduction of ₹ 1,02,86,929.00 under the provisions of section 80P(2)(i) of the Act on the amount of interest received from State Bank of India. As per the AO, such amount of interest income is not arising from the activity of providing finance facility to its members. Therefore, the same was disallowed by treating the same as income from other sources and added to the total income of the assessee. 9. Aggrieved assessee carried the matter before the learned CIT-A who also confirmed the order of the AO. 10. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 11. The learned AR before us contended that the identical issue in the own case of the assessee has been decided by this Tribunal partly in favour of the assessee in ITA No. 108/AHD/2017 for the assessment year 2013-14 vide order dated 31-1- 2019. The learned AR, accordingly, prayed before us that the same direction can also be extended for the year under consideration. 12. On the other hand, the learned DR vehemently supported the order of the authorities below. 13. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the issue on hand has already been adjudicated by this tribunal in the own case of the assessee (supra). The relevant extract of the order of this Tribunal is reproduced as under: “7. We have heard both the sides and perused the material on record carefully. The assessee is engaged in the business of providing credit facilities to its members. The assessing officer has noticed that in addition to the interest The Government Servants Co-op. Credit Society Ltd. vs. ITO income earned on loan and advances to its members, the assesse has claimed deduction u/s. 80P(2)(a)(i) of the act on interest income earned from fixed deposit maintained with the commercial bank and cooperative banks. As per section 80P(2)(a)(i) of ITA no.442/AHD/2020 A.Y. 2012-13 8 the act the interest income earned on providing credit facility to its members is deductible u/s. 80P(2)(a)(i) of the act. After perusal of the aforesaid provision of the act we observe that deduction u/s 80P(2)(a)(i) is not available on the interest earned on deposit maintained with the commercial bank. We find that the Hon'ble jurisdictional high court has decided the identical issue in favour of the Revenue vide State Bank of India vs. CIT (2016) 72 taxmann.com 64 (Gujarat) wherein it is held that interest income on deposit placed with the commercial banks is not exempt u/s. 80P(2)(a)(i) of the act. In respect of the claim of the Ld. Counsel that interest earned from investment of surplus funds with the cooperative bank is entitled for deduction u/s 80P(2)(d) of the act we have noticed that as per section 80P(2)(d) of the act, the whole of interest and dividend income derived by a co-operative society from its investment in any other co-operative society is deductible u/s. 80P(2)(d). We find that the Hon'ble High Court of Karnataka, in the case of (2017) 83 taxmann.com 140 (Kar) Principal CIT vs. Tatagars Co-operative Sale Society on identical issue and facts has held that it is only primary agricultural credit society with its limited work of providing credit facilities to its member which is governed by ambit and scope of deduction u/s. 80P and further stated that interest income earned from surplus deposit with co-operative bank is not entitled for deduction 80P(2)(d). The relevant part of the decision of the Hon'ble High Court of Karnataka, in the case of (2017) 83 taxmann.com 140 (Kar) Principal CIT vs. Tatagars Co-operative Sale Society on identical issue and facts is reproduced as under:- "Admittedly and undoubtedly, the assessee is a co-operative Society engaged mainly in the activity of marketing of agricultural produces grown by its members. The assessee co- operative society also accepts deposits from its members and provides credit facility to its members, runs Kirana Stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods carriage, etc. [Para 10] The assessment years involved in the instant appeals are assessment years 2007-08 to 2011-12. The bone of contention is that the deduction under section 80P(2) is now claimed by the assessee under section 80P(2)(d) and not under section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), the assessee herein has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Co-operative Bank is essentially a Co- operative Society also and clause (d) allows deduction of income by way of interest or dividends derived by the assessee co-operative Society from its investments with any other co-operative Society. [Para 11] The sheet anchor of the contention of the assessee misses two essential points required for claiming the deduction from gross total income for a co-operative society; (i) that the character or nature of income, namely interest on investments or deposits, does not change irrespective of the fact whether it is earned or received from a Schedule Bank or Co-operative Bank, (ii) that What the Supreme Court held in the case of the assessee itself, against assessee, was that such interest income on its surplus and idle funds not immediately required for its business, is not income from business taxable under section 28 of the Act, but was taxable as 'income from other sources' under section 56, whereas for availing the exemption or 100 per cent deduction under section 80P, the income is specified in clauses (a) to (f) of sub section (2) of section 80P which should be its business or operational income. [Para 12] What section 80P(2)(d) which was though not specifically argued and canvassed before the Supreme Court, envisages is that such interest or dividend earned by an assessee co-operative society should be out of the investments with any other co-operative society. The words 'Co- operative Banks' are missing in clause (d) of sub section (2) of section 80P. Even though a cooperative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the primary agricultural credit society with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under section 80P of the Act. [Para 13] The banking business, even though run by a Co-operative bank is sought to be ITA no.442/AHD/2020 A.Y. 2012-13 9 excluded from the beneficial provisions of exemption or deduction under section 80P of the Act. The purpose of bringing on the statute book sub-section (4) in section 80P was to exclude the applicability of section 80P altogether to any co-operative bank and to exclude the normal banking business income from such exemption/deduction category. The words used in section 80P(4) are significant. They are: 'The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society................' The words 'in relation to' can include within its ambit and scope even the interest income earned by the assessee, a co-operative society from a Co-operative Bank. This exclusion by section 80P(4) even though without any amendment in section 80P(2)(d) is sufficient to deny the claim of the assessee for deduction under section 80P(2)(d). The only exception is that of a primary agricultural credit society. The depository The Government Servants Co-op. Credit Society Ltd. vs. ITO Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. [Para 14] The amendment of section 194A(3)(v) excluding the Co-operative Banks from the definition of 'Co- operative Society' by Finance Act, 2015 and requiring them to deduct tax at source under section 194A also makes the legislative intent clear that the co-operative banks are not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of chapter VIA in the form of section 80P of the Act. [Para 15] If the legislative intent is so clear, then it cannot be contended that the omission to amend clause (d) of section 80P(2) of the Act at the same time is fatal to the contention raised by the revenue before this Court and sub silentio, the deduction should continue in respect of interest income earned from the co-operatve bank, even though the Supreme Court's decision in the case of assessee itself is otherwise. [Para 16] As stated above, it is the character and nature of income which determines its taxability or exemption from taxability. It is needless to say that the provisions relating to exemption and deduction need to be strictly construed and no liberal interpretation or intendment can be inferred in such provisions. What was clearly held to be not exempt and not deductible under section 80P(2)(a) by the Supreme Court in the case of assessee, cannot be contrarily held as exempted and deductible now for these years, merely because the depository bank, with whom the investments were made by the assessee happens to be a co-operative bank. One cannot appreciate this distinction so as not to apply the binding precedent of the Supreme Court for subsequent years merely on account of the change of the bank where such deposits were made by the assessee, all other facts remaining the same, particularly the nature and character of the income earned by it. The interest income of assessee continues to be not attributable to its business operations even in these subsequent years. [Para 17] The character of income depends upon the nature of activity for earning that income and though on the face of it, the same may appear to be falling in any of the specified clauses of section 80P(2) of the Act, but on a deeper analysis of the facts, it may become ineligible for deduction under section 80P(2) of the Act. Hence, the income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a scheduled bank or a co-operative bank and, thus, clause (d) of section 80P(2) of the Act would not apply in the facts and circumstances of the present case. The person or body corporate from which such interest income is received will not change its character, viz. interest income not arising from its business operations, which made it ineligible for deduction under section 80P of the Act. [Para 23] In view of the aforesaid, the appeal filed by the revenue deserves to be allowed.:" [Para 24] In the light of the above facts and legal findings we consider that the income by way of interest earned by deposit or investment of idle or surplus does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus clause (d) of section 80P(2) of the act would not apply in the facts and the circumstances of the present case. The assessee has earned interest income on surplus funds deposited with nationalized bank and the cooperative Bank and the same is not attributable to business operation of the assessee co-operative society as interest earned on the fund invested with the commercial bank is not operational income from ITA no.442/AHD/2020 A.Y. 2012-13 10 providing credit facilities to its members. We consider that earning of such interest income either from nationalized or cooperative bank will not change nature and character of the income. On perusal of the provision of section we observe such deduction is pertinent to the operational income earned by the co-operative society from the activities in which it is engaged and not the other income which accrues to the society in the form of interest from investment of surplus funds with the cooperative bank. After considering the facts and legal finding, we do not find any merit in the appeal of the assessee, therefore, the same is dismissed. However as decided in the various decision of the Co-ordinate Benches of ITAT Ahmedabad we direct the assessing officer to allow pro rata expenses in respect of interest earned from deposit held with nationalized bank to the assessee for computing the deduction u/s. 80P after examining/verification and affording adequate opportunity to the assessee. Therefore, the appeal of the assessee is partly allowed for statistical purposes.” 13.1 The facts of the case on hand are identical to the facts of the case as discussed above. At the time of hearing the learned DR has also not brought anything on record suggesting any change in the facts and circumstances or change in the provisions of law, distinguishable from the earlier decision of the ITAT as discussed above. Accordingly, respectfully following the same, we set aside the issue to the file of the AO for fresh adjudication after necessary verification in the light of the finding of this tribunal in the own case of the assessee which is reproduced in the preceding paragraph and as per the provisions of law. Hence the ground of appeal of the assessee is partly allowed for the statistical purposes. 14. In the result, the appeal filed by the assessee is partly allowed for the statistical purposes. Order pronounced in the Court on 28/02/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 28/02/2022 Manish