Andhra Pragathi Farmers Service Co-Op Society, Ramadurgam V. ITO, Ward-1, Adoni

ITA 661/Hyd/2022

AI Insights

The case involves the Andhra Pragathi Farmers Service Co-op Society appealing against the orders of the Income Tax Officer and the Commissioner of Income Tax (Appeals), which denied them deductions under section 80P(2) of the Income Tax Act, 1961, for interest income from deposits in nationalized banks. The Tribunal considered the precedents and rulings, particularly focusing on the Supreme Court's decision in Mavilayi Service Cooperative Bank Limited, which clarified that such deductions are not applicable to cooperative banks functioning like commercial banks. The Tribunal dismissed the appeals, agreeing with the lower authorities that the deductions claimed were not admissible under the current legal framework.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133099 (ITAT-undefined)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Hyderabad
• Next Hearing Date: 09-10-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 22-11-2022
• Other Referred Cases: M/s. Totgars Cooperative Sales Society Ltd Vs. ITO, Karnataka, Vavveru Co-operative Rural Bank Limited Vs. CCIT, Mavilayi Service Co-operative Bank Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order
• Section: 263; 154; 143(3); 143(1); 80P

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND SHRI LALIET KUMAR, JUDICIAL MEMBER आ.अपी.सं / ITA Nos.660 & 661/Hyd/2022 (निर्धारण वर्ा / Assessment Year: 2016-17 and 2018-19) Andhra Pragathi Farmers Service Co-op Society, Ramadurgam, Chippagiri Mandal, Kurnool. C/o. Katrapati & Associates, 1-1-298/2/B3, 1 st Floor, Ashok Nagar, Hyderabad – 500 020. PAN : AAAAR1876J. Vs. Income Tax Officer, Ward – 1, Adoni. अपीलधर्थी / Assessee प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध/Assessee by: Shri K.A. Sai Prasad, C.A. रधजस्‍व द्वधरध/Revenue by: Shri Shakeer Ahamed, Sr.AR. O R D E R PER LALIET KUMAR, J.M. The captioned appeals are filed by the assessee feeling aggrieved by the separate orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.29.09.2022 invoking proceedings under section 154 of the Income Tax Act, 1961 (in short, “the Act”), respectively, for the A.Y.s. 2016-17 and 2018-19. सुिवधई की तधरीख/Date of hearing: 10.10.2023 घोर्णध की तधरीख/Pronouncement on: 17.10.2023 2 2. The appeal filed by the assessee in ITA No.661/Hyd/2022 is barred by limitation by 3 days. It has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing. 2.1 The grounds raised by the assessee in both the appeals are same and hence, we are reproducing the grounds of ITA No.660/Hyd/2022 for A.Y. 2016-17 only, for the sake of brevity and the same read as under : “1. The order of the learned First Appellate Authority is not correct either in law or on facts and in both. 2. The learned First Appellate Authority is not justified in confirming the action of the Assessing Officer denying deduction u/s 80P(2) in the proceedings u/s 154. The issue involved is debatable and hence cannot be subject matter of adjustments u/s 154. 3. The learned First Appellate Authority is not justified in confirming the action of the Assessing Officer denying deduction u/s 80P(2) in respect of interest received on deposits made in Nationalised Banks amounting to Rs. 6,77,560/- .” 3. As the facts and issues in both the appeals are same, we are reproducing the facts of appeal in ITA No.660/Hyd/2022 for the sake of brevity. 4. The brief facts of the case are that assessee is an Association of Persons (AoP) engaged in carrying on the business of providing credit facilities to its members and earning the interest income on such credit facilities. It has filed its return of income for the Asst.Year 2016-17 on 23-06-2016 by admitting gross total income of Rs. 36,28,799/- and claimed the entire gross total income as deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 and the same was accepted u/s. 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS. 3 Thereafter, notice u/s.143(2) was issued on 04-07-2017 and subsequent notices u/s.142(1) were issued. In response to the above, assessee has produced the books of accounts and the information from time to time. After examination of books of accounts and verification of information, Assessing Officer has completed the assessment by accepting the income returned u/s.143(3) of the Income Tax Act, 1961 and passed assessment order on 18.05.2018. 4.1. Thereafter, Assessing Officer issued notice u/s 154 of the Act dt.07.02.2020 wherein he proposed rectification as “In the assessment order passed under section 143(3) on 18.05.2018 while determining the assessed income the interest earned from nationalized bank / institutions thereon is not eligible for deduction u/s 80P of the IT Act. Since the matter is related to incorrect claim u/s 80P of the Act and in view of the Supreme Court decision in the case of M/s. Totgars Cooperative Sales Society Ltd Vs. ITO, Karnataka, it is a mistake apparent from the record.” Thereafter, the Assessing Officer passed order u/s 154 assessing the total income at Rs.36,28,799/- interalia disallowing the claim of deduction u/s 80P amounting to Rs.6,77,560/- towards interest income received from deposits in banks 5. Feeling aggrieved with the order of Assessing Officer passed u/s 154 of the Act dt.31.03.2021, assessee filed an appeal which was subsequently migrated to the ld.CIT(A), NFAC, Delhi, who dismissed the appeal of assessee 6. Aggrieved with the order of ld.CIT(A), assessee is now in appeal before us on the grounds mentioned hereinabove. 4 7. The primary contention of the learned Authorised Representative before us is that the issue is debatable in nature and cannot be the subject matter of rectification order passed u/s 154 of the Act. It was submitted that jurisdictional High Court in the case of Vavveru Co-operative Rural Bank Limited Vs. CCIT reported in 396 ITR 371 (A.P) had decided the issue in favour of the assessee and therefore, the issue is debatable, and the Assessing Officer cannot relook the issue under the garb of section 154 of the Act. Ld. AR further submitted that the co-ordinate Benches of the Tribunal have decided the issue in favour of the assessee and he has drawn our attention to the recent decision of SMC Bench dt.12.09.2023 in the case of assessee in ITA 432/Hyd/2023 (wherein one of us Judicial Member) has decided the issue vide paras 6 to 8 of the order as under : 6. Before me, Ld.AR submitted that the case of the assessee is covered with the decision of the Tribunal in its own case in ITA No.246/Hyd/2021 for A.Y. 2015-16, wherein the Tribunal vide Paragraphs 3 to 5 held as under : “3. We next advert the sole substantive issue between the parties, qua correctness of the Pr.CIT’s identical revision direction treating the corresponding regular assessments, dated 28.6.2017, 29.6.2017 and 27.6.2017; respectively as erroneous ones causing prejudice to the interest of the Revenue on the ground that the Assessing Officer (s) had accepted these taxpayer identical section 80P(aa) deduction claims pertaining to the interest income derived from nationalized banks. Learned Pr.CIT holds that the hon'ble apex court’s decision in Totgars Co-operative Society Ltd vs, Income Tax Officer (322 ITR 283) (S.C) as well as CIT vs. Nawanshahar Central Co-op Bank Ltd (289 ITR 6) (S.C) have already held that such deduction isn’t available to a society like the assessee but banks only. He has also referred to the CBDT Circular No.18/2015 to the very fact. 4. Both the parties reiterated their respective stands against and in support of Pr.CIT’s foregoing revision directions. We notice in this factual backdrop that the instant issue of as to whether a cooperative society is eligible for section 80P(2a) deduction qua, the interest income derived from deposits made in the nationalized banks is no more resintegra as the Tribunal coordinate bench 5 decision in ITA No.284/Hyd/2021, dated 30.09.2021 takes note of the hon'ble jurisdictional High Court decision in Vavveru Coop. Rural Bank Ltd vs. CCIT (396 ITR 371(A.P) as under: “3. We now come to the correctness of learned PCITs revision directions under challenge holding the corresponding regular assessment framed on 27.12.2018 and 27.10.2017 as erroneous ones causing prejudice to the interest of the Revenue on the ground that both the said Assess ng Officers' had accepted the assessee’s section 80P(2)(d) deduction c1aim(s) regarding interest income(s); derived from deposits made in SBI/Nationalised Bank(s) as eligible for the said relief. Learned PCITs rely on hon'ble apex court's landmark decision in The Totgar Co-operative Sale Society Limited Vs. ITO 322 ITR 283 (SC) that the impugned deduction is exigible only in case of income derived from co- operative banking activity or interest income from a certified institution than deposits made in nationalized banks. Learned PCIT therefore hold both the foregoing assessments as an instance inviting application of ITA Nos.284 & 286/Hyd/2021 section 263 revision jurisdiction. This leaves the assessees' aggrieved. 4. We have given our thoughtful consideration to rival pleadings qua correctness of the learned PCITs foregoing revision direction and find no reason to uphold the same. This is primarily for the reason that hon’ble jurisdictional high court decision in Vavveru Co-operative Rural Bank Ltd. Vs. CCIT 396 ITR 371 (A.P) holds that a co-operative society's income derived from deposits in nationalized banks/SBI is also eligible for 80P deduction. Their lordships have duly taken into consideration the hon'ble apex court's foregoing decision (supra). We therefore hold that both the Assessing Officers therein had not committed any error in not disallowing the assessees' section 80P(2)(d) deduction claims in issue qua the respective interest income derived form fixed deposit in nationalized banks. The PCITs' revision direction under challenge herein forming subject matter of these two appeals stand reversed on the very analogy therefore. We lastly quote hon'ble apex court's ITA Nos.284 & 286/Hyd/2021 landmark decision Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) that an assessment has to be both erroneous as well as causing prejudice to the interest of revenue; simultaneously before the CIT or the PCIT; as the case may be, sets section 263 revision mechanism in motion. And that it is not each and every assessment which would attract revision proceedings but only those wherein the Assessing Officer has not taken one of the two possible views. We thus restore both the assessments herein as a necessary corollary. No other ground has been pressed before us”. 5. We adopt the foregoing detailed discussion mutatis mutandis to hold that the Pr.CIT’s revision direction therein under challenge are not sustainable in law. The same stand reversed in all the instant three cases therefor. No other ground has been pressed before us. These three assessees’ appeals are allowed in above terms. A copy of this common order be placed in the respective case files.” 6 7. On the other hand, ld. DR relied on the orders of lower authorities. 8. I have heard the rival submissions and perused the material on record. The issue in the present case is with respect to disallowance of deduction of Rs.29,97,587/- claimed by the assessee u/s 80P(2)(a) of the Act. Before me, ld. AR submitted that the case is already covered in favour of the assessee and filed the order of Tribunal wherein the Tribunal gave decision in favour of assessee. Further, the said decision is not stayed or over-ruled by any of the higher Judicial Forums. In view of the above circumstances, I respectfully following the decision of the co- ordinate Bench of the Tribunal passed in the assessee’s own case for A.Y. 2015-16, allow the appeal. Thus, the appeal of the assessee is allowed.” 8. On the other hand, Ld. D.R. has drawn our attention to the orders passed by the Assessing Officer u/s 154 of the Act as well as the order of the Ld.CIT(A) and our attention was drawn to Para 8 of the order passed by the Ld.CIT(A) which is to the following effect : “8. The issue under reference has already been adjudicated in the IA Nlo.192273& 192277of 2019 and the Diary No.31268 of 2019 in case of Mavilayi Service Co-operative Bank Limited and other by the Hon'ble Supreme Court. The details of which are as below: The Assessing Officer has to conduct an enquiry into the factual situation as enquiry into the factual situation as to the activities of the assessee society and arrive at a conclusion whether benefits can be extended or not in the light of the provisions under Sub section(4) of 80P. Further, a few lines of the judgement has been reproduced as below: With the insertion of sub-section (4) by the Finance Act, 2006, which is in the nature of a proviso to the aforesaid provision it is made clear that such a deduction shall not be admissible to a co- operative bank. However, if it a primary agricultural credit society or a primary co-operative agricultural and rural development bank, the deduction would still be provided. Thus, co-operative banks are now specifically excluded from the ambit of section 80P of the Act. Further, it is also a matter of common knowledge that in order to do the business of a Co-operative bank It is imperative to have a licence from RBI, which the appellant did not possess. Thus, if the Banking Regulation Act 1949 is now to be seen, what is clear from section 3 r.w.s 56 is that a primary co-operative bank cannot be a primary agricultural credit society must be engaged in the business of banking as defined by section 5(b) of 7 the Banking Regulation Act, 1949, which means that accepting, for the purpose of lending or investment of deposits of money from public, likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to co-operative Societies, no cooperative society shall carry on banking business in India, unless it is a co- operative bank and holds a licence issued in that behalf by the RBI, as opposed to this a primary agricultural credit society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities are allowed u/s 80P(2)(a)(i) of the Act. The Hon’ble Supreme Court has referred to the clarification by the CBDT dated 09.05.2008 and stated that "The above material would clearly indicate that the limited object of section 80P(4) is to exclude co-operative banks that function at par with other commercial bank i.e. which lend money to members of the public. As seen in its Judgement quoted above, the Hon'ble Supreme Court has stated that only Co-operative societies which are giving credit facilities for the benefit of its members and not those co- operative banks which are functioning as commercial banks should be given the benefit of deduction u/s 80P.” 9. It was submitted that once the order has been passed by the Hon’ble Supreme Court against the assessee which was not brought to the knowledge of the co-ordinate Bench of the Tribunals, then the order passed by the co-ordinate Bench of the Tribunal cannot be said to be binding on this Tribunal. 10. It was submitted that the issue has attained finality and therefore, the Assessing Officer was right in its order to decide the issue. It was submitted that if the order is passed contrary to the order of Hon’ble Supreme Court then it is a mistake apparent from the record and therefore, the Assessing Officer was within his right to rectify the original order and deny the deduction claimed by the assessee. 11. We have heard the rival submissions and perused the material on record. Undoubtedly, the issue has been settled by the Hon’ble Supreme Court in the case of Mavilayi Services Co- operative Bank Limited decided vide 123 taxmann.com 161 (431 ITR 1) and the above said order is now law of land and if any 8 decision passed in contravention to the decision of hon’ble Supreme Court, then it is an error apparent from the record which is required to be rectified. 12. In view of the above, the Assessing Officer has rightfully denied the deduction to the assessee as the assessee was not eligible for deduction in accordance with the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Limited. 13. In view of the above, we are of the opinion that the Assessing Officer was within his right to pass the order u/s 154 of the Act and therefore, the Ld.CIT(A) was correct in dismissing the appeal of the assessee. With respect to the binding nature of the co-ordinate Bench of the Tribunal (SMC), it will be suffice to say that the decision of the SMC is not binding on the Division Bench. Further, as mentioned in para 8 of the order, the Tribunal has categorically noted that “further the said decision has not stayed or over-ruled by any higher authorities”. In our considered opinion, the decision of the Tribunal was based on the decision of the jurisdictional High Court in the case of Vavveru Co-operative Rural Bank Limited Vs. CCIT (supra), which was later overruled by the Hon’ble Supreme Court in the case of Mavilayi Service Co- operative Bank Limited (supra). Therefore, the decision of SMC in the case of assessee was per in-curium and was not a binding precedent, as it was passed by SMC Bench without considering the binding decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited (supra). Therefore, we do not find any reasons to interfere with the order passed by the Ld.CIT(A). Accordingly, the appeal of the assessee is dismissed. 9 14. In the result, the appeal of assessee in ITA No.660/Hyd/2022 is dismissed. 15. As far as the other appeal of assessee i.e., ITA No.661/Hyd/2022 for A.Y. 2018-19 is concerned, in view of the submission of both the parties that the issues raised in A.Y. 2016-17 are identical to the other assessment year, except the amounts involved, we for the reasons stated hereinabove while deciding the appeal in ITA No.660/Hyd/2022 and for similar reasons, dismiss the appeal of assessee. 16. In the result, the appeal of assessee in ITA No.661/Hyd/2022 is dismissed. 17. To sum up, both the appeals of assessee are dismissed. A copy of the same may be placed in the respective case files. Order pronounced in the Open Court on 17 th October, 2023. Sd/- Sd/- d/- Sd/- Sd/- Sd/- Sd/- Sd/- d/- (R.K. PANDA) VICE PRESIDENT (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 17 th October, 2023. TYNM/sps 10 Copy to: S.No Addresses 1 Andhra Pragathi Farmers Service Co-op Society, Ramadurgam, Chippagiri Mandal, Kurnool, C/o. Katrapati & Associates, 1-1-298/2/B3, 1 st Floor, Ashok Nagar, Hyderabad – 500 020. 2 Income Tax Officer, Ward – 1, Adoni. 3 Pr.CIT, Kurnool. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order