Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, CHANDIGARH BENCH
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 19.02.2019 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). 3. That the Commissioner of Income tax (Appeal) is not justified in disallowing the amount of Rs. 14,19,668/- 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.
ITA 649/CHD/2019 A.Y. 2012-13 Page 2 of 4
In the facts of the present case, ld. AR submitted that there have been factual inaccuracies taken into consideration by the tax authorities as a result of which the assessee society has been taken to be akin to be a Banking Co-operative Society which is not the case. In the facts of the present case, the assessee society is not engaged in the banking activities. It was submitted that for engaging in Banking activities and accepting deposits etc. it is mandatory that a license is to be obtained from the RBI. No such license or application for obtaining it is available on record. It was his submission that the assessee was represented by a counsel who was not fully alive to the facts of the case and the assessee has suffered on account of the reason that correct facts could not be brought on record on account of this reason. Accordingly, relying upon submissions advanced in ITA 648/CHD/2019 wherein also similar factual confusion prevailed, a prayer for remand back of the issue to the file of the CIT(A) for enabling the assessee to bring on record the correct and true facts was made.
Considering the facts and the submissions, the said request was not objected to by the ld. Sr.DR.
In the facts of the present case, the ld. CIT(A) has passed a near identical order vide para 4.7 to 4.11 as in Dangri Co-operative Agricultural Service Society Ltd. The relevant extract reads as under :
4.7 I have carefully considered the contentions of the appellant along with judicial decisions cited on this issue and find that appellant society is primarily 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-
ITA 649/CHD/2019 A.Y. 2012-13 Page 3 of 4 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, 1 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. 14,69,668 made by the AO on this account. 4.10 Further, I find that an addition of Rs. 28,605 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 proceeding! 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 deductible u/s 80P(2)(a)(i) and 80P(2)(a)(d) so if the claim of deduction of Rs.28,605 is allowed then deduction u/s SOP 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 a: 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 SOP (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 Since as per assessee's uncontested plea, the correct facts could not be brought on record, the above decision is set aside. It is noticed that in the fact, there is no discussion on what arguments, if any were advanced before the CIT(A). Accordingly, considering the submissions advanced on behalf of the parties, the issues are restored back and the ITA 649/CHD/2019 A.Y. 2012-13 Page 4 of 4 impugned order is set aside back to the file of the CIT(A) with the direction to the assessee to place full and complete facts before the said authority in order to ensure the passing of an order on merits of the case. 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 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.