The Madai Co-operative Rural Bank Ltd, Kannur V. ITO, Kannur

ITA 85/COCH/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4035 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: SHR R KRISHNA IYER
• Keywords: Question of law; Benefit of exemption
• Section: 142(1); 260A; 144; 139

Judgement Text

ITA NO 85/C/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN , AM & GEORGE GEORGE K, JM ITA NO 85/COCH/2013 (A SST YEAR 2009 - 10 ) THE MADAI COOP RURAL BANK LTD PAYYANAGADI KANNUR 670 303 VS THE INCOME TAX OFFICER WARD 1 KANNUR ( APP ELLANT) (RESPONDENT) PAN NO. AAABT1743P ASSESSEE BY SHR R KRISHNA IYER REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 6 TH SEPT 2016 DATE OF PRONOUNCEMENT 9 TH SEPT 2016 ORDER PER GEORGE GEORGE K,JM: THIS APPEAL IS RESTORED TO THE TRIBUN AL BY THE HONBLE KERALA HIGH COURT VIDE JUDGMENT DATED 15.2.2016 IN ITA NO.299 OF 2013. 2 BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. THE ASSESSEE HAD FILED R ETURN OF INCOME ON 16.9.2010. THE ASSESSMENT WAS COMPLETED U/S 14 4 OF THE ACT, VIDE ORDER DATED 16.12.2011 , BY DENYING THE BENEFIT OF D EDUCTION U/S 80P OF THE I T ACT. THE AO HELD THAT BY VIRTUE OF SECTION 80A(5) OF THE ACT, THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION CLAIMED U/S 80P OF THE ACT , SINCE THE RETURN OF INCOME ITA NO 85/C/2013 2 WAS NOT FURNISHED WITHIN THE TIME LIMIT PRESCRIBED U/S 139 OF THE ACT. THE SECOND DISALLOWANCE WAS U/ S 40 ( A ) (IA) OF THE ACT FOR NON DEDUCTION OF TAX WITH REGARD TO THE IN TEREST PAYMENT. THIRDLY, THE AO DISALLOWED PAYMENTS MADE TO UNRECOGNIZED GRATUITY FUND. 4 AGGRIEVED BY THE ASSESSMENT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ASSESSMENT ORDER. 5 AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE PREFERRED APPEAL TO THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 7.6.2013 DISPOSED OFF THE APPEAL OF THE ASSESSEE. THE TRIBUNAL HELD THAT SINCE THE RETURN WAS NOT FILED WITHIN THE TIME PRESCRIBED U/S 139(1)OR U/S 139(4), THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P OF THE ACT IN VIEW OF SECTION 80A(5) OF THE ACT. AS REGARD THE NON DEDUCTION OF TAX ON INTEREST PAYMENT , THE TRIBUNAL CONFIRMED THE ORDER S OF THE LOWER AUTHORITIES. WITH REGARD TO THE D ISALLOWANCE OF CONTRIBUTION MADE TO UNAPPROVED GRATUITY FUND, THE TRIBUNAL REM ITTED THE MATTER TO THE AO. 6 AGGRIEVED BY THE ORDER OF THE TRIBUNAL, THE ASSESSEE PREFERRED FURTHER APPEAL U /S 260A OF THE ACT. THE HON BLE KERALA HIGH COURT, VIDE JUDGMENT D ATED 15.2.2016 IN ITA NO. 299 OF 2013, RESTORED THE MATTER TO THE TRIBUNAL. IT IS IN THIS CONTEXT, THE CASE WAS HEARD ON 6 TH SEPT 2016. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE BELATED FILING OF RETURN, THE HONBLE HIGH COURT HAS DECIDED THE ITA NO 85/C/2013 3 ISSUE IN FAVOUR OF THE ASSESSEE. THE HONBLE HIGH COURT HAD HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DENYING THE BENEFIT OF EXEMPTION U/S 80P OF THE ACT ON THE MERE GRO UND OF BELATED FILING OF RETURN OF INCOME . THE HON BLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: B WHETHER THE TRIBUNAL IS JUSTIFIED IN DENYING TH E EXEMPTION U/S 80P OF THE I T A CT 1961 ON THE MERE GROUND OF BELAYED FILING OF RETURN BY THE ASSESSEE? C. WHETHER A RETURN FILED BY THE ASSESSEE BEYOND THE PERIOD STIPULATED U/S 139(1)/(4) OR SECTION 142(1)/148 CAN BE HELD AS NON - EST IN LAW AND INVALID FOR THE PURPOSE OF DECIDING EXEMPTION U/S 80P OF THE I T ACT, 1961? 7.1 IN CONSIDERING THE ABOVE SUBSTANTIAL QUESTION OF LAW, THE HONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS : 18. QUESTIONS B & C RELATE TO DENIAL OF EXEMPTION ON GROUND REFERABLE TO BELATED FILING OF RETURN, THAT IS TO SAY, RETURNS FILED BEYOND THE PERIOD STIPULATED 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 I T 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 VIA 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 1 S NOT INCLUDED I N SECTION 80AC. THIS IS SO BECAUSE, THE INHIBITION AGAINST ALLOWING DEDUCTION IS ITA NO 85/C/2013 4 WORDED IN QUITE SIMILAR TERMS IN SECTIONS 80A(5) AND 80AC, OF WHICH SECTION 80A(5) IS A PROVISION INSERTED THROUGH THE FINANCE ACT 33/2009 WITH EFFECT FROM 1.4.2013 AFTER THE INSERTION OF SECTION 80 AC AS PER THE FINANCE ACT OF 2006 WITH EFFECT FROM 1.4.2006. THIS CLEARLY EVIDENCES THE LEGISLATIVE INTENDIMENT 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 E XEMPTIONS OR DEDUCTIONS REFERABLE TO SECTION 80P WOULD DEFINITELY HAVE TO BE CONSIDERED AND GRANTED IF ELIGIBLE. 20 HENCE, QUESTION WOULD ARISE AS TO WHETHER BELATED RETURNS FILED BEYOND THE PERIOD STIPULATED UNDER SECTION 139(1) OR SECTION 139(4) AS WEL L 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 STATUE AND THE GOVERNING BIND PRECEDENTS, IT GOES WITHOUT SAYING THAT THE CL AIM FOR EXEMPTION 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 DED UCTION 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 1 S ISSUED ON THE PREMISE OF ESCAPED ASSESSMENT REFERABLE TO SECTION 148 OF THE I T ACT. THIS POSITION NOTWITHSTANDING, WHEN AN ASSESSMENT IS SUBJECTED TO FIRST APPEAL OR FURTHER APPEALS UNDER THE IT ACT OR ALL QUESTIONS GERMANE FOR CONCLUDING THE ASSESSMENT WOULD BE RELEVANT AND CLAIMS WHICH MAY RESULT 1N M ODIFICATION OF THE RETURNS AL READY FI 1 ED COULD ALSO BE ENTERTAINED, PARTICULARLY WHEN IT RELATES TO CLAIMS FOR EXEMPTIONS. THIS IS SO BECAUSE THE FINA 1 IY OF ASSESSMENT WOULD NOT BE ACHIEVED IN ALL SUCH CAS E S, UNTIL THE TERMINATION OF ALL S U CH APPE LL ATE REMEDIES. UNDER SUCH CIRCUMSTANC ES, THE TRIBUNAL WAS NOT JUSTIFIED IN DENYING EXEMPTION UNDER SECTION 80P OF THE I T ACT ON THE MERE GROUND OF BELATED FILING OF RETURN BY THE ASSESSEE CONCERNED. A RETURN FI 1 ED BY THE ASSESSEE BEYOND THE PERIOD STIPULATED UNDER SECTION 139(1) OR 139(4) O R 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 IT ACT. IN ALL SUCH SITUATIONS, IT CANNOT BE TREATED THAT A RETURN FILED AT ANY STAGE OF SUCH PROCEEDINGS COULD BE TREATE D A S NON - EST IN LAW AND INVALID FOR THE PURP O S E OF DECIDING EXEMPTION UNDER SECTION 80P O THE I T ACT. WE THUS, ANSWER SUBSTANTIAL QUESTIONS OF LAW BAND C F ORMULATED AND ENUMERATED ABOVE. ITA NO 85/C/2013 5 7.2 IN LIGHT OF THE ABOVE JUDGMENT OF THE HONBLE HIGH COURT, THE BELATED FILING OF RETURN OF INCOME BY THE ASSESSEE DOES NOT DISENTITLE IT FROM THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT. FURTHER, T HE ASSESSEE, IN THE INSTANT CASE , IS A PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 . THE C ERTIFICA TE HAS BEEN ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES TO THE ABOVE SAID EFFECT AND THE SAME IS ON RECORD. THE HONBLE HIGH C OURT, IN ASSESSEES OWN CASE AND OTHER BATCH OF CASES , HAD HELD THAT PRIMARY AGRICULTURAL CREDIT SOCIETY , REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 , IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) . S INCE THERE IS A CERTIFICATE ISSUED B Y THE REGISTRAR OF COOPERATIVE SOCIETIES , STATING THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P (2) OF THE ACT. 8 AS REGARD THE DISALLOWANCE OF DEDUCTION U/S 40 A(IA) OF THE ACT, THE TRIBUNAL HAD REJECTED THE ASSESSEE CLAIM BY HOLDING AS UNDER: 5. WE HEARD THE ID R EPRESENTATIVE FOR THE ASSESSEE AND THE ID. DR. IT IS NOT IN DISPUTE THAT VERY MEAGER AMOUNT WAS GIVEN TO THE MEMBERS AS AGRICULTURAL LOAN. THE CLT(A) FOUND THAT THE PRINCIPAL OBJECT OF THE SOCIETY WAS NOT FULFILLED. MOREOVER, THE ASSESSEE IS ALSO PROVIDING BANKING SERVICE TO ITS CUSTOMERS. ONCE THE ASSESSEE IS PROVIDING BANKING SERVICE MERELY IT WAS REGISTERED AS A CO - OPERATIVE SOCIETY, IT CANNOT HA VE THE BENEFIT OF THE PROVISIONS OF SECTION 194A(3)(VIIA) OF THE ACT. MOREOVER, IT IS NOT THE CASE OF THE ASSESSEE THAT THE RECIPIENTS OF THE INTEREST DID NOT HAVE ANY TAXABLE INCOME. IN THOSE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF T HE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. ITA NO 85/C/2013 6 9 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AS PER SECTION 194(3)(VIIA) OF THE ACT, TAX DEDUCTION IS NOT REQUIRED FROM INTEREST CREDITED OR PAID IN RESPECT OF THE DEPOSIT S WITH A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CREDIT SOCIETY OR A COOPERATIVE LAND MORTGAGE BANK OR A COOPERATIVE LAND DEVELOPMENT BANK. THE AO, CIT(A) AND THE ITAT HAD DECIDED THE ISSUE AGAINST THE ASSESSEE MAINLY FOR THE REASON THAT THE ASSE SSEE IS NOT A PRIMARY A GRICULTURAL C REDIT S OCIETY AS CLAIMED AND IS NOT ENTITLED TO EXEMPTION PROVIDED U/S 194(3)(VIIA) OF THE ACT. HOWEVER, THE LATEST JUDGMENT OF THE HONBLE KERALA HIGH COURT , IN THE CASE OF CHIRAKKAL SERVICE COOPERATIVE BANK LTD VS CIT REPORTED IN 384 ITR 490 (KER) HAD HELD THAT A COOPERATIVE SOCIETY REGISTERED AS A PRIMARY AGRICULTURAL SOCIETY UNDER THE KERALA COOPERATIVE SOCIETIES ACT 1969 , IS ENTITLED TO THE BENEFIT OF SECTION 80P(2) OF THE ACT. THE HONBLE HIGH COURT HAD CATEGOR ICALLY HELD THAT THE CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIALITES TO THE EFFECT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY , WOULD SUFFICE AS REGARDS THE CLAIM OF DEDUCTION U/S 80P(2) OF THE AC T. WHEN THE HONBLE HIGH CO URT CATEGORICALLY FOUND THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, WE SEE NO REASON AS TO WHY THE BENEFIT OF EXEMPTION PROVIDED U/S 194(3)(VIIIA) OF THE ACT CANNOT BE EXTENDED TO THE ASSE SSEE . ACCORDINGLY, THE INTEREST CREDITED OR PAID I N RESPECT OF THE DEPOSITS WITH THE ASSESSEE W AS NOT REQUIRED FOR TAX DEDUCTION AT SOURCE AND HENCE, THE PROVISIONS OF SECTION 40A(IA) OF THE ACT HAS NO APPLICATION. IT IS ORDERED ACCORDINGLY. ITA NO 85/C/2013 7 10 NO OTHER ISSUES WERE ARGUED BY THE LD COUNSEL FOR THE ASSE SSEE DURING THE COURSE OF HEARING OF THIS APPEAL. 11 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF SEPT 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT ME MBER JUDICIAL MEMBER COCHIN: DATED 9 TH SEPT 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN