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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI MANU KUMAR GIRI, JM
आयकर अपीलीय अिधकरण ‘ए’’ �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय �ी मनोज कुमार अ�वाल ,लेखा सद� एवं माननीय �ी मनु कुमार िग�र, �ाियक सद� के सम�। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM AND HON’BLE SHRI MANU KUMAR GIRI, JM आयकरअपील सं./ ITA No.509 & 510/Chny/2024 (िनधा�रणवष� / Assessment Years: 2018-2019 & 2020-2021)
The Erode City Municipal Corporation Vs. The Assessing Officer, Emp Co-op T & C Limited K831 Ward 1(1) Munipical Shopping Complex, Erode Kamaraj Road, Erode 638 001. [PAN: AAEAT 4519Q] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Ms. G. Vardini Karthik, Advocate ��यथ� क� ओर से /Respondent by : Shri ARV Srinivasan, IRS, Addl. CIT सुनवाई क� तार�ख/Date of Hearing : 11.07.2024 घोषणा क� तार�ख /Date of Pronouncement : 22.07.2024 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member)
These two Income Tax Appeals filed by the assessee are directed against the order of the Ld. Commissioner of Income Tax(Appeal)(NFAC) Delhi [CIT(A)] dated 09.01.2024 and dated 08.01.2023 for Assessment Years 2018-19 and 2020-21 respectively.
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Adjudication on Appeal for AY 2018-19 in ITA No.509/Chny/2024: 2. Grounds of appeal are as under: ‘’1) The order passed by the Learned CIT(A) dated 09.01.2024 is erroneous in law and opposed to the facts and circumstances of the case. 2) The Learned Commissioner of Income Tax (Appeals) erred in disallowing the deduction claimed under Section 80P(2)(a)(i). Furnishing of Return of Income - Section 139(4) 3) The CIT(A) failed to see that the assessee had furnished his return of income within the time frame prescribed under section 139(4) of the Income Tax Act, 1961. Circular No. 13/2023 allows condonation of delay for deduction u/s 80P 4) The CIT(A) failed to see that CBDT had issued a Circular No. 13/2023 dated 26.07.2023 allowing the co-operative societies to claim deduction u/s 80P by filing condonation of delay Petition u/s 119(2)(b) to treat the return as filed u/s 139(1). The appellant has filed a petition u/s 119(2)(b) dated 26.12.2023 which is still pending before the Central board of Direct Taxes. Concept of Members and Deduction u/s 80P 5) The CIT(A) ought to have seen that the Appellant is a Erode City Municipal Corporation Employees Cooperative Thrift & Credit Society registered under the Tamil Nadu Cooperative Societies Act, 1983 and provides Thrift loans to its members (Class A and Class B) 6) The CIT(A) failed to see that there is no definition of members under the Income Tax Act, 1961 and all the members of the society must renew their membership once in three years. 7) The CIT(A) failed to see that the concept of members (A class and B Class) is as per under Section 2(6) of the Tamilnadu Cooperative Society Act 1983 and as per Bye laws of Society
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and the Assessing Officer himself has recorded that the associate members are also admitted as members of the society 8) The Appellant's case is squarely covered by the Judgement of the Jurisdictional High Court in the case of CIT.v. S-1308 AMMAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., [2017] 392 ITR 55 (Mad) and PCIT.v. S-1308 ΑΜΜΑΡET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., [2020] 426 ITR 244. (Mad) 80P (4) EDCC BANK IS ALSO A CO-OPERATIVE SOCIETY 9) The CIT(A) failed to see that deposits were made with EDCC bank, which is a co-operative society registered under the TamilNadu Co-operative Societies Act and places reliance on the Judgement of the Supreme Court in [2023] 458 ITR 384’’. 3. The brief facts of the case are that the appellant society e-filed return of income for AY 2018-19 on 12/03/2019 offering a gross total income of Rs. 87,07,378/- and total income of Rs. Nil after claiming deduction of Rs. 87,07,378/- under section 80P(2)(a)(i). The return was duly processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS for the reason 'Deductions under Chapter VI-A'. Notice under section 143(2) dated 22/09/2019 was duly issued and served. Disallowance of claim for deduction u/s 80P on account of return being filed beyond the due date specified u/s 139(1) of the Act: The return of income was filed on 12/03/2019 whereas the due date as per the provisions of section 139(1) for the appellant was 31/10/2018. The AO invoked the provisions of section 80AC to hold that since the return of income was not filed on or before the due date
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specified u/s 139(1), the appellant was not eligible to claim deduction u/s 80P and the entire claim of deduction u/s 80P(2)(a) (i) of Rs. 87,07,378/- was disallowed.
Being aggrieved by the assessment order dated 22.03.2021, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A) has dismissed the appeal of assessee and observed in its order as under: ‘’6.1 I have considered the grounds of appeal, the statement of facts, the submissions filed, and the details mentioned in the assessment order. The appellant has filed 7 grounds of appeal, numbered A to G, which are reproduced at Para 2 above. The grounds of appeal are not properly drafted and are in the nature of arguments, but the gist is that the appellant is aggrieved by the decision of the AO that the appellant is not eligible to claim deduction u/s 80P as the return of income has been filed after the due date specified u/s 139(1) and further that interest income of Rs. 40,33,830/- earned on investments with the Erode District Central Cooperative Bank (EDCCB) is not eligible for claim of deduction u/s 80P(2)(a)(i) or 80P(2)(d).] 6.2 Grounds no. A and B are against not being allowed to claim deduction u/s 80P as the return of income was filed beyond the due date specified u/s 139(1). The AO invoked the provisions of section 80AC, as amended w.e.f. 1/4/2018 to deny claim of deduction u/s 80P of Rs. 87,07,378/- The appellant has relied upon various decisions like the decision of the Hon'ble Kerala High Court in the case of Chirrakal Service Cooperative Bank Ltd. 384 ITR 490 (Ker.) In this regard, it is relevant to refer to the decision of the Hon'ble Supreme Court in the case of Wipro Limited - [2022] 140 taxmann.com 223 (SC). Relevant portion of the order is reproduced below: "The exemption provisions are to be complied with strictly and literally and the same cannot be construed as procedural requirement. Filing a revised return under Section 139(5) and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is not permissible. For claiming the benefit under Section 10B (8), the twin conditions of
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furnishing the declaration to the AO in writing and that the same must be furnished before the due date of filing the return of income under sub- section (1) of section 139 are required to be fulfilled ie both the conditions are mandatory in nature. High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8)." 6.3 The aforesaid principle laid down by the Hon'ble Supreme Court is applicable in the instant case as the provisions of section 80AC, as amended w.e.f. 1/4/2018 are unambiguous and no deduction under the heading "C-Deductions in respect of certain incomes" can be allowed unless return of income is furnished on or before the due date specified u/s 139(1). The decision relied upon by the appellant in the case of Chirrakal Service Co-operative Bank Ltd. pertains to an AY which is prior to the amendment of section 80AC and is, therefore, not applicable to the present case. Thus the action of the A.O. in disallowing claim of deduction u/s 80P of Rs. 87,07,378/- on account of filing of return of income beyond the due date specified u/s 139(1) is hereby upheld. Grounds no. A & B are hereby dismissed’’. 5. On further appeal before us, Ld. Counsel submitted that a petition u/s 119(2)(b) dated 26.12.2023 for condonation of delay in filing claim of deduction u/s 80P is still pending adjudication before the Central Board of Direct Taxes (‘CBDT’ in short). Hence prayed for set aside the matter before Ld.CIT(A) for fresh adjudication only after receipt of order of CBDT on petition u/s 119(2)(b) dated 26.12.2023 for condonation of delay in filing claim of deduction u/s 80P.
The Ld. DR, Shri ARV Srinivasan, Addl. CIT has not objected to the prayer of the ld. Counsel for the asssessee. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. It is admitted fact that a petition
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u/s 119(2)(b) dated 26.12.2023 for condonation of delay in filing claim of deduction u/s 80P is still pending adjudication before the CBDT hence the same has a direct bearing on the issue in hand. Therefore, we deem it fit to restore back the appeal to the ld. CIT(A) for denovo adjudication only after receipt of order of CBDT on petition u/s 119(2)(b) dated 26.12.2023 for condonation of delay in filing claim of deduction u/s 80P. The ld.CIT(A) will proceed with the appeal after affording reasonable opportunity of hearing to the assessee. That on receipt of order of CBDT on petition u/s 119(2)(b) dated 26.12.2023 for condonation of delay in filing claim of deduction u/s 80P, the assessee is also directed to substantiate its case forthwith failing which Ld. CIT(A) shall be at liberty to proceed with disposal of appeal on merits.
The appeal (ITA No.509/Chny/2024 for AY 2018-19) is allowed for statistical purposes.
Adjudication on appeal for AY 2020-21 in ITA No.510/Chny/2024: 9. Grounds of appeal are as under: ‘’1)The order passed by the Learned CIT(A) dated 08.01.2024 is erroneous in law and opposed to the facts and circumstances of the case. 2) The Learned Commissioner of Income Tax (Appeals) erred in disallowing the deduction claimed under Section 80P(2)(a)(i). Furnishing of Return of Income - Section 139(4) 3) The CIT(A) failed to see that the assessee had furnished his return of income within the time frame prescribed under section 139(4) of the Income Tax Act, 1961.
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Circular No. 13/2023 allows condonation of delay for deduction u/s 80P 4) The CIT(A) failed to see that CBDT had issued a Circular No. 13/2023 dated 26.07.2023 allowing the co-operative societies to claim deduction u/s 80P by filing condonation of delay Petition u/s 119(2)(b) to treat the return as filed u/s 139(1). The appellant has filed a petition u/s 119(2)(b) dated 26.12.2023 which is still pending before the Central board of Direct Taxes. Concept of Members and Deduction u/s 80P. 5) The CIT(A) ought to have seen that the Appellant is a Erode City Municipal Corporation Employees Cooperative Thrift & Credit Society registered under the Tamil Nadu Cooperative Societies Act, 1983 and provides Thrift loans to its members (Class A and Class B) 6) The CIT(A) failed to see that there is no definition of members under the Income Tax Act, 1961 and all the members of the society have to renew their membership once in three years. 7) The CIT(A) failed to see that the concept of members (A class and B Class) is as per under Section 2(6) of the Tamilnadu Cooperative Society Act 1983 and also as per Bye laws of Society and the Assessing Officer himself has recorded that the associate members are also admitted as members of the society 8) The Appellant's case is squarely covered by the Judgement of the Jurisdictional High Court in the case of CIT.v. S-1308 AMMAPET PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., [2017] 392 ITR 55 (Mad) and PCIT.v. S-1308 ΑΜΜΑΡET
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PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD., [2020] 426 ITR 244. (Mad) 80P (4) EDCC BANK IS ALSO A CO-OPERATIVE SOCIETY 9) The CIT(A) failed to see that deposits were made with EDCC bank, which is a co-operative society registered under the TamilNadu Co-operative Societies Act and places reliance on the Judgement of the Supreme Court in [2023] 458 ITR 384’’.
Brief facts of the case are that the appellant society e-filed return of income for AY 2020-21 on 02/01/2021, showing income of Rs. Nil. The return was duly processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS for the reason 'Deductions under Chapter VI-A'. Notice under section 143(2) dated 29.6.2021 was duly issued and served. During the assessment proceedings, the Ao noted that the appellant claimed to be a co-operative Society engaged in activities of providing credit facilities to its members. During the year under consideration, the appellant had e-filed return and claimed deduction u/s 80P(2)(a)(i) of the Act of Rs 83,65,720/-. In response to various notices issued, the appellant filed details. The AO noticed that interest from banks earned was shown at Rs 17,91,225/-, Deduction u/s 80P(2)(a)(i) had been claimed on this income. Upon being show-caused as to why deduction u/s 80P(2)(a)(i) should not be disallowed on this interest income, the appellant raised an alternate claim that this income was eligible for deduction u/s 80P(2)(d). The appellant stated that it is entitled for deduction u/s 80P on Rs 17,91,225/- and relied on SC judgment in case of Mavilayi Service Co Op Bank Ltd
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and Bombay High Court judgment in case of PCIT v Quepem Urban Co Op Credit Society Ltd. Appellant further stated that claim for previous years has been accepted and since it is involved in providing credit facilities of business to its members, the income is in nature of business. The AO held that deduction u/s 80P(2)(a)(i) is available only on operational income earned from providing credit facilities to members of Society, whereas interest income earned from banks cannot be attributed to the activities of the society. Further, as per the AO, even u/s 80P(2)(d), the claim of deduction is not available cooperative banks are not cooperative societies. Therefore, the AO held that the interest income of Rs 17,91,225/- is not allowable as deduction under section 80P(2)(a)(i)/80P(2)(d) of the I.T.Act, 1961 and same was brought to tax u/s 56 of the Act.
Being aggrieved by the assessment order dated 13.09.2022, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A) has dismissed the appeal of assessee and observed in its order as under: ‘’6.4 The appellant had tried to distinguish its case from that of the Supreme Court decision in the case of Citizen Cooperative Society Ltd. However, the AO has not denied the deduction by relying upon the principle laid down in Citizen Coop Soc Ltd. Hence the distinction drawn in its grounds of appeal is not relevant. The appellant has also relied upon the decision of the Bombay High Court in the case of Quepem Urban Coop Credit Society Ltd. [2021] 128 taxmann.com 41 (Bombay). However, there exists a Supreme Court decision on this issue, which has been shown to apply even in the case of credit societies like the appellant, by various courts. Thus, in tune with the various decisions cited above, which make the SC decision in the case
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of Totgars Co-Operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC) applicable to the present case, it is hereby held that interest income of Rs. 17,91,225/- from FDRs maintained with the EDCCB is not income from business but is to be treated as 'income from other sources' and is, therefore, not eligible for deduction u/s 80P(2)(a)(i). 6.7 In view of the above discussion, it is hereby held that the appellant is not eligible to claim deduction either u/s 80P(2)(a)(i) or 80P(2)(d) of the IT Act on the interest income from co- operative banks of Rs. 17,91,225/- The action of the AO in denying deduction u/s 80P(2)(a) (i)/80P(2)(d) on the interest income of Rs. 17,91,225/- and bringing this income to tax as 'income from other sources' is hereby upheld. All the 14 grounds of appeal are hereby dismissed’’.
Now on further appeal, assessee is before us.
The ld.Counsel referred page 1 of paper book which is captioned as ‘BYLAWS OF THE ERODE DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED NO.P.E.1. ERODE’. The opening para of this bylaws states as under: ‘’The Erode District Central Co-operative Bank Ltd; No.P.E.1. Erode is registered as a cooperative society under the TamilNadu Co-op Societies Act, 1961’’.
The ld.Counsel at the outset also referred a judgment of the Hon’ble Jurisdictional High Court of Madras in the case of Thorapadi Urban Co-op Credit Society Limited & Another Vs ITO [WP. Nos.11173-11174 of 2022 dated 10.10.2023 and contended that this issue whether the assessee Co-operative Society is entitled
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for a deduction for the interest income received from the Co-operative Bank has been settled by the Hon’ble Jurisdictional High Court of Madras. The Ld.DR, Shri ARV Srinivasan, Addl. CIT did not controvert the assertions of the ld.Counsel for the asssessee.
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that the issue ‘whether the assessee Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank’ is covered in favour of the assessee by a judgment of the Hon’ble Jurisdictional High Court of Madras in the case of Thorapadi Urban Co-op Credit Society Limited & Another Vs ITO [WP. Nos.11172, 11174, 11177 and 11180 of 2023 and WMP Nos. 11034, 11038, 11044 and 11048 of 2023 dated 10.10.2023. The judgment of the Hon’ble Jurisdictional High Court of Madras reads as under: ‘’8. The main issue is to decide in the present case is as to whether the petitioner Co~operative Society is entitled for a deduction for the interest income received from the Co~operative Bank? 9. It would be appropriate to extract hereunder the relevant portion of Section 80P(2)(d). 80 P. Deduction in respect of income of co~operative societies: (1) ...... ..... ..... (2) The sums referred to in sub~section (1) shall be the following, namely :— (a) to (c) ..... ..... ......
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(d) “in respect of any income by way of interest or dividends derived y the co-operative society from its investment with any other co-operative society, the whole of such income” 9. A reading of the above said provision makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term Co-operative Society-. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20.5.2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co~operative Bank registered under the Co-operative Societies Act. The Income Tax Act, 1961 has also defined –Co-operative Society- under Section 2(19) as follows: “2(19). “Co-operative society“ means a co-operative society registered under the Co~ operative Societies Act, 1912 (2 of 1912 ), or under any other law for the time being in force in any State for the registration of co~ operative societies. 10. A reading of the above definition would make it clear that Co- operative Society- means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.
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The learned counsel for the respondent referred to the judgment of the Hon-ble Supreme Court rendered in Totgars Co- operative Sale Society Ltd., v. Income-tax Officer, Karnataka, wherein the issue came up for consideration as to whether the interest income received by a Co-operative Bank from its members by way of providing the credit facilities to its members is eligible for deduction or not. Ultimately the Hon-ble Supreme Court found that under Section 80P(2)(a)(i), the same is eligible for deduction. Therefore, the law laid down by the Hon-ble Supreme Court is not applicable for in the present case as the eligibility of deduction of interest has to be decided under Section 80P(2)(d) and not under Section 80P(2)(a)(i). The learned counsel has also relied upon other judgments which are not applicable for the present facts of the present case. 12. At this juncture, it would be appropriate to refer a judgment passed by a Division Bench of this Court in Commissioner of Income Tax Salem v. The Salem Agricultural Producers Co- operative Marketing Society Ltd” in Tax Case Appeal No.5 of 2015, wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under: “ Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 with respect to the interest received from Class B members who were involved in non-agricultural society?”. While answering to the above, the Division Bench held that the respondent therein, which is a Co-operative society, is entitled to avail the benefit under 80P(2)(d) of the Act. The judgment was
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rendered on 10.08.2016, where the judgement rendered by the Hon-ble Supreme Court in 2010 was considered’’. 14. Hence considering byelaw and respectfully following the judgment of Hon’ble Jurisdictional High Court of Madras, we allow the appeal (ITA No.510/Chny/2024 for AY 2020-21) of the assessee.
In the result, the appeal in ITA No.509/Chny/2024 is allowed for statistical purpose whereas appeal in ITA No.510/Chny/2024 is allowed.
Order pronounced in open court on 22nd day of July, 2024 at Chennai.
Sd/- Sd/- (मनोज कुमार अ�वाल) (मनु कुमार िग�र) (MANOJ KUMAR AGGARWAL) (MANU KUMAR GIRI) लेखा सद� / ACCOUNTANT MEMBER �ाियक सद� / JUDICIAL MEMBER चे�ई Chennai: िदनांक Dated :22-07-2024 KV आदेश क� ��त�ल�प अ�े�षत /Copy to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF