ACIT, SIKAR vs. SIKAR KENDRIYA SAHKARI BANK LTD., SIKAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “A”, JAIPUR Jh jes'k lh 'kekZ] ys[kk lnL; ,oa Jh fot; iky jko] U;kf;d lnL; ds le{k BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No.171/JP/2014 fu/kZkj.k o"kZ@Assessment Year :2007-08 A.C.I.T, cuke Sikar Kendriya Sahkari Bank Ltd., Vs. Circle-Sikar. Basant Vihar, Sikar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAAAS 1601 G vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri Raj Mehra (Addl.CIT) fu/kZkfjrh dh vksj ls@ Assessee by: Shri Anil Kaushik (CA) lquokbZ dh rkjh[k@ Date of Hearing : 23/04/2019 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 22/07/2019 vkns'k@ ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the revenue against the order of ld.CIT(A)-III, Jaipur dated 23/12/2013 for the A.Y. 2007-08 in the matter of order passed U/s 143(3) of the Income Tax Act, 1961 (in short, the Act).

2 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. accordingly the assessee had been claiming deduction u/s 80P till assessment year 2006-07, and was being allowed by the department. However, in the return of income the consultant of the appellant, who prepared and filed their ITR for the assessment year 2007-08, in wake of amendments U/s 36(1)(viia) of the Act which was amended by the Finance Act, 2007 w.e.f. 01/4/2007 whereby cooperative banks were also brought within the ambit of Section 36(1)(viia) of the Act considered/misinterpreted that the above amendments were effective for assessment year 2007-08 and accordingly claimed deduction u/s 36(1)(viia) of the Act for A.Y.2007-08 and did not claim deduction u/s 80P of the Act in the ITR filed for the assessment year 2007-08. The case was scrutinized and the AO did not allow the deduction claimed by the assessee u/s 36(1)(viia) vide his order dated 13.11.2009, it was held vide para 2.2(a), Page 2 of the order "Because assessee is a cooperative society. It is neither a scheduled bank nor a non-scheduled bank as defined in explanation (i) to section 36(1)(viia). Clause (viia) of section 36(1) was amended by Finance Act 2007 w.e.f 1.4.2007 to include specifically the cooperative bank, thereby implying that the assessee is not covered by the provisions of section 36(1)(viia) for the assessment year 2007-08.

3 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. 4. By the order dated 02/11/2010, the ld. CIT(A) upheld the decline of claim U/s 36(1)(viia). In a further appeal filed before the Tribunal, the Tribunal upheld the disallowance U/s 36(1)(viia) being not admissible for the A.Y. 2007-08 but admitted additional ground of assessee regarding the admissibility of deduction U/s 80P of the Act. The matter again considered by the A.O. in the set aside proceedings, wherein he again confirmed the disallowance U/s 80P of the Act.

4 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. The appellant has declared total income of Rs. 34337830/- and with the above mentioned additions the total income was determined at Rs. 43682040/-. It may be noted that while filing the return of income for A.T. 2007-08 the appellant has not made any claim uls 80P of IT Act. This also a fact that the appellant has made claim u/s 36(1)(viia) of IT Act amounting to Rs. 6008932/- on account of bad and doubtful debts which was disallowed by the A.O. In the 1st appeal the above mentioned additions were confirmed as under: S. No. Nature of addition made by the Amount of addition Addition A.O. made by the A.O. confirmed by the 1st appellate authority 1 Rs. 6008932/- Disallowance for claim of bad Rs. 6008932/- and doubtful debts 2 Rs. 1535628/- Rs. 112433 Disallowance for claim for contribution to any other fund 3 Disallowance for claim for Rs. 10,00,000/- Rs. 10,00,000/- contribution to managerial salary fund 4 Rs. 699653/- Rs. 699653/- Disallowance of claim for contribution to PACS Fund 5 1,00,000/- Disallowance of claim for 1,00,000/- contribution to KK Funds Total - 9344213/-

The appellant has filed further appeal before the Hon'ble ITAT, Jaipur and one additional ground was also raised in which essentially it was contended that the appellant has been deprived benefits of deduction u/s 80P of IT Act and u/s 36(1)(viia) of IT Act. While deciding the appeal of the appellant the Hon'ble ITAT in ITA No. 116/JP/2011 vide order dated 04.11.2011 confirmed the additions made by the A.O. and also confirmed by the worthy CIT(A). However, as regards deduction u/s 80P of. IT Act, the Hon'ble ITAT observed that in view of amended provisions of sec. 36(1)(viia) since amendment has taken place from the year under

5 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. consideration and amended provision could not be considered while completing assessment or deciding the issue by Ld. CIT(A), therefore the issue was restored back to the file of the A.O. to consider the same in the light of amended provisions of sec. 36(1)(viia). While making re-assessment as per the directions of the Hon'ble ITAT the A.O. observed that the deduction uls 36(1)(viia) of IT Act was made available to the co-operative banks only from A.Y. 2008-09 and therefore the claim made by the assessee under this section in assessment year under consideration i.e. 2007-08 was ab-initio void. According to A.O. such claim was rightly disallowed to the assessee. The A.O. further noted that the deduction/ exemption u/s 80P and sec. 36(1)(viia) are entirely different and that these are for different class of persons. As per A.O. it is not necessary that if deduction u/s 36(1)(viia) is disallowed, automatically deduction/exemption u/s 80P will be allowed. Accordingly the A.O. assessed the income on the same amount of Rs. 42258845/- as was determined by lst appellate authority. On the other hand, the appellant case is that its income being income from co-operative banking activities was entirely exempt u/s 80P and that such exemption was withdrawn by finance act, 200.6 w.e.f. 01.04.2007. It is stated that it was wrongly understood that such exemption is not available from A.Y. 2007-08 and that accordingly such exemption was not claimed. It is further stated that such amendment by way of Finance Act, 2006 w.e.f. 01.04.2007 and therefore the withdrawal of such benefit was w.e.f. A.Y. 2008-09 and not AY 2007-08. The appellant has submitted that it was wrongly understood that both the amendments are effective from A.Y. 2007-08, though both these amendments in respect of sec. 80P and and 36(1)(viia) were by way of different Finance Act i.e. sec. 80P by Finance Act, 2006 and sec. 36(1)(viia) by Finance Act,

6 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. 2007. The appellant has essentially contended that in A.Y. 2007- 08, the claim u/s 36(1)(viia) was wrongly made whereas claim u/s 80P was allowable in respect of A.Y. 2007-08 but the same could not be made due to inadvertent mistake as discussed above. The appellant has also relied on the decision of Hon'ble High Court of Delhi in the case of Addl. CIT Vs. Jogendra Singh, 1985, 151 ITR 93 in which it has been held that it is well settled law that for purpose of assessment to income tax, the law to be applied is the law i.e. in force in the relevant assessment year, in other words the IT Act as it stands amended on the day of April of the Financial year will apply to the assessment year for that year. The appellant contention is that in A.Y. 2007-08 the whole of the income was exempt u/s 80P of IT Act. It is also stated that such claim u/s 80P of IT Act has been allowed in earlier years and that as such deduction was allowable in respect of A.Y. 2007- 08 therefore the same may be allowed accordingly.

On careful consideration of all relevant fact, it may be noted that sec. 36(1)(viia) was amended and co-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank were added for claim of deduction in respect of provision for bad and doubtful debts. Such amendment was by way of Finance Act, 2007 w.e.f 01.04.2007. Accordingly the provisions were applicable in respect of F.Y. 2007-08 and A.Y. 2008-09. As already discussed, the appellant claimed deduction in respect of A.Y. 2007-08 i.e. assessment-year-tinder consideration and the same was rightly disallowed. It may further be noted that sub- sec. 4 was added to sec. 80P by way of Finance Act, 2006 w.e.f. 01.04.2007 and as per such amendment, provisions of the sec. 80P shall not apply in relation to any co-operative bank other

7 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. than a primary agricultural credit society or a primary co- operative agricultural and rural development bank. It will indicate that w.e.f. 01.04.2007 i.e. from F.Y. 2007-08 i.e. A.Y. 2008-09, the provisions of sec. 80P were not to be applicable. In other words from A.Y. 2008-09, the deduction u/s 80P has been withdrawn. It will accordingly indicate that in respect of A.Y. 2007-08 the deduction u/s 80P was applicable and allowable to the appellant. It may also be mentioned that the deduction u/s 80P of IT Act was allowed to the appellant on regular basis upto AY 2006-07 and while completing the assessment in respect of AY 2006-07 the AO has disallowed deduction u/s 80P in respect of interest received on loans / advances given to the employees, interest received from non SLR investments and Income received by way of service charges. However even in respect of such income deduction u/s 80P was allowed by 1st appellate authority in appeal no. 28/WR/08-09 vide order dated 21.08.2008. The only income on which deduction u/s80P was not allowed was with reference to 75% of misc. income which was arrived at Rs. 171950/- and which was estimated to be non banking income out of misc. income. The findings of the 1s` appellate authority was confirmed by the Hon'ble ITAT Jaipur vide their order in ITA No 1495 and 1057/JP/2008 dated 20.03.2009. The above fact will indicate that the claim of the appellant in respect of deduction u/s 80P has always been accepted except estimation of some income out of misc. income to be of non banking income on which deduction u/s 80P was also not allowed. In this background it may be noted that there is no dispute on the fact that during AY 2007-08 deduction u/s 80P was allowable to the appellant. It is also fact that no such claim was made in the original return or during the original assessment proceedings. It is also fact that such claim was

8 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. made before the Hon'ble ITAT by way of raising additional ground of appeal and the Hon'ble ITAT accepted such additional ground and directed the AO to consider such claim. It is also fact that during the re-assessment proceedings the appellant has claimed its income to be exempt u/s 80P of IT Act. It is noted that though the AO has not allowed such deduction u/s 80P of IT Act but such rejection of claim is made mainly by stating that the deductions u/s 36 (1)(viia) and 80P are not identical and that simply because of the reason that deduction u/s 36(1)(viia) was rejected, deduction u/s 80P cannot be allowed. In other words the AO has not pointed out any specific reason as to why deduction u/s 80P was not to be allowed when such claim was allowable to the appellant till AY 2006-07 and when Hon'ble ITAT has given specific direction for consideration of such claim. It may also be mentioned that such legal ground or legal claim can be admitted at the appellate stage by the Hon'ble ITAT. Reliance is placed for such proposition on the following case laws:

It is also fact that such claim u/s 80P has regularly been allowed to the appellant upto AY 2006-07 and as discussed above, even Hon'ble ITAT has found such claim to be of allowable nature. The facts and circumstances of the appellant case in respect of assessment year under consideration are identical to the facts of the appellant case in respect of AY 2006-07. Keeping in view the above facts and circumstances and particularly the findings in respect of AY 2006-07 which were also confirmed by the Hon'ble ITAT, 75% of income from other sources (total misc. income

9 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. shown by the assessee at Rs.375807/- during A.Y. under consideration) amounting to Rs. 281855/- is estimated to be income not related to the banking business and accordingly on such income deductio u/s 80P (2)(a)(i) will not be allowed. In respect of remaining income at Rs. 41976990/-(Rs.42258845/- i.e. total income determined by the AO — Rs.281855/-),the appellant is entitled for deduction u/s 80P (2(a)i) of IT Act. The AO is directed to allow such deduction to the appellant accordingly.”

"9. It would be fruitful to quote Sec.80A(5) of the IT Act, which provides as under:- 80.A.(1)”””””””””(2)”””””’’’(3)””””””””(4)”””””””””(5) where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading C____ Deductions in respect of certain incomes, no deduction shall be allowed to him there under.

10 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. 10. In our view, the decision of the Apex Court in the case of Goetze (India) Ltd. *supra), relied upon by ld. counsel for the revenue, rather supports the case of the assessee, than of revenue as the Hon'ble Apex Court has observed as under:- The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. 11. On perusal of the above, in our view, though the assessing authority had no power but the appellate authorities did have power and therefore, for this reason also, in our view, the judgment (Goetze (India) Ltd. (supra) supports the case of the assessee rather than the revenue. 12. The Hon'ble Delhi High Court in the case of CIT Vs. Jai Prabolic Springs Ltd.: (2008) 306 ITR 42 (Delhi), held as under:- 12 As clear from the above said facts, there is no dispute that customer introduction charges did not represent revenue expenditure. The principal ground taken by the Revenue in this appeal is that if no claim for deduction of the amount was made in the return of income, then deduction would not be allowed. 13 Section 254 of the Act says that the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. 14. Reference may be made to National Thermal Power Co. Ltd. v. Commissioner of Income Tax, where the Supreme Court observed that: The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessees as well as the Department have a right to file an appeal/cross-objections

11 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.” 8. We found that the ld. CIT(A) has correctly considered the assessee’s claim U/s 80P of the Act even though, it was not filed before the A.O. and after recording a finding to the effect that the similar claim was allowed by the ITAT itself in assessee’s own case up to the A.Y. 2006-07 and the facts and circumstances during the year under consideration are same, therefore, the assessee was eligible for deduction U/s 80P in terms of direction given hereinabove.

12 ITA No.171/JP/2014 ACIT Vs. Sikar Kendriya Sahkari bank Ltd. 10. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 22nd July, 2019.

Sd/- Sd/- ¼fot; iky jko½ ¼jes'k lh 'kekZ½ (VIJAY PAL RAO) (RAMESH C SHARMA) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 22nd July, 2019 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant-The A.C.I.T, Circle-Sikar. 1. izR;FkhZ@ The Respondent- Sikar Kendriya Sahjari Bank Ltd., Sikar. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए 5. Jaipur xkMZ QkbZy@ Guard File (ITA No. 171/JP/2014) 6.

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत