THE MAHARASHTRA STATE CO. OP.BANKS ASSOCIATION,MUMBAI vs. AO CPC BENGALURU, KARNATAKA

Grounds of appeal

In this case, there was delay in filing of appeal before the Naitonal Faceless Appeal Centre (NFAC). NFAC rejected the appeal on this ground by holding as under:- “The appeal was filed belatedly and the reasons shown by the appellant stated that the intimation u/s. 143(1) of the Act could not be viewed on email in time and thereafter due to Covid-19, there was national lockdown. Thus resulted into belatedly filing of appeal. The appellants submission is general in nature especially in a situation where almost every person is using social media and email for pursuing its business activities / promotion. In respect the other part of the reason stated viz Covid-19 scenario, it is very cogent 1 elucidate that the appellant had an ample time to submit the appeal we before the Covid-19 outbreak, when it first started. In view of the above, I am not satisfied with the reason for not presenting the appeal in time. Hence, the condonation of delay sought is hereby rejected u/s 249(3) of the Act.”

Thereafter, without prejudice, the NFAC took up the appeal on merits and held as under:- “I have carefully considered the facts on record, the intimation order, grounds of appeal and the Statement of facts of the appellant. The sole issue relates to disallowance of deduction u/s 80P(2)(c) of the Act. However, the appellant failed to submit complete copy of intimation order wherein the reason for disallowance must have been mentioned. Also, the appellant submit only general argument and did not even furnished the complete claim of deduction under chapter VIA of the Act including deduction u/s 80P(2)(c) of the Act. Further the appellant also failed to respond notices for granting opportunity of being heard. This shows that the appellant does not want to pursue its own appeal. In view of these facts & circumstance\the grounds are dismissed.”

Against the above order, assessee is in appeal before the ITAT.

I have heard both the parties and perused the records. I note that as regards the delay in filing the appeal before NFAC, it is noted that assessees plea before the NFAC was that due to lockdown in covid period, there was delay in filing the appeal. The NFAC without giving detail whatsoever observed that there was sufficient delay in non covid period and hence , rejected the assessees appeal on the ground of limitation. In this regard, I note that order of AO’s order dated 17.10.2019. Hence, by no stretch of imagination it can be said that period other than covid pandemic where material warranting non condonation of delay. Hence, I hold that NFAC erred in holding that delay was not to be condoned. As regards the merits of the case, the order of NFACs as regards legality of the adjustment done by the CPC under 143(1), the NFAC basically held that since, nobody appeared, it was dismissing the appeal. It is settled law that ld.CIT(A) has no power to dismiss the appeal for non prosecution. Moreover, the issue stands covered in favour fo the assessee by the decision of ITAT on similar issue in the case of New Ideal Cooperative Housing Society Limited in for AY 2015-16 vide order dated 03.02.2021. The ITAT has held as under:-

In my considered opinion the adjustment done by denial of deduction u/s. 80P(2)(d) and 80P(2)(c)(ii) in this case does not fall in any of the above. That a cooperative society will not get exemption on the interest earned on deposits in cooperative bank is not something which is a subject matter of adjustment under section 143(1)(a) of the Act. I find that despite noting that there are tribunal decisions in favour of assessee, the learned CIT(A) has chosen not to follow the same by referring to some other decisions. I further find that learned CIT(A) has completely erred in treating the assessee as cooperative bank and invoking the provisions of section 80P(4). Section 80P(4) provides that :- (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 co-operative agricultural and rural development bank. Explanation.--For the purposes of this sub-section,-- (a) "co-operative 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 co-operative 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.

Honourable Supreme Court in the case of Citizen Cooperative Society Ltd. (Civil Appeal No. 10245 of 2017 vide order dated 8.8.2017) has settled the law that for being considered as a cooperative bank licence from RBI in this regard is a sine qua non. In absence of the RBI licence as such the assessee cannot be treated as cooperative bank. Hence disallowing the deduction by referring to the provisions of section 80P(4) is completely unsustainable. Moreover section 80P(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies. It is nobody's case that cooperative bank are not cooperative societies.

Moreover similar issue was elaborately dealt by a larger bench of honourable Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Ors. (Civil Appeal Nos. 7343-7350 of 2019 dated 12.1.2021 and the issue was decided in favour of the assessee. We may gainfully refer to the Hon'ble Apex Court observation in para 21 as under, wherein the Hon'ble Apex Court referred to its earlier decision of Citizen Cooperative Society Ltd. (supra) :- "The following propositions may be culled out from the judgment: (I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; (II) That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of section 80P must be given by way of deduction; (III) That this Court in Kerala State Cooperative Marketing Federation Ltd. and Ors. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from section 80P(2)(b) qua milk co-operative societies, the legislature expressly says so - which is not the case with section 80P(2)(a)(i); (V) That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only co- operative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of section 80P(4)."

Hence on merits also the order of learned CIT(A) denying the deduction u/s. 80P(2)(d) is not sustainable.

As regards the statutory deduction u/s. 80P(2)(c)(ii) of the Act, there is no reason why the same should be denied. Moreover, the said adjustment is not falling in any of the adjustment permitted by 143(1)(a) of the Act. Hence, assessee's claim of deduction u/s. 80P(2)(c)(ii) has also been wrongly denied in the processing done u/s. 143(1)(a) of the Act. The learned CIT(A) has failed to decide the same despite assessee's ground in this regard. The same is directed to be allowed.

In the result, appeal filed by the assessee is allowed.

I find that the aforesaid adjudication squarely applies to the facts of the case. The Ld. DR could not controvert the same. Hence, following the aforesaid precedents, I set aside the order of NFAC and decide the issue in favor the assessee.

In the result, assessees appeal stands allowed.