The Karimnagar District Co-Operative Central Bank Limited, Karimnagar V. Income Tax Officer, Ward-2, Karimnagar

ITA 532/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5291 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 22-03-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 20-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DIPAK R
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 532/HYD/2018 ASSESSMENT YEAR: 2013-14 THE KARIMNAGAR DISTRICT CO-OPERATIVE CENTRAL BANK LIMITED, KARIMNAGAR [PAN: AABAT0905H] VS INCOME TAX OFFICER, WARD-2, KARIMNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR FOR REVENUE : DR.DIPAK. R. DR DATE OF HEARING : 22-03-2021 DATE OF PRONOUNCEMENT : 04-05-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2013-14 ARISES FROM TH E CIT(A)-2, HYDERABADS ORDER DATED 31-05-2017 PASSED IN APPEAL NO.0124/2016-17, IN PROCEEDINGS U/S.143(3) O F THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE INSTANT APPEAL: ITA NO.532/HYD/2018 :- 2 -: 1. THE LD.CIT(A) ERRED ON FACTS AND LAW IN UPHOLDI NG ADDITIONS MADE BY THE AO TOWARDS THE DISALLOWANCE OF APPELLANT'S C LAIM OF DEDUCTIONS U/S 80(P)(2)(D) AND 36(1)(VII)(A) OF THE INCOME TAX ACT, 1961. 2. THE LD.CIT(A) ERRED IN UPHOLDING THE DECISION OF THE AO IN DISALLOWING APPELLANT'S CLAIM OF DEDUCTION U/S 80(P )(2)(D) OF THE I.T. ACT, 1961, WITHOUT ADJUDICATING THE GROUNDS OF THE APPELLANT BEFORE HIM, WITHOUT STATING THE REASONS FOR UPHOLDING THE DECISION OF THE AO AND SIMPLY BY STATING THAT HE IS IN TOTAL AGREEMENT WITH THE AO. 3. THE LD.CIT (A) OUGHT TO HAVE APPRECIATED THE FAC T THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE AO IS ERRONEOUS, PERVERSE AND UNSUSTAINABLE, BASED ON NO EVIDENCE AN D DESERVES TO BE SET ASIDE. 4. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE AO ERRED IN DENYING APPELLANT'S CLAIM OF ELIGIBLE DEDUCTION OF RS.9,78,44,820 OUT OF RS.42,98,32,900 U/S 80(P)(2)(D) OF THE LT. A CT, 1961, WITHOUT PROPERLY APPRECIATING THE FACTS AND LEGAL STATUS. 5. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT WAS ORIGINALLY FORMED AS A CREDIT CO-OPERATIVE SOCI ETY WAY BACK IN THE YEAR 1921 AND WAS REORGANISED IN 1957 WITH AMENDMEN TS IN ITS BYE- LAWS. 6. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT WAS ALLOTTED REGISTRATION NO.21520 UNDER THE HYDERA BAD CO- OPERATIVE SOCIETY ACT-XVI OF 1952 AND REGISTRATION WAS ACCORDED UNDER THE AP CO-OPERATIVE SOCIETIES ACT, 7 OF 1964 WITH THE SAME REGISTRATION NUMBER AND THE SAME IS APPLICABLE TILL DATE. 7. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE AO ERRED IN DISALLOWING APPELLANTS CLAIM OF DEDUCTION U/S 8 0(P)(2)(D) OF THE I.T. ACT, WITHOUT UNDERSTANDING THE FACT THAT THE APPELL ANT WAS PRIMARILY A CO-OPERATIVE SOCIETY AND HAD IN THAT CAPACITY MAD E INVESTMENTS IN OTHER CO-OPERATIVE SOCIETIES WHICH COULD NOT BE REG ARDED AS A BANKING ACTIVITY AND THE CLAIM OF DEDUCTION U/S 80(P)(2)(D) OF THE I.T. ACT IS CONFINED TO THE ELEMENT OF INCOME FROM INTEREST AND DIVIDENDS FROM ABOVE INVESTMENTS. 8. THE LD.CIT (A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE AO ERRED IN DENYING DEDUCTION U/S 80(P)(2)(D) OF THE I.T. AC T, 1961, WHICH WAS CLAIMED BY THE APPELLANT IN THE CAPACITY OF CO-OPER ATIVE SOCIETY, THOUGH IT FALLS WITHIN THE MEANING OF A CO-OPERATIV E BANK UNDER THE BANKING REGULATION ACT, 1961. 9. THE LD.CIT (A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE AO ERRED IN DENYING DEDUCTION U/S 80(P)(2)(D) OF THE LT. ACT , 1961, BY APPLYING ITA NO.532/HYD/2018 :- 3 -: THE PROVISIONS OF 80P(4) OF THE LT. ACT, 1961, WITH OUT UNDERSTANDING THE FACT THAT THE CONTENTION OF THE APPELLANT IS NO T BASED ON CLASSIFICATION, AND IT IS BASED ON DEDUCTION AVAILA BLE TO IT AS A CO- OPERATIVE SOCIETY AGAINST ITS INVESTMENTS WITH THE OTHER CO-OPERATIVE SOCIETIES. 10. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE AO ERRED IN UNDERSTANDING THE FACT THAT CO-OPERATIVE S OCIETIES CANNOT BE BARRED FROM CLAIMING DEDUCTION U/S 80(P)(2)(D) OF T HE I.T.ACT, 1961 AND THIS SECTION APPLIES TO CO-OPERATIVE SOCIETIES IN RESPECT OF INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THEM FRO M ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY. 11. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE AO ERRED UNDERSTANDING THAT THE APPELLANT IS A CO-OPERATIVE SOCIETY BY ITS NATURE OF ACTIVITIES AND IT IS ELIGIBLE FOR DEDUCTI ON U/S 80(P)(2)(D) OF THE I.T. ACT, 1961, TO THE EXTENT OF INCOME EARNED BY I T BY WAY OF INTEREST AND DIVIDENDS DERIVED FROM ITS INVESTMENTS WITH OTH ER CO-OPERATIVE SOCIETIES. 12. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE A.O ERRED IN INVOKING PROVISIONS OF SECTION 80P(4) OF THE ACT, W HICH ARE APPLICABLE TO CO-OPERATIVE BANKS SINCE THE APPELLANT AS A CO-O PERATIVE SOCIETY HAS CLAIMED DEDUCTION U/S 80 (P)(2)(D) OF THE I.T. ACT, TO THE EXTENT OF INTEREST AND DIVIDENDS DERIVED FROM THE INVESTMENTS MADE IN OTHER CO-OPERATIVE SOCIETIES AND THE ABOVE CLAIM OF DEDUC TION DOES NOT CONSTITUTE ANY INCOME FROM BANKING ACTIVITIES OF TH E APPELLANT. 13. THE CIT(A) ERRED IN UPHOLDING THE DECISION OF T HE A.O IN DISALLOWING DEDUCTION OF RS. 104,53,39,000/- CLAIME D BY THE APPELLANT U/S 36(1)(VIIA) OF THE I.T.ACT, 1961, WIT HOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E. 14. THE CIT(A) ERRED IN UPHOLDING THE DECISION OF T HE A.O IN DISALLOWING DEDUCTION U/S 36(1)(VIIA) OF THE I.T. A CT, 1961 BY STATING THAT THE APPELLANT HAS NOT MADE ANY PROVISION FOR B AD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNTS. 15. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT MAKING PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS I S NOT MANDATORY WHEN THE APPELLANT IS CLAIMING DEDUCTION ULS 80P(2) (D) OF THE I.T. ACT, 1961. 16. THE CIT(A) OUGHT TO HAVE CONSIDERED THE INFORMA TION AND WORKINGS FURNISHED BY THE APPELLANT IN SUPPORT OF I TS CLAIM OF DEDUCTION TOWARDS PROVISION FOR BAD AND DOUBTFUL DE BTS U/S 36(1)(VIIA) OF THE I.T. ACT, 1961. ITA NO.532/HYD/2018 :- 4 -: 17. THE APPELLANT MAY ADD OR ALTER OR AMEND OR MODI FY OR SUBSTITUTE OR DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL . 3. COUPLED WITH THIS, THE ASSESSEE HAS ALSO FILED ITS PETITION DT.11-03-2021 SEEKING TO RAISE ITS ADDITIONAL SUBSTANTIV E GROUND NOS.18 TO 21. THE REVENUE STRONGLY OBJECTED TO THE ASSESSEES FOREGOING PETITION ALLEGEDLY ARGUING ALTOGE THER NEW ARGUMENT REGARDING ADMISSIBILITY OF SECTION 36(1)(VII I) DEDUCTION. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY ARGUED THAT THE ASSESSEE IS ESTOPPED FROM RAISING THE IMPUGNED ADDITIONAL SUBSTANTIVE GROUNDS NOT RELEVANT TO THE ISSUE BEFORE US. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS. SUFFICE TO SAY, THE HON'BLE APEX COURTS LANDMARK DECISION IN NATIONAL THERMAL POWER CO. LTD., VS., CIT [229 ITR 383] (SC) AS CONSIDERED IN TRIBUNALS SPECIAL BENCH S DECISION ALL CARGO GLOBAL LOGISTICS LTD., VS. DCIT (2012) [1 37 ITD 217](SB) (MUMBAI), HOLDS THAT WE CAN VERY WELL ENTER TAIN A NEW GROUND GOING TO ROOT OF THE MATTER SO AS TO DETERMINE CORR ECT TAX LIABILITY OF A TAXPAYER. WE GO BY THE VERY ANALOG Y AND FIND THAT THE ASSESSEES FOREGOING PETITION SEEKS TO RAISE ITS ADDITIONAL SUBSTANTIVE GROUND THAT IT IS ELIGIBLE FOR SE CTION 36(1)(VIII) DEDUCTION IN RESPECTIVE AMOUNTS TRANSFERRE D TO SPECIAL RESERVE SINCE COVERED WITHIN THE DEFINITION O F; A SPECIFIED ENTITY; AS PER THE PROVISIONS OF THE ACT. ITA NO.532/HYD/2018 :- 5 -: 5. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE TH AT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS ADJUD ICATED THE ABOVE CLINCHING ISSUE IN THEIR RESPECTIVE ORDERS. 6. FACED WITH THIS SITUATION, WE DEEM IT APPROPRIATE TO RESTORE THE IMPUGNED ISSUE OF SECTION 80P(2) DISALLOWA NCE OF RS.9,78,44,820/- CLAIM BACK TO THE ASSESSING OFFICER TO BE EXAMINED AFRESH IN LIGHT OF SECTION 36(1)(VIII) OF THE ACT; AS APPLICABLE IN CASE OF THE SPECIFIED ENTITY; AS PER LA W, WITHIN THREE EFFECTIVE OPPORTUNITIES OF HEARING. IT IS FURTHER MADE CLEAR THAT IT SHALL BE ASSESSEES RESPONSIBILITY ONLY TO FILE ALL THE NECESSARY DETAILS. 7. THIS ASSESSEES APPEAL IS TREATED AS ALLOWED FOR S TATISTICAL PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MAY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 04-05-2021 TNMM ITA NO.532/HYD/2018 :- 6 -: COPY TO : 1.THE KARIMNAGAR DISTRICT CO-OPERATIVE CENTRAL BANK LIMITED, C/O. P.MURALI & CO., CHARTERED ACCOUNTANTS , 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2.THE INCOME TAX OFFICER, WARD-2, KARIMNAGAR. 3.CIT(APPEALS)-2, HYDERABAD. 4.PR.CIT-2, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.