C.I.T. vs. SHRI GOPAL GRAM SEVA SAHAKARI MANDLI LTD.

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ITR/16/2003HC GujaratGJHC24025672200302 December 2014Author: HONOURABLE MR. JUSTICE KS JHAVERI,HONOURABLE MR. JUSTICE K.J.THAKER23 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the questions of law were to be answered in favour of the Revenue and against the assessee. Regarding the first question, the Court found that the Appellate Tribunal was not right in setting aside the order of the Commissioner of Income-tax. The reasoning was that the notification relied upon by the Tribunal and the Assessing Officer was issued under the repealed Act of 1922 and was itself repealed. The Court emphasized that Section 297 of the Income Tax Act, 1961, governs the field of repeals and savings. Consequently, the old notification could not be relied upon. For the second question, the Court reiterated that since the notification was repealed, it could not stand in the eye of law, and the Tribunal's holding that it provided a basis for exemption was incorrect. The Court rejected the argument that the notification was not withdrawn, stating that once the Act under which it was issued was repealed, the notification itself lost its validity. The Court restored the order of the CIT(A) and remitted the matter back to the Income Tax Officer to decide the case afresh under Section 80P of the 1961 Act.

What were the facts?

The assessee, Shri Gopal Gram Seva Sahakari Mandli Ltd., a cooperative society, was assessed by the Income-tax Officer (ITO) for an assessment year not specified. The assessee returned an income of Rs. 3,63,435/-, claiming exemption based on a notification issued in 1950 under the old Income Tax Act, 1922. The ITO initially accepted this claim. However, the Commissioner of Income-tax (CIT) viewed the assessment as erroneous and prejudicial to the revenue, believing the assessee was entitled to exemptions only under Section 80P of the Income Tax Act, 1961. The CIT invoked Section 263, proposing to set aside the assessment and direct reframing to consider Section 80P. The assessee objected, arguing the 1950 notification was not withdrawn. The CIT set aside the ITO's order and directed reframing, which the assessee appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT, following its prior decisions, held the CIT's order was not justified and set it aside, leading to this reference to the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the appellate Tribunal was right in setting aside the order of the Commissioner of Income-tax? 2. Whether, the appellate Tribunal is right in law in holding that 'Notification No.SRO/992 dated 22.12.1950 of the old Act, 1922 was not withdrawn and, therefore, it provided a good basis to the Co-operative Society to seek exemption of its income from business? Assessee's Contentions: The assessee contended that its income was exempt as per Notification No.SRO/998 dated 22.12.1950, issued under the Act of 1922, which was not withdrawn. They relied on previous Tribunal decisions in ITA No.1946/Ahd/82 and ITA No.2319/Ahd/92 for A.Y. 1984 and A.Y. 1978-79 respectively, in the case of Shri Moti Marad Juth Vividh Karyakari Sahakari Mandli Ltd., where the Tribunal had accepted similar exemption claims. The assessee also argued that the ITO had applied its mind and that the jurisdiction exercised under Section 263 was uncalled for. Revenue's Contentions: The Revenue argued that the 1950 notification was issued under the repealed Indian Income-tax Act, 1922, and was itself repealed. They relied on Section 297 of the Income Tax Act, 1961, which deals with repeals and savings, implying that the old notification could not govern the field. The Revenue contended that the Tribunal was wrong in setting aside the CIT's order.

Which sections of the Income-tax Act were involved?

Section 263,Section 80P,Section 297

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
O/ITR/16/2003 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 16 of 2003 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ C.I.T.....Applicant(s) Versus SHRI GOPAL GRAM SEVA SAHAKARI MANDLI LTD.....Respondent(s) ================================================================ Appearance: MR. MANISH BHATT with MRS MAUNA M BHATT, ADVOCATE for the Applicant(s) No. 1 MR SN DIVATIA, ADVOCATE for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 23 O/ITR/16/2003 JUDGMENT Date : 02/12/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI)

1.

By way of this reference, the Tribunal as per the   order   of   Hon'ble   Supreme   Court   vide   order dated   12.08.1996   in   Civil   Appeal   No.10652   of 1996, arising out of S.L.P.(C) No.12022 of 1991 moved by the Commissioner of Income­tax, Rajkot has directed the Tribunal to raise and refer the following question said to be questions of law to the   Hon'ble   High   Court   of   Gujarat   for   its esteemed opinion:

“1. Whether,   on   the   facts   and   in   the circumstances of the case, the appellate Tribunal was right in setting aside the order of the Commissioner of Income­tax.

2.

Whether,   the   appellate   Tribunal   is right

in law

in holding

that 'Notification No.SRO/992 dated 22.12.1950 of   the   old   Act,   1922   was   not   withdrawn and, therefore, it provided a good basis to   the   Co­operative   Society   to   seek exemption of its income from business.”

2.

The relevant facts of the present case are that the assessee is a cooperative society and was   assessed   by   the   Income­tax   Officer   in   the status of A.O.P.   The assessee had returned its income   at   Rs.3,63,435/­.     At   the   assessment proceedings, it was contended on behalf of the assessee   that   its   business   was   to   supply fertilizer, crude oil, sugar, oil seeds etc. to the members and non­members.  However, it prayed that   its   income   was   exempt   under   notification issued in 1950. The Income­tax officer agreed that   the   income   of   the   assessee   was   exempted under   certain   notifications   issued   in   1950. However,   while   examining   the   record   of   the proceedings, the learned CIT, Rajkot was of the view   that   the   income   of   the   assessee   was   not entirely exempt in accordance with the I.T.Act, 1961   but   that   it   was   entitled   to   certain exemptions   governed   by   section   80P   of   the I.T.Act.  The learned CIT was, therefore, of the opinion that the assessment made by the ITO was erroneous   and   prejudicial   to   the   interest   of revenue to the extent of treating the income of the assessee as wholly exempt.   Learned CIT(A)

therefore   issued   the   necessary   notices   under section   263   of   the   Act   and   called   upon   the assessee to show cause as to why the assessment be not set aside and he not directed to be re­ framed   in   which   the   claim   of   the   cooperative society should be considered afresh in light of the   provisions   of   Sec.80P   of   the   Act.     The assessee took a number of objections to the show cause notice issued to it and mainly contended that its income was exempt as per notification No.SRO/998 dated 22.12.50 which was though issued under  the   Act of 1922 but was not withdrawn. The assessee has contended that on behalf of the assessee that like contention was accepted by the Tribunal in ITA No.1946/Ahd/82 for A.Y.1984 and in   ITA   No.2319/Ahd/92   for   A.Y.   1978­79   in   the case   of   Shri   Moti   Marad   Juth   Vividh   Karyakari Sahakari Mandli Ltd., the Tribunal had taken a view   that   the   income   of   a   Co­op.   Society   was exempt but that decision was not accepted by the department and a reference was filed u/s. 256(2) of the Act, 1961. The said references had been admitted   by   the   Hon'ble   High   Court.     Holding thus, the CIT set aside the order made by the ITO with   a   direction   to   him   to   re­frame   the assessment   in   which   the   income   of   the Co­op.society   i.e.   the   assessee   should   not   be treated   as   complete   exemption.   He   further directed   the   ITO   to   consider   provisions   of Section   80P   while   framing   the   fresh   assessment order. Being aggrieved against said directions of CIT, the assessee had preferred appeal before the ITAT.  The Tribunal followed the earlier decision of the Tribunal to maintain the consistency and concluded that the order of A.O. in granting the exemption to the cooperative society in respect of   its   business   income,   was   not   erroneous   and prejudicial to the interests of Revenue and the order of the CIT(A) was set aside and then the Tribunal has referred this matter to this Court.

3.

Learned   counsel   Mr.Bhatt   with   Mrs.Mauna Bhatt,   learned   counsel   appearing   for   the applicant­Revenue, has relied on the order passed by the Assessing Officer, whereby, the Assessing Officer has followed the circular issued in the year   1922   though,   the   same   was   repealed   by Section 297 of the Income Tax Act.  The said Act reads as under: “Repeals and savings

297.

(1) The Indian Income­tax Act, 1922 (11 of 1922) is hereby repealed. (2) Notwithstanding the repeal of the Indian Income­tax   Act,   1922   (11   of   1922) (hereinafter   referred   to   as   the   repealed Act)­ (a) where   a   return   of   income   has   been filed   before   the   commencement   of   this Act   by   any   person   for   any   assessment year, proceedings for the assessment of that person for that year may be taken and   continued   as   if   this   Act   had   not been passed; (b) where   a   return   of   income   is   filed after   the   commencement   of   this   Act otherwise than in pursuance of a notice under section 34 of the repealed Act by any   person   for   the   assessment   year ending on the 31st day of March, 1962, or any earlier year, the assessment of that person   for   that   year   shall   be   made   in accordance with the procedure specified in this Act; (c) any   proceedings   pending   on   the commencement   of   this   Act   before   any income­tax   authority,   the   Appellate Tribunal or any court, by way of appeal, reference,   or   revision,   shall   be continued and disposed of as if this Act had not been passed; (d) where in respect of any assessment year   after   the   year   ending   on   the   31st day of March, 1940,­ (i) a notice under section 34 of the repealed Act had been issued before the   commencement   of   this   Act,   the proceedings   in   pursuance   of   such notice may be continued and disposed of   as   if   this   Act   had   not   been passed; (ii) any income chargeable to tax had escaped   assessment   within   the meaning   of   that   expression   in section 147 and no proceedings under section   34   of   the   repealed   Act   in respect   of   any   such   income   are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in   section   149   or   section   150,   be issued   with   respect   to   that assessment   year   and   all   the provisions  of this Act shall apply accordingly.” (e) “[subject   to   the   provisions   of clause (g) and clause (j) of this sub­ section,]   section   23A   of   the   repealed Act   shall   continue   to   have   effect   in relation   to   the   assessment   of   any company   or   its   shareholders   for   the assessment year ending on the 31st day of March, 1962 or any earlier year, and the provisions   of   the   repealed   Act   shall apply to all matters arising out of such assessment   as   fully   and   effectually   as if   this   Act   had   not   been   passed; (f) any proceeding for the imposition of a penalty in respect of any assessment completed before the first day of April, 1962,   may   be   initiated   and   any   such penalty   may   be   imposed   as   if   this   Act had not been passed; (g) any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st  day of March, 1962, or any earlier year, which is completed on or after the 1st  day of April,   1962   may   be   initiated   and   any such penalty may be imposed under this Act. (h) any election or declaration made or option   exercised   by   an   assessee   under any provision of the repealed Act and in force

immediately

before

the commencement of this Act shall be deemed to have been an election or declaration made   or   option   exercised   under   the corresponding provision of this Act; (i) where, in respect of any assessment completed   before   the   commencement   of this Act, a refund falls due after such commencement   or   default   is   made   after such commencement in the payment of any sum due under such completed assessment, the provisions of this Act relating to interest   payable   by   the   Central Government   on   refunds   and   interest payable   by   the   assessee   for   default shall apply; (j) any   sum   payable   by   way   of   income­ tax,   super­tax,   interest,   penalty   or otherwise under the repealed Act may be recovered   under   this   Act,   but   without prejudice   to   any   action   already   taken for the recovery of such sum under the repealed Act; (k) any agreement

entered

into, appointment   made,   approval   given, recognition

granted,

direction, instruction, notification, order or rule issued   under   any   provision   of   the repealed Act shall, so far as it is not inconsistent   with   the   corresponding provision of this Act, be deemed to have been   entered   into,   made   granted,   given or   issued   under   the   corresponding provision   aforesaid   and   shall   continue in force accordingly; (l) any   notification   issued   under   sub­ section   (1)   of   section   60   [or   section 60A]   of   the   repealed   Act   and   in   force immediately   before   the   commencement   of this Act shall, to the extent to which provision has not been made under this Act, continue in force. [Provided  that   the   Central   Government may   rescind   any   such   notification   or amend it so as to rescind any exemption, reduction in rate or other modification made thereunder;] (m) where the period prescribed for any application,   appeal,   reference   or revision   under   the   repealed   Act   had expired on or before the commencement of this Act, nothing in this Act shall be construed

as enabling

any such application,   appeal,   reference   or revision   to   be   made   under   this   Act   by reason   only   of   the   fact   that   a   longer period   therefor   is   prescribed   or provision is made for extension of time in   suitable   cases   by   the   appropriate authority.

4.

Mr.Bhatt has further relied on Section 263 of the Income Tax Act, which reads as under: “Revision of orders prejudicial to revenue.

263.

(1) The   [Principal   Commissioner   or] Commissioner   may   call   for   and   examine   the record of any proceeding under this Act, and if   he   considers   that   any   order   passed therein   by   the   [Assessing]   Officer   is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such   inquiry   as   he   deems   necessary,   pass such order thereon as the circumstances  of the   case   justify,   including   an   order enhancing   or   modifying   the   assessment,   or cancelling   the   assessment   and   directing   a fresh assessment. [Explanation­For   the   removal   of   doubts,   it is hereby declared that, for the purposes of this sub­section,­ (a) an   order   passed   [on   or   before   or after the 1st  day of June, 1988] by the Assessing Officer shall include­ (i) an order of assessment made by the   Assistant   Commissioner   [or Deputy Commissioner] or the Income­ tax   Officer   on   the   basis   of   the directions   issued   by   the   [Joint] Commissioner under section 144A. (ii) an   order   made   by   the   [Joint] Commissioner   in   exercise   of   the powers or in the performance of the functions   of   an   Assessing   Officer confirmed   on,   or   assigned   to,   him under   the   orders   or   directions issued   by   the   [Principal   Chief Commissioner or] Chief Commissioner or   [Principal   Director   General   or] Director   General   or   [Principal Commissioner

or Commissioner authorised   by   the   Board   in   this behalf under section 120; (b) “record” [shall include and shall be deemed   always   to   have   included   all records relating to any proceeding under this   Act   available   at   the   time   of examination

by the [Principal Commissioner or] Commissioner; (c) where any order referred to in this sub­section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal

Commissioner

or] Commissioner   under   this   sub­section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] (2) No   order   shall   be   made   under   sub­ section   (1)   after   the   expiry   of   two   years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding   anything   contained   in sub­section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction   contained in an order of   the   Appellate   Tribunal,   [National   Tax Tribunal,]   the   High   Court   or   the   Supreme Court. Explanation.­   In   computing   the   period   of limitation   for   the   purposes   of   sub­section (2), the time taken in giving an opportunity to   the   assessee   to   be   reheard   under   the proviso to section 129 and any period during which any proceeding  under this section  is stayed   by   an   order   or   injunction   of   any court shall be excluded.”

5.

Mr.Bhatt   has   mainly   relied   upon   paragraphs No.4 and 6 of the order passed by CIT(A).   The said paragraphs read as under:

“4. I have considered the submissions.  The argument of the assessee that in light of the notification No.SRO/998 and the clarification issued   by   the   Board   the   income   of   a   co­ operative   society   is   exempt,   is   not acceptable for the following reasons. (1) Under   Section   297(1)   of   the Income­tax Act, 1961, the Indian Income­ tax Act, 1922 is repealed. (2)Under Section 297(2) of the Income­ tax   Act,   1961,   Indian   Income   tax   Act, 1922   is   applicable   only   for   specified objects narrated in clauses (a) to (m) thereof   and   none   of   the   clauses specifically   provides   for   exemption   in respect   of   Part­B   State's   cooperative Societies. (3) Under   Section   297(2)(1)   of   the Income­tax   Act,   1961   any   notification issued under Section 60A of the Indian Income­tax Act 1922 is applicable under the   Income­tax   Act,   1961   only   if   no provision had been made under the said Act.     Section   80­P   of   the   Income­tax Act,   1961   contains   specific   provisions for   all   co­operative   societies   in   all the taxable territories. (4) The   notification   under   the   old Act   has   not   been   withdrawn   so   as   to preserve   the   validity   of   orders   made under   the   old   Act   in   respect   of   Co­ operative Societies.

6.

Under the circumstances, the argument of the assessee that income of a co­operative society   in   Saurashtra   is   exempt   is   not acceptable.  The order made by the Income­tax Officer is erroneous and prejudicial to the interest of revenue.  I, therefore, set aside the order made by the Income­tax Officer with a   direction   to   reframe   the   assessment   in which   the   income   of   co­operative   society should not be treated as completely exempt. The   Income­tax   Officer   is   directed   to consider the provisions of Section 80P.   A suitable   fresh   order   should   be   made   after hearing the assessee.”

6.

Being aggrieved by the decision, the assessee has   filed   appeal   before   the   Tribunal   and   the Tribunal   by   following   its   view   taken   in   the earlier decisions, has opined in para 6 of its order as under:

“6. We   appreciate   the   force   in   the argument of the learned D.R., but at the same time we find that the Tribunal has consistently   taken   the   view   on   the subject   that   the   notifications   issued under the old Act, 1922 having not been withdrawn   by   the   authorities   concerned provide good basis to the co­op.society to   seek   exemption   of   its   income   from business.   Therefore, consistently  with the view taken by the Tribunal, we hold that   in   granting   exemption   to   the assessee   co­op.   Society   in   respect   of its   business   income,   the   order   of   the ITO was not erroneous and prejudicial to the interest of the revenue.  Therefore, keeping ourselves in line with the views already expressed by the Tribunal on the point,   we   set   aside   the   order   under appeal and restore that of the ITO.”

7.

Therefore, Mr.Bhatt has contented that it is well settled principle of law that once the new Act  comes,  unless there is specific mention in the   earlier   Act   and   the   notifications   issued therein cannot be made applicable.  In this case, under the new Act, the notification issued under the earlier Act stood repealed and the present case will be governed by Sections 80P and 80T of the Act.  Both the Sections are reproduced herein below. Section 80P reads as under: “Deduction  in respect  of income  of co­ operative societies. 80P (1) Where,   in   the   case   of   an assessee   being   a   co­operative   society, the   gross   total   income   includes   any income   referred   to   in   sub­section(2), there   shall   be   deducted,   in   accordance with   and   subject   to   the   provisions   of the section, the sums specified in sub­ section   (2),   in   computing   the   total income of the assessee. (2) The sums

referred

to in sub­section (1) shall be the following, namely:­ (a) in   the   case   of   a   co­operative society engaged in­ (i) carrying   on   the   business   of banking

or providing

credit facilities to its members, or (ii)a cottage industry, or (iii) the marketing

of agricultural   produce   grown   by   its members, or] (iv)the   purchase   of   agricultural implements, seeds livestock or other articles   intended   for   agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of   power,   of   the   agricultural produce of its members, [or] (vi)the   collective   disposal   of   the labour of its members, or (vii) fishing

or allied activities,   that   is   to   say,   the catching,

curing,

processing, preserving, storing or marketing of fish   or   the   purchase   of   materials and equipment

in connection therewith   for   the   purpose   of supplying them to its members.] the whole of the amount of profits and gains   of   business   attributable   to   any one or more of such activities. [Provided that in the case of a co­operative society falling under sub   clause   (vi),   or sub­clause (vii), the rules and bye­laws of the society restrict the voting rights to the following classes of its members namely:­ (1) the   individuals   who   contribute   their labour or, as the case may be, carry on the fishing or allied activities; (2) the co­operative credit societies which provide financial assistance to the society;

(3) the State Government;] [(b) in   the   case   of   a   co­operative society, being a primary society engaged in   supplying   milk,   oilseeds,   fruits   or vegetables   raised   or   grown   by   its members to­ (i) a federal co­operative society, being   a   society   engaged   in   the business

of supplying

milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the   Government   or   a   local authority; or (iii) a   Government   company   as defined   in   section   617   of   the Companies Act, 1956 (1 of 1956), or a   corporation   established   by   or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits   or   vegetables,   as   the   case may be, to the public) the whole of the amount of profits and gains of such business;] (c) in   the   case   of   a   co­operative society engaged in activities other than those specified in clause (a) or clause (b)   (either   independently   of,   or   in addition   to,   all   or   any   of   the activities so specified), so much of its profits   and   gains   attributable   to   such activities as [does not exceed,­ (i) where such co­operative society is a consumers'

co­operative society,   [one   hundred]   thousand rupees; and (ii)in   any   other   case,   [fifty] thousand rupees. Explanation.­

In this clause “consumers'   co­operative   society means a society for the benefits of the consumers;] (d) in respect of any income by way of interest or dividends derived by the co­ operative   society,   the   whole   of   such income; (e) in respect of any income derived by the   co­operative   society   from   the letting   of   godowns   or   warehouses   for storage,  processing or facilitating the marketing   of   commodities,   the   whole   of such income; (f) in   the   case   of   a   co­operative society, not being a housing society or an urban consumers' society or a society carrying   on   transport   business   or   a society   engaged   in   the   performance   of any   manufacturing   operations   with   the aid   of   power,   where   the   gross   total income   does   not   exceed   twenty   thousand rupees, the amount of any income by way of interest on securities or any income from   house   property   chargeable   under section 22. Explanation­   For   the   purposes   of   this section,   an   “urban   consumers'   co­ operative   society”   means   a   society   for the benefit of the consumers within the limits   of   a   municipal   corporation, municipality,

municipal

committee, notified   area   committee,   town   area   or cantonment. (3) In   a   case   where   the   assessee   is entitled   also   to   the   deduction   under [section   80HH]   for   section   80HHA   [or section   80HHB]   [or   section   80HHC]   [or section   80HHD]   [or   section   80­I]   [or section   80­IA}   or   section   80J   the deduction under sub­section (1) of this section,   in   relation   to   the   sums specified in clause (a) or clause (b) or clause © of sub­section (2) shall, shall be allowed with reference to the income, if any, as referred to in those clauses included   in   the   gross   total   income   as reduced by the deductions under [section 80HH] [section  80HHA,] [section 80HHB], [section   80HHC.]   [section   80HHD,] [section 80­I],

[section 80­IA,] [section 80J and section 80JJ]].] (4) The provisions of this section shall not   apply   in   relation   to   any   co­ operative   bank   other   than   a   primary agricultural credit society or a primary co­operative   agricultural   and   rural development bank. Explanation.­   For   the   purposes   of   this sub­section,­ (a) “co­operative bank” and “primary agricultural  credit society”  shall have the   meanings   respectively   assigned   to them in Part V of the Banking Regulation Act, 1949 (10 of 1949) (b)

“primary

co­operative agricultural and rural development bank” means   a   society   having   its   area   of operation   confined   to   a   taluk   and   the principal object of which is to provide for   long   term   credit   for   agricultural and rural development activities.]“ Section 80T reads as under: Deduction   in   respect   of   long­term capital  gains  in the case  of assessees other than companies. 80T [Omitted   by   the   Finance   Act,   1987, w.e.f.   1­4­1988. Original   section   was inserted   by   the   Finance   (No.2)   Act, 1967, w.e.f. 1­4­1968 in replacement of section 114.] Deduction   in   respect   of   winnings   from lottery. 80TT. [Omitted by the Finance Act, 1986, w.e.f.   1­4­1987. Original   section   was inserted   by   the   Finance   Act,   1972, w.e.f.   1­4­1972   and   amended   by   the Finance   (No.2)   Act,   1980,   w.e.f.   1­4­ 1981.] Deduction   in   respect   of   interest   on deposits in savings account. 80TTA. (1)Where the gross total income of an assessee, being an individual or a Hindu   undivided   family,   includes   any income   by   way   of   interest   on   deposits (not being  time deposits)  in a savings account with­ (a) a   banking   company   to which the Banking Regulation Act, 1949   (10   of   1949),   applies (including   any   bank   or   banking institution referred to in section 51 of that Act); (b) a   co­operative   society engaged   in   carrying   on   the business   of   banking   (including   a co­operative land mortgage bank or a   co­operative   land   development bank); or (c)  a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898), there   shall,   in   accordance   with   and subject   to   the   provisions   of   this section,   be   allowed,   in   computing   the total income of the assessee a deduction as specified hereunder, namely:­ (i) in   a   case   where   the   amount   of such   income   does   not   exceed   in   the aggregate ten thousand rupees, the whole of such amount; and (ii) in any other case, ten thousand rupees. (2) Where the income referred to in this section is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons or a body of individuals, no deduction shall be allowed under this section in respect of   such   income   in   computing   the   total income of any partner of the firm or any member   of   the   association   or   any individual of the body. Explanation.­   For   the   purposes   of   this section,   “time   deposits”   means   the deposits   repayable   on   expiry   of   fixed periods.]

8.

In view of the above  sections, the present case will be governed by the said sections.  In that   view   of   the   matter,   notice   under   Section 263, since the basis of the assessment order was erroneous, is justified.

9.

Learned counsel for the respondent Mr.Divetia submitted that the notice under Section 263, in as   much   as   while   considering   assessment   order, the Assessing Officer, ITO has applied its mind and   stated   that   exemption   notification   will govern the field and therefore, the jurisdiction exercised under Section 263 is uncalled for.

10.

We have heard counsel for both the sides. The questions which are referred has been gone into detail in view of the order passed by the ITO, relying   on   alteration   of   1922   Act,   which   is repealed by the Act of 1961. The notification also stands repealed.  Those notifications issued under Sections 60 and 60A will govern the field.

11.

The question of law as it is framed will have to be answered  in favour of the Revenue , the reason being the old notificaiton could not have been   relied   by   the   Appellate   Tribunal   or   the Assessing   Officer   and   the   Appellate   Tribunal cannot be said to be right in setting aside the order of the Commissioner of Income Tax .

12.

As far as the second question is concerned, it   being   interconnected   and   once   we   have   held that Section 297 governs the field, the Appellate Tribunal is not right in law.

13.

The second argument regarding exemption and hearing, in our view once the notification has been repealed, it cannot stand in the eye of law. This distinction is not plausible or reasonable. In   above   view   of   the   matter,   this   argument   is also required to be rejected.

14.

Accordingly, both the questions are answered in   favour   of   the   department   and   against   the assessee.   The order of the CIT(A) is restored and   the   matter   is   remitted   back   to   decide   the same afresh by the Income Tax Officer to decide the case under Section 80P of the 1961 Act. (K.S.JHAVERI, J.) (K.J.THAKER, J) ANKIT

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