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Income Tax Appellate Tribunal, CHANDIGARH
Before: SMT. DIVA SINGH, JM
Hearing conducted via Webex आदेश/ORDER
The present appeal has been filed by the assessee wherein the correctness of the order dated 20.02.2019 of CIT(A), Palampur pertaining to 2012-13 assessment year is assailed on the following grounds :
1. That the Commissioner of Income Tax (Appeal) has erred in law and facts by disallowing the deduction under section 80P(4) of the Income Tax Act, 1961 by defining it as a primary Co-operative bank.
2. That the co-operative society is engaged in "carrying on the business of banking or providing credit facilities to its members" which qualifies the provision for deduction under section 80P(2)(a)(i) and 80P(2)(d).
ITA 648/CHD/2019 A.Y. 2012-13 Page 2 of 5 3. That the Commissioner of Income Tax (Appeal) is not justified in disallowing the amount of Rs. 2,92,749/- by ignoring the provisions of 80P. 4. That the impugned demand and order is void-ab-initio, is liable to be quashed and should not be insisted upon. 5. That the Appellant craves to add, amend, alter or withdraw any ground or ground of appeal
6. That stay should be granted for recovery during pendency of appeal.
The ld. AR inviting attention to the assessment order passed u/s 147/143(3) and the impugned order submitted that there are certain factual inaccuracies which have crept into the orders of the Tax Authorities. Inviting attention to page 2 of the assessment order para 3 it was his submission that the line of query taken by the AO would show that the tax authorities have proceeded on the footing that the assessee is a Co-operative Banking Society and thus applied the case laws which were not relevant or applicable to the facts of the assessee's case. In the facts of the present case, it was his submission that no licence under the RBI for banking activity has been obtained by the assessee and in case the assessee was to be treated as a banking society, then the necessary licence for carrying out the banking activities should be available. The assessee is an Agricultural Co-operative Society also tasked with PDS activities. Referring to the orders passed, it was his submission that the assessee society’s case was handled by some other counsel who was not fully conversant with the factual intricacies of the case involved
ITA 648/CHD/2019 A.Y. 2012-13 Page 3 of 5 and they failed to bring these to the notice of the ld. CIT(A). In the situation, it was his limited prayer that the matter may be remanded back to the file of the CIT(A) in order to permit the assessee an opportunity to address the correct facts.
The ld. Sr.DR considering the submissions did not object to the said prayer.
I have heard the submissions and perused the material on record. In the facts of the present case, it is seen that the CIT(A) has passed the following order on facts :
“4.7 I have carefully considered the contentions of the appellant alongwith judicial decisions cited on this issue and find that appellant society is primarily a agricultural co-operative service society and engaged in sale of PDS and non-PDS items. However, it is not denied by the appellant society that it is accepting deposits from nominal as well as non-members and giving funds to them on interest basis. This fact has also been accepted by the society both at the stage of assessment as well as in the course of present proceedings. Therefore, I hold that appellant is not entitled to the claim of deduction under section 80 P(2)(a)(i) of the IT act on this income. 4.8 Further, I find that Hon'ble Supreme Court has recently in the case of Citizen Cooperative Society Ltd in civil appeal number 10245 of 2017 has held that where interest has been earned on investments made by the society then the claim of exemption under section 80 P cannot be allowed to the cooperative society, which is meant only for its members and providing credit facilities to its members. The contention of the appellant that funds were received from the members has been considered but the fact that interest income has been earned on account of investments made with other persons has not been denied. 4.9 Thus, in view of the above mentioned facts and judicial decisions, I hold that appellant is not entitled to the claim of deduction under section 80 P(2)(a)(i) of the IT act. As regards the claim of deduction under section 80 P(2)(d) of the IT act is concerned and also the set off of cost of funds against the interest income earned is concerned, I agree with the reasons given by the AO in the assessment order, in the absence of any controverting facts being brought on record by the appellant. Accordingly, i confirm the addition of Rs. 2,92,749 made by the AO on this account.
ITA 648/CHD/2019 A.Y. 2012-13 Page 4 of 5 4.10 Further, 1 find that an addition of Rs. 63,048 has been made by the AO on account of provisions made by the appellant on account of NPAs. The addition was made on the ground that this provision is a contigent liability which is not allowable under the IT Act. The appellant has submitted in the course of present proceedings that NPA provision made in the accounts which does not change the character of income. It is submitted that the provision made on account of said NPAs has reduced the exempt income. It is also stated that income of the co-operative society is deductible u/s 80P(2)(a)(i) and 80P(2)(a)(d) so if the claim of deduction of Rs.63,048 is allowed then deduction u/s 80P will automatically be increased by this amount. 4.11 Having considered the material available on record, I find that AO was justified in disallowing the claim of NPA provision as same is not allowable as deduction. However, I find force in the contentions of the appellant that disallowance of provision made on account of NPAs will enhance the claim of deduction u/s 80P (2)(a) of the IT Act. The AO is being directed to re-compute the income of the appellant after allowing the deduction u/s 80 P (2)(a) of the IT Act.
4.1 I find that the above finding in the absence of any discussion on what arguments, if any were advanced before the CIT(A) is not of much help. The ld. AR has argued that the orders have been passed on account of mistake of the counsel in not addressing the inaccurate and irrelevant facts which have crept in. Accordingly, after hearing the parties in the peculiar facts and circumstances, as they stand, the impugned order is set aside restoring the issue back to the file of the CIT(A) with the direction to the assessee to place full and complete facts before the First Appellate Authority in order to facilitate a proper reasoned order on merits. It is made clear that the opportunity so provided to the assessee should not be abused and full and proper compliance be made before the said authority. Said order
ITA 648/CHD/2019 A.Y. 2012-13 Page 5 of 5 was pronounced at the time of virtual hearing itself in the presence of the parties via Webex.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 26th March,2021.