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Facts
The assessee, a co-operative society, appealed an order denying deduction under section 80P(2) of the Income-tax Act, 1961. The appeal was filed with a delay of 290 days, which the assessee attributed to not receiving notices due to an incorrect email ID being used. The Tribunal admitted the appeal after being convinced of no malafide intention for the delay.
Held
The Tribunal held that the assessee's activity of providing credit facilities to its members, including nominal members, should not lead to the denial of deduction under section 80P(2)(a)(i). The Tribunal referred to Supreme Court decisions stating that such denial is not justified, especially if the society is not a bank and does not have a banking license. Any interest or dividend from investments should be considered under section 80P(2)(d).
Key Issues
Whether the assessee, a co-operative society, is eligible for deduction under section 80P(2)(a)(i) despite providing credit facilities to nominal members and not being a bank? Whether interest/dividend from investments should be considered under section 80P(2)(d)?
Sections Cited
80P(2)(a)(i), 80P(4), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC-‘B’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 02.06.2023 passed by NFAC, Delhi for A.Y. 2016-17 on following grounds of appeal:
Page 2 of Tax Effect in Grounds Raised
INR
1. That the impugned order is opposed to facts General and law in so far as it is pre-judicial to the Ground interests of the Appellant.
2. That the impugned order is illegal, bad and nullity at law inasmuch as it was passed without affording sufficient opportunity to the General Appellant. Thus, the impugned order is Ground passed in violation of the principles of natural justice.
3. Without prejudice to ground 1 and 2, the NFAC ought to have decided the case on General merits based on the statement of facts and Ground grounds of appeal furnished in the Form No. 35 of the appeal memo.
4. That the NFAC erred in confirming the order of the Ld. AO denying the deduction under section 80P(2) of the Income-tax Act, 1961 and in doing so he failed to appreciate the fact that: a) The Appellant is a co-operative society 4,77,928 engaged in the business of providing credit facilities only to its members. b) The Appellant is not having a banking license from the Reserve Bank of India and is not a co-operative bank. The Appellant prays for leave to add, delete, modify and/or adduce additional ground at any time before the appeal is disposed off. For these and such other grounds that may be adduced or removed in time to time, it is requested that the Hon'ble ITAT may be pleased to examine the case in the light of justice and grant the relief sought for.” 2.1 At the outset, the Ld.AR submitted that there is a delay of 290 days in filing the present appeal before this Tribunal. The Ld.AR submitted that, the assessee filed affidavit stating the reasons that caused delay. It is submitted that, the notices issued by the Ld.CIT(A) was sent to email ID which was not
Para 4 of the affidavit gives the details of the email ID to which the notices were issued.
2.2 The assessee submitted in the affidavit that, it was only when assessee received call from the income tax department on 25.04.2024 calling upon assessee to pay the outstanding demand, the assessee consulted the tax practitioner and came to know that an ex-parte order has been passed by Ld.CIT(A). The Ld.AR submitted that assessee immediately took necessary steps to file appeal before this Tribunal thereby causing a delay of 290 days.
2.3 The Ld.AR prayed for the delay to be condoned, as there was no malafide intention of the assessee either in not appearing before the Ld.CIT(A) or in not filing the appeal before this Tribunal within the period of limitation.
On the contrary, the Ld.DR could not controvert the submissions of the assessee though he vehemently opposed the condonation petition.
I have perused the submissions advanced and the affidavit filed by the assessee.
There is no dispute by the Ld.DR that the notices were sent to an email ID which was not the mail ID mentioned in form 35. I note that the assessee was absolutely unaware of the notices being issued by the department and that ex-parte order is passed
Page 4 of Ld.CIT(A). I am convinced that no malafide intention could be attributed to the assessee for the delay so caused in filing the present appeal before this Tribunal. I therefore admit the present appeal filed by the assessee.
4.1 On merits of the case, it is noted that assessee has been denied the deduction u/s. 80P(2)(a)(i) of the act by holding that the assessee is a bank and therefore the provisions of section 80P(4) will be applicable. It is noted that the Ld.AO has also referred to the decision of Hon’ble Supreme Court in case of Citizen Co-operative Society Ltd. vs. ACIT reported in (2017) 84 taxmann.com 114 and held that the assessee provides credit facility to nominal members also thereby violating the principles of mutuality.
4.2 The Ld.DR supported the orders passed by the authorities below.
4.3 I note that assessee is admittedly is carrying out activity of providing credit facilities to its members and has claimed deduction u/s. 80P(2)(a)(i) of the act. This Tribunal has in various cases considered similar issue wherein it has been held that pursuant to the decision of Hon’ble Supreme Court in case of Mavilayi Service Co- operative Bank Ltd. v. CIT reported in 431 ITR 1 deduction cannot be denied for the reason that the credit facility were extended to the nominal / associate members also.
Page 5 of 4.4 In the interest of justice, I remit this issue back to the Ld.AO to consider the claim of assessee having regard to the ratio laid down by Hon’ble Supreme Court in case of Mavilayi Service Co- operative Bank Ltd. v. CIT (supra) r.w. definition of “member” in Karnataka Co-operative Societies Act, 1959. It is also directed in the event, assessee has earned any interest / dividend from investments, which cannot be considered under 80P(2)(a)(i), the Ld.AO is directed to consider the same under the provisions of section 80P(2)(d) by following the ratio laid down by Hon’ble Supreme Court in case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. vs. AO reported in (2023) 154 taxmann.com 305. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, the grounds raised by the assessee stands partly allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 27th June, 2024.