WARVANDI VIVIDH KARYAKARI SEVASAHAKARI SOCIETY LTD.,AHMEDNAGAR vs. ITO, WARD 2,, AHMEDNAGAR

This is an appeal filed by the appellant society directed against the order of National Faceless Appeal Centre, Delhi dated 09.03.2024 passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2020-21.

Briefly, the facts of the case are that the appellant is a Consumer Cooperative Credit Society formed under the Maharashtra Cooperative Societies Act, 1960. It is engaged in the business of retail sale of Food items etc. The Return of Income for the A.Y. 2020-21 was filed declaring Nil income after claiming exemption u/s.80P of the Act. Against the said return of income, the assessment was completed by the Assessing Officer (AO) vide order dated 09.09.2022 passed u/s.143(3) r.w.s.144B of the Act at a total income of Rs.32,42,385/-. While doing so, the AO brought to tax the interest income of Rs.32,42,385/- earned on deposits made out of surplus funds with Cooperative bank by holding that the interest earned from cooperative banks does not qualify for exemption either u/s.80P(2)(c)(ii) or u/s.80P(2)(d). It was also held that interest income of the cooperative society is not exempt from tax as cooperative bank is not a cooperative society, placing reliance on the sub-section (4) of section 80P.

Being aggrieved, an appeal was filed before the ld.NFAC with a delay of 90 days. The appellant society filed explanation praying for condonation of delay by stating that the delay had occurred due to the fact that the appellant society is situated in a village at a distance of 90 kms from the District Headquarter. As a result of the distance, there was delay in obtaining the legal advice in filing the appeal. Thus, it was prayed before the NFAC that the delay in filing the appeal be condoned. However, the ld. NFAC had refused to condone the delay by holding that the appellant cannot sleep over the issue in filing the appeal for more than 120 days after the assessment order was passed. The ld. NFAC also referred to the statutory provisions of section 5 of the Limitation Act, 1963, placing reliance on the judgment of Hon’ble Apex Court in the case of N. Balakrishna V. M. Krishnamurthy AIR 1998 SC 3222 and several other judicial precedents.

Being aggrieved, the appellant society is in appeal before the Tribunal in the present appeal.

When the appeal was called on, none appeared on behalf of the appellant society despite due service of notice of hearing. We therefore proceed to dispose of the appeal ex parte after hearing the ld. Departmental Representative.

We heard the ld. Sr. DR and perused the material on record. At the first instance, we shall deal with the issue : Whether or not the ld. NFAC was justified in refusing to condone the delay of 90 days in filing the appeal. We have carefully perused the reasons given for the delay in filing the appeal before the ld. NFAC which are extracted vide para 3.4 of the impugned order and also the reasons given by the ld. NFAC for not condoning the delay. The ld. NFAC relied upon certain judicial precedents in support of the proposition that in the absence of any “sufficient cause” for the delay, the delay need not be condoned. There can be absolutely no quarrel about this proposition of law, but the ld. NFAC had nowhere discussed as to how the explanation tendered by the appellant society does not tantamount to a “sufficient cause”. From the tone of the order, it would indicate that ld. NFAC had refused to condone the delay on the ground that it was filed more than 90 days after the assessment order came to be passed. No litigant stands to benefit in approaching the courts belatedly. It is not the length of delay that would be required to be considered while examining the plea for condonation of delay, it is the cause for delay which has been propounded will have to be examined. If the cause for delay would fall within the four corners of “sufficient cause”, irrespective of the length of delay same deserves to be condoned. However, if the cause shown is insufficient, irrespective of the period of delay, same would not be condoned. Applying the above principles to the facts of the case, we are of the considered opinion that in view of the above settled position of law, the ld. NFAC ought to have condoned the delay of 90 days and adjudicated the issue in appeal on merits.

In the normal circumstances, we would have remitted the matter back to the ld. NFAC to adjudicate the issue in appeal on merits, but in view of the fact that the issue in appeal is settled by series of decisions by the Coordinate Benches of this Tribunal and does not require any verification of facts, we desist from doing so and proceed to dispose of the matter on merits.

In the present case, we find that admittedly the interest income was earned on deposits made with a Cooperative Banks. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court after referring to the decision of the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd.Vs. ITO (2010) 322 ITR 283(SC) held that the ratio of decision of the Hon’ble Supreme Court is not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. In the light of this discussion, we are of the considered opinion that the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks qualify for deduction under the provisions of section 80P(2)(d) of the Act. Therefore, the grounds of appeal raised by the appellant society stand allowed.