KERALA DINESH BEEDI WORKERS CENTRAL CO-O vs. COMMISSIONER OF INCOME TAX, KANNUR

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ITA/43/2011HC KeralaKLHC01026391201124 February 2012Bench: HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court upheld the orders of the Tribunal and the Commissioner. The Court found no reason to consider the claim on merits, as the Tribunal and Commissioner had left the matter to be decided by the Assessing Officer. The Court also found no merit in the challenge against the Commissioner's jurisdiction under Section 263, as the Commissioner's apprehension that the order was prejudicial to the revenue was considered valid. The Court directed the Assessing Officer to reconsider the matter without being influenced by any observations made by the lower authorities. The deduction under Section 80P(2) was to be examined in conjunction with Section 80AB, keeping in mind the interest liability incurred by the assessee. The appeal was dismissed with these observations.

What were the facts?

The assessee, Kerala Dinesh Beedi Workers Central Co-operative Society Ltd., appealed against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had declined to interfere with a revisional order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act. The CIT had directed the Assessing Officer (AO) to reconsider the assessee's entitlement to a deduction of interest earned on deposits made in other societies under Section 80P(2) of the Act. The original assessment order had granted the full deduction. The CIT's concern was that the AO had not considered the applicability of Section 80AB, which imposes restrictions on deductions under Chapter VI A, especially since the assessee's interest expenditure exceeded its interest income.

What were the issues?

1. Whether the Tribunal was justified in declining to interfere with the Commissioner's order under Section 263 of the Income Tax Act, directing the AO to reconsider the assessee's entitlement to deduction of interest earned on deposits under Section 80P(2), in light of Section 80AB? Assessee's Contention: The assessee argued that the interest earned was on pension fund deposits and that the lower authorities had not decided the case on merits. The assessee also challenged the jurisdiction of the Commissioner under Section 263. Revenue's Contention: The revenue contended that the AO had failed to consider the applicability of Section 80AB, which restricted deductions under Chapter VI A, particularly when the assessee's interest liability was more than its interest income. The Commissioner believed the original assessment order was prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 80P(2),Section 80AB,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH FRIDAY, THE 24TH DAY OF FEBRUARY 2012/5TH PHALGUNA 1933 ITA.No. 43 of 2011 ( ) ---------------------- ITA.530/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT: -------------------------------- KERALA DINESH BEEDI WORKERS, CENTRAL CO-OPERATIVE SOCIETY LTD., 'DINESH BHAVAN PAYYAMBALAM, KANNUR, REPRESENTED BY ITS SECRETARY SHRI.C.RAJAN. BY ADV. SRI.DALE P.KURIEN RESPONDENT/RESPONDENT: -------------- COMMISSIONER OF INCOME TAX, KANNUR.

BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

APPENDIX ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DT.18.12.2007. ANNEXURE B: TRUE COPY OF REVISIONAL ORDER DT.27.2.2008. ANNEXURE C: TRUE COPY OF TRIBUNAL ORDER DT.29.1.2010. ANNEXURE D: TRUE OCPY OF CERTIFICATE DT.13.2.2008 ISSUED BY THE KANNUR DISTRICT CO-OP. BANK LTD. ANNEXURE E: TRUE OCPY OF THE BYE LAWS OF KERALA DINESH BEEDI WORKER'S CENTRAL CO-OPERATIVE SOCIETY LTD. NO.S.IND.(C)61. ANNEXURE F: ENGLISH TRANSLATION OF MALAYALAM BYE LAW OF WELFARE CUM PENSION SCHEME OF KERALA DINESH BEEDI EMPLOYEES CO-OP. SOCIETY LTD. TRUE COPY P.S. TO JUDGE

C.N.RAMACHANDRAN NAIR, & BABU MATHEW P. JOSEPH, JJ. .................................................................... I.T. Appeal No.43 of 2011 .................................................................... Dated this the 24th day of February, 2012. JUDGMENT Ramachandran Nair, J. The short question arising in the appeal filed by the assessee is whether the Tribunal was justified in declining to interfere with the order issued by the Commissioner under Section 263 of the Income Tax Act directing the Assessing Officer to reconsider assessee's entitlement for deduction of interest earned on deposit made in other societies under Section 80P(2) of the Income Tax Act. We have heard counsel for the appellant and Standing Counsel for respondent. 2. After hearing both sides and on going through the orders of the Tribunal and that of the Commissioner and also the assessment order, what we notice is that the assessment was completed granting deduction of the entire amount claimed under Section 80P(2) of the Act which is interest income earned by the assessee on deposit made in another society. However, the Commissioner on going through the assessment order noticed that the Assessing Officer has not considered

ITA 43/2011 2 application of Section 80AB which provides certain restrictions in regard to deduction admissible under Chapter VI A of the Income Tax Act. On facts the finding is that assessee has claimed deduction of expenditure on interest which is more than the amount claimed as deduction under Section 80P(2) of the Act. It is in this context the Commissioner set aside the assessment with direction to the Assessing Officer to consider correctness of the deduction allowed under Section 80P(2) with specific reference to the provisions of 80AB, keeping in mind the interest liability debited by the assessee for the previous year. It is obvious from the assessment order that the Assessing Officer has not considered the scope of Section 80AB in respect of the claim made by the assessee under Section 80P(2), particularly in the light of the fact that interest liability incurred by the assessee is more than the interest earned by it. We further notice that none of the authorities have decided the case on merits which was also raised by the assessee before us by stating that the interest earned is on pension fund deposit. When both the Tribunal as well as the Commissioner gave freedom to the assessee to convince the Assessing Officer about the entitlement of full debit of interest liability incurred and admissibility of the claim in

ITA 43/2011 3 full under Section 80P(2), we see no reason for this court to consider the claim on merits. Further, we do not find any merit in the challenge against the jurisdiction of the Commissioner in interfering with the assessment under Section 263 because if the Commissioner's apprehension is correct, then the order was prejudicial to the interest of the Revenue. So much so, we uphold the order of the Tribunal and that of the Commissioner but leave the matter to be considered by the Assessing Officer without being influenced by anything said by any of the two lower authorities. The observation of the Tribunal also should not weigh with the officer while passing orders based on Commissioner's order issued under Section 263 of the Act. The appeal is dismissed but with the above observations. C.N.RAMACHANDRAN NAIR Judge BABU MATHEW P. JOSEPH Judge pms

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