M/S MAYURAKSHI GRAMIN BANK EMPLOYEES PROVIDENT FUND,BIRBHUM vs. ACIT, CIR-3, SURI, BIRBHUM

आदेश /O R D E R PER S.S.Godara, Judicial Member:-

M/sMayurakshi Gramin Bank Employees P.F. Vs. ACIT Cir-3 Bwn. Page 2

“3. Discussions and Findings: Facts, in brief, pertaining to this appeal are that during the period the appellant had received interest on investments through bank accounts amounting to Rs 52,40,140/- and, after giving the exchange commission of Rs 337/-, the appellant had a surplus of Rs 52,41,802/- which he claimed as exempt u/s 10(23AAA) of the Act. When asked to submit a copy, however, under rule 3(1) of the Para A of the fourth schedule of the IT Act, dated 31.O1.1986 of the then CIT West Bengal- XIV, Calcutta, regarding the recognition to the appellant fund, the appellant failed to do so. The only letter filed by the appellant stated the following: .That as per Government of India notification no. 1/4/ 2006-RRB dated 26.02.2007, the Mayurakshi Gramin Bank was amalgamated with Howrah Gramin Bank and Burdwan Gramin Bank and a new RRB - named Paschim Bang Gramin Bank- was formed. . After amalgamation, the new entity stated that a new and single provident fund in the name of Paschim Banga Gramin Bank would be formed. . The exemption to the appellant fund was withdrawn by Regional Provident Fund Commissioner, Durgapur. . On and from 10.09.07, all the investments and securities of the appellant became property of Regional Provident Fund Commissioner, Durgapur and the appellant became custodian of the investments and securities. . That finally, all its income and liabilities would be transferred to the new fund. The AO held that since the appellant himself had admitted that it did not possess the requisite exemption, there was no alternative but to tax the income in the hands of the appellant. Hence this appeal. During appeal proceedings, the appellant has repeated the plea taken before the AO. The fact of the matter is that an exemption such as the one provided by section 10(23AAA) is a very specific exemption and creates an exception to taxation, which is a rule. An exception has to be read very strictly because of the revenue implications involved. In fact the said section shows itself shows its strictness when it says that the exemption shall be provided only for only short periods of time, in any case not exceeding three years at a tame. This shows the strictness to be followed in the implementation of the provisions of this section. In the instant case, it is uncontested that the exception was not available with the appellant for the said period. When approval was accorded to the appellant, it was after taking into account the overall facts and circumstances of the appellant in relation to the Mayurakshi Gramin Bank, of which the appellant was a part Bank. When the circumstances changed and the principal of the appellant – the Mayurakshi Gramin Bank ceased to exist, it was up to the M/sMayurakshi Gramin Bank Employees P.F. Vs. ACIT Cir-3 Bwn. Page 3 appellant to show to the competent authority that the circumstances for the grant of the said exemption had not materially altered and that the appellant was till eligible for the said exemption. The appellant has not brought anything on record to suggest that either this exercise was undertaken by him or that even if not undertaken for some reason, such circumstances did indeed exist which would have enabled the appellant - if he had applied for the exemption - to have succeeded in obtaining this exemption form the competent authority. In a similar manner to grant of an exemption, the withdrawal of any exemption is a matter decided by the competent authority after due diligence and application of mind. The exemption has been withdrawn in this case and it is not the case of the appellant that he has challenged this withdrawal or that he even disagrees with it. The exemption has been withdrawn within the full knowledge of the appellant and the competent authority that funds were still available with the appellant and these would result in generation of taxable income. Despite its knowledge, the competent authority has deemed it fit to withdraw the exemption and the appellant has not thought it proper to challenge it. In these circumstances, it is difficult to see how he can claim the said exemption when it has been admittedly correctly withdrawn. There is no deeming provision – and it is absolutely forbidden to read any such provisions in the strict reading of the said section – under which this exemption can be granted even though it has been withdrawn by a competent authority after due application of mind and the withdrawal has gone unchallenged. I cannot, in the present circumstances, therefore, find merit in the claim of the appellant raised in his grounds of appeal. The grounds are therefore dismissed.

3. Learned Authorized Representative submits at the outset that although both the Assessing Officer as well as CIT(A) have held the assessee is not eligible for section 10(23AAA) exemption, they have erred in computing its income regarding surplus funds of Rs.52,41,802/- as taxable despite the fact that there is no such taxable income assessable in the relevant previous year. He raises sole issue computation of assessee’s appropriate taxable income in other words. The Revenue’s case on the other hand is that the assessee has raised the instant alternative plea of computation of its correct taxable income for the first time in second appellate proceedings and therefore, the same deserves to be restored back to the Assessing Officer for a fresh factual verification. We conclude in these peculiar facts that although no illegality or infirmity is found in both the lower appellate proceedings denying section 10(23AAA) exemption benefit in principle, the issue of computation of taxable income deserves to be restored back to the Assessing Officer for afresh computation as per law within three effective opportunities of hearing. We order accordingly. The assessee shall M/sMayurakshi Gramin Bank Employees P.F. Vs. ACIT Cir-3 Bwn. Page 4 appear before the Assessing Officer along with a copy of this remand direction on or before 30th of April 2020 for consequential proceedings.

Order pronounced in the open court 22/11/2019.