THE GRADUATES CO-OPERATIVE SOCIETY LIMITED ,SHIVAMOGGA vs. THE INCOME TAX OFFICER WARD-1 , SHIVAMOGGA

There is a delay of 383 days in filing appeal being ITA No.2787/Bang/2018 and delay of 402 days in filing the other 5 appeals. The delay in filing the appeal has been explained as due to the following

The reasons for the delay in filing the appeals belatedly has been explained by the Assessee as due to advise of the erstwhile counsel who represented the Assessee in the proceedings before CIT(A) that no further appeal need be filed. It appears that subsequently the Assessee appointed Hareesh & Co., Chartered Accountants as statutory auditors of the society for Financial Year 2017-18 and during the course of their audit they came across the orders of CIT(A) which are impugned in these appeals and advised that the Assessee was entitled to reliefs claimed before CIT(A) which was not allowed and that further appeal has to be filed before Income Tax Appellate Tribunal (ITAT). Thereafter the Assessee has filed these appeals with a request for condonation of delay on facts as stated above.

The Secretary of the Assessee has filed affidavit affirming the facts as stated in paragraph-3 above. Partner of the statutory auditors appointed for Financial year 2017-18, has also filed affidavit affirming the facts as given in paragraph-3 above.

In the above circumstances, the Assessee has prayed that the non- filing of the appeal in the first instance and the resultant delay arose out of bonafide reasons. The delay was not on account of any gross negligence or deliberate disregard of its rights or gross inaction on the part of the Assessee. There was sufficient cause for the delay as stated above. It has also been submitted that non-admission of Assessee's claim would result in an otherwise meritorious matter being thrown out on a mere technicality. No prejudice would be caused to the Revenue by allowing the appeal to be admitted and proceeded with on merits more so when the claim has been allowed by the Department in subsequent years.

The learned counsel for the Assessee submitted that if this application for condonation of delay in filing the appeals is not allowed, the appellant would be put to great hardship and irreparable injury and on the other hand no hardship or injury would be caused to the Respondent if this application of Condonation of delay is allowed. Reliance was placed on the decision of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471 and also in the case of Concord of India Insurance Co. Ltd., Vs Smt. Nirmala Devi and Others 118 ITR 507. Further reliance was also placed on another decision of the Hon'ble Apex Court in the case of Radha Krishna Rai Vs. Allahabad Bank & Others [2000] 9 Supreme Court Cases 733 and Commissioner of Income-tax Vs. West Bengal Infrastructure Development Finance Corporation limited (2011) 334 ITR 269 (SC). Reliance was also placed on the unreported decision of the Hon'ble Jurisdictional Karnataka High Court in the case of CIT & Another Vs. ISRO Satellite Center, in ITA No. 532 of 2008 and other batch of appeal order dated 28/10/2011 has condoned the delay of 5 years in filing the appeal before the CIT[A]. Reliance was also placed on the decision of the Hon'ble Jurisdictional Tribunal in the case of Smt. Shakuntala Hegde, Legal Heir of Mr. Ramakrishna Hegde Vs. ACIT, in ITA No. 2785/Bang/2004 order dated

The learned DR submitted that the delay is inordinate and should not be condoned and that subsequent professional advise cannot be a valid ground for not filing appeal in time.

I have given a careful consideration to the rival submissions. At the outset, I observe that the Hon’ble Supreme Court, in the case of Mst. Katiji (supra), has explained the principles that need to be kept in mind while considering an application for condonation of delay. The Hon’ble Apex Court has emphasized that substantial justice should prevail over technical considerations. The Court has also explained that a litigant does not stand to benefit by lodging the appeal late. The Court has also explained that every day’s delay must be explained does not mean that a pedantic approach should be taken. The doctrine must be applied in a rational common sense and pragmatic manner. In the case of Shakuntala Hegde, L/R of R.K. Hegde v. ACIT, ITA No.2785/Bang/2004 for the A.Y. 1993-94, the Tribunal condoned the delay of about 1331 days in filing the appeal wherein the plea of delay in filing appeal due to advice given by a new counsel was accepted as sufficient. The Hon’ble Karnataka High Court in the case of CIT v. ISRO Satellite Centre, ITA No. 532/2008 dated 28.10.2011 has condoned the delay of five years in filing appeal before them which was explained due to delay in getting legal advice from its legal advisors and getting approval from Department of Science and PMO. In the aforesaid decision, the Hon’ble Court found that the very liability of the assessee was non-existent and therefore condoned the delay in filing appeal. Keeping in mind the aforesaid principles, I shall consider the claim of the assessee in the present case.

Admittedly, the delay was due to advice given by the counsel who appeared on behalf of the Assessee before the AO and CIT(A) not to file appeal and on advice from a professional from a new statutory auditor appointed for FY 2017-18, to file appeals, the appeals were filed. I find that there has been no willful neglect on the part of the Assessee. In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies. I am also of the view that by condonation of delay there is no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected. I therefore accept the reason given for condonation of delay in filing the appeals. The delay in filing the appeals is accordingly condoned.

As far as the merits of the various issues raised in Appeals relating to AY 2009-10 to 2012-13 are concerned, the common issue is with regard to treating interest income earned on deposits with banks is eligible for deduction u/s.80P(2)(d) of the Act. The deduction calmed by the assessee was not allowed by the Revenue authorities for the reason that the income which was claimed as deduction was interest income which was earned by the assessee on deposits and in view of the decision of the Hon’ble Supreme Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., 83 taxmann.com 140 interest income had to be regarded as ‘income from other sources’. Since interest income was not income derived from the business of co-operative society, the deduction claimed by the assesee cannot be allowed.

I have heard the rival submissions. The learned AR relied on the decision of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-operative Society Ltd. Vs. ITO 230 taxman 309 (Karn) wherein the Hon’ble Karnataka High Court considered the decision of the Hon’ble Apex Court in the case of The Totgar’s Co-operative

We have carefully gone through the judgment relied by the learned DR. The facts of the case before the Hon’ble Karnataka High Court in the decision cited by the learned DR was that the Hon’ble Court was considering a case relating to Assessment Years 2007-2008 to 2011- 2012. In case decided by the Hon’ble Supreme Court in the case of the very same Assessee, the Assessment years involved was AY 1991-92 to 1999-2000. The nature of interest income for all the AYs was identical. The bone of contention of the Assessee in AY 2007-08 to 2011-12 was that the deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999-2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after the Supreme Court's decision against the assessee Totgar's Co-operative Sale Society Ltd. (supra), were shifted from Schedule Banks to Co-operative Bank. U/s.80P(2)(d) of the Act, income by way of interest or dividends derived by a Co-operative Society from its investments with any other Co- operative Society is entitled to deduction of the whole of such interest or dividend income. The claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon’ble Karnataka High Court followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. (supra) and held that interest earned from Schedule bank or co- operative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such

The AO will afford opportunity of being heard to the Assessee and filing appropriate evidence, if desired, by the Assessee to substantiate its case, before deciding the issue.

The other common issue that arises for consideration in AY 2013-14 & 2014-15 is with regard to the claim of the Assessee on deduction on enhanced profits that are eligible for deduction u/s.80P(2)(a)(i) of the Act in view of disallowance of certain expenses. The ld. counsel for the assessee has submitted that even assuming disallowance of expenses is justified, the addition made consequent to such disallowance will go to increase the profits of the business that is eligible for deduction u/s.80P(2)(a)(i) of the Act and deduction u/s. 80P(2)(a)(i) of the Act has to be allowed on such enhanced profits.

In this regard, the dl. Counsel for the assessee has placed reliance on the decision of two High Courts viz., Hon’ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. (2010) 194 Taxman 192 (Bom) and

In the result, appeals by the assessee for AY 2009-10 to 2012-13 are treated as allowed for statistical purpose while appeal for AY 2013-14 & 2014- 15 are partly allowed.