Erumapetty Panchayath Service Co-op Bank Ltd, Erumapetty V. The iTO, Guruvayur

ITA 52/COCH/2022

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1699 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 30-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 148; 142(1); 80P; 139(1); 139(4)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM ITA No.51/Coch/2022 : Asst.Year 2008-2009 ITA No.52/Coch/2022 : Asst.Year 2013-2014 M/s.Erumapetty Panchayath Service Co-operative Bank Limited No.206, 6/24, Erumapetty Thrissur – 680 584 PAN : AAAAE6234H. v. The Income Tax Officer Ward 1 Guruvayoor. (Appellant) (Respondent) Appellant by : Sri.Ajith Kaimal, CA Respondent by : Smt.J.M.Jamunna Devi, Sr.DR Date of Hearing : 19.05.2022 Date of Pronouncement : 20.05.2022 O R D E R Per George George K, JM : These appeals at the instance of the assessee are directed against two orders of the CIT(A), both dated 26.11.2021. The relevant assessment years are 2008-2009 and 2013-2014. 2. Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order. The solitary issue raised is whether the CIT(A) is justified in confirming the Assessing Officer’s order, wherein it was held that the assessee is not entitled to deduction u/s 80P of the I.T.Act. 3. The brief facts of the case are as follows: ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 2 The assessee is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. The assessee is engaged in providing credit facilities to its members. For the assessment years 2008-2009 and 2013-2014, the assessments were completed by denying the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act. The A.O. was of the view that the assessee was primarily engaged in the business of banking and in view of insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P of the I.T.Act. Further, the A.O. held that out of the total loans disbursed, only a minuscule portion was disbursed for agricultural purposes (9.52% for assessment year 2008-2009 and 4.65% for assessment year 2013-2014). For the assessment year 2008-2009, there was additional reason to deny the benefit of deduction u/s 80P of the I.T.Act. The A.O. held that the assessee did not file the return of income within the due date specified u/s 139(1) of the I.T.Act nor within the time limit specified in the notice issued u/s 148 of the I.T.Act. Therefore, it was concluded by the A.O. that as per section 80A(5) of the I.T.Act, the assessee would not be entitled to deduction u/s 80P of the I.T.Act. 4. Aggrieved by the orders of the A.O. denying the benefit of deduction u/s 80P of the I.T.Act for assessment years 2008- 2009 and 2013-2014, the assessee filed appeals before the first appellate authority. The CIT(A) confirmed the view taken by the Assessing Officer. ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 3 5. Aggrieved by the orders of the CIT(A), the assesee has filed these appeals before the Tribunal. The learned AR, as regards the issue that the assessee has not filed the return of income within the time specified, relies on the judgment of the Hon’ble Kerala High Court in the case of Chirakkal Service Co- operative Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.). On merits, with regard to the denial of deduction u/s 80P(2)(a)(i) of the I.T.Act, the learned AR submitted that the issue in question is covered in favour of the assessee by the judgment of the Hon’ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT reported in 431 ITR 1 (SC). 6. The learned Departmental Representative supported the orders of the Income Tax Authorities. 7. We have heard rival submissions and perused the material on record. As regards the denial of deduction u/s 80P for the reason that the assessee has not filed the return within the due date, we find that the issue is no longer res integra. The Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT (supra), was considering the following question of law:- “(B) Whether the Tribunal is justified in denying the exemption under section 80P of the Income-tax Act, 1961, on the mere ground of belated filing of return by the assessee? (C) Whether a return filed by the assessee beyond the period stipulated under section 139(1)(4) or section 142(1) / 148 can be held as non est in law and invalid for the purpose ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 4 of deciding exemption under section 80P of the Income-tax Act, 1961 ?” 7.1 In deciding the above questions, the Hon’ble High Court held as follows:- “18. Question B and C relate to denial of exemption on ground referable to belated filing of return, that is to say, returns filed beyond the period stipulate under section 139(1) or section 139(4), as the case may be, as well as section 142(1) or section 148, as the case may be. There are no cases among these appeals where returns were not filed. There are cases where claims have been made along with the returns and the returns were filed within time. Still further, there are cases where returns were filed belatedly, that is to say, beyond the period stipulated under sub-section (1) or (4) of section 139; and, there are also returns filed after the period with reference to sections 142(1) and 148 of the Income-tax Act. 19. Section 80A(5) provides that where the assessee fails to make a claim in his return of income for any deduction, inter alia, under any provision of Chapter VI-A under the heading “C.-Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder. Therefore, in cases where no returns have been filed for a particular assessment year, no deductions shall be allowed. This embargo in section 80A(5) would apply, though section 80P is not included in section 80AC. This is so because, the inhibition against allowing deduction is worded in quite similar terms in section 80A(5) and 80AC, of which section 80A(5) is a provision inserted through the Finance Act 33 of 2009 with effect from April 1, 2013, after the insertion of section 80AC as per the Finance Act of 2006 with effect from April 1, 2016. This clearly evidences the legislative intendment that the inhibition contained in sub-section (5) of section 80A would operate by itself. In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible. 20. Here, question would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 5 will also stand effectuated as a claim duly made as part of the returns so filed, for due consideration. 21. When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre-assessment enquiry is carried forward by issuance of notice under section 142(1) or when notice is issued on the premise of escaped assessment referable to section 148 of the Income-tax Act. The position notwithstanding, when an assessment is subjected to first appeal or further appeals under the Income-tax Act or all questions germane for concluding the assessment would be relevant and claims which may result in modification of the returns already filed could also be entertained, particularly when it relates to claim for exemptions. This is to because the finality of assessment would not be achieved in all such cases, until the termination of all such appellate remedies. Under such circumstances, the Tribunal was not justified in denying exemption under section 80P of the Income-tax Act on the mere ground of belated filing of return by the assessee concerned. A return filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the Income-tax Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under section 80P of the Income-tax Act. We thus answer substantial questions of law B and C formulated and enumerated above.” 7.2 The above view of the Hon’ble High Court was not disturbed by the Full Bench of the Hon’ble Kerala High Court in the case of Pr.CIT v. Poonjar Service Co-operative Bank Ltd. reported in (2019) 414 ITR 67 (Ker) (FB) nor by the Hon’ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT (supra). Therefore, in the light of the above judgment of the Hon’ble Kerala High Court in the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT (supra), we hold that the assessee cannot be denied the ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 6 deduction u/s 80P of the I.T.Act for the reason that the return of income has been filed belatedly. It is ordered accordingly. 7.3 As regards the issue on merits, we find that the Hon’ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT (supra) had held that section 80P of the I.T.Act being a benevolent provision enacted by Parliament to encourage and promote the credit co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, the view in favour of the assessee is to be taken. It was further held by the Hon’ble Apex Court that deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue by adding the word “agriculture” into section 80P(2)(a)(i) of the I.T.Act. It was concluded by the Hon’ble Apex Court that notwithstanding that the assessee co-operative society may give loans to the members, which are not related to agriculture, deduction u/s 80P(2)(a)(i) of the I.T.Act cannot be denied. The relevant finding of the Hon’ble Apex Court in this regard reads as follows:- “To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co- operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 7 have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.” 7.4 The Assessing Officer did not have the benefit of the judgment of the Hon’ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT (supra), we are of the view in the interest of justice and equity the issue of deduction u/s 80P(2)(a)(i) of the I.T.Act needs to be examined de novo in the light of the judgment of the Hon’ble Apex Court, referred supra. Therefore, the issue raised on merits is restored to the files of the A.O. The A.O. shall take a decision in accordance with law after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. 8. In the result, the appeals filed by the assessee are allowed for statistical purposes. Order pronounced on this 20 th day of May, 2022. Sd/- (Laxmi Prasad Sahu) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 20 th May, 2022. Devadas G* ITA Nos.51 & 52/Coch/2022. M/s.Erumapetty Panchayath Service Co-op Bank Ltd. 8 Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), NFAC, Delhi. 4. The CIT Cochin. 5. The DR, ITAT, Cochin. 6. Guard File. Asst.Registrar/ITAT, Cochin